M/s. Tirupati Infrabuild Pvt. Ltd., Faridabad V. ACIT, Faridabad

CO 212/DEL/2015

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 3972 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 13 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 09-07-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2011-2012
• Appeal Filed On: 26-06-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S L ANURAGI
• Keywords: Rejection of books of accounts; Additional evidence
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: C , NEW DELHI BEFORE SHRI N.K.SAINI , ACCOUNTANT MEMBER AND SMT. BEENA A PILLAI, JUDICIAL MEMBER ITA NO. 6604 /DEL/201 4 AY: 20 11 - 12 ACIT CIRCLE II FARIDABAD VS . TIRUPATI INFRABUILD P LTD. 120, OM SHUBHAM TOWER NEELAM BATA ROAD, N I T FARIDABAD PAN: AACCT 6868 J & CROSS OBJECTION NO.212/DEL/2015 (IN ITA NO. 6604 /DEL/201 4) AY: 20 11 - 12 TIRUPATI INFRABUILD P LTD. 120, OM SHUBHAM TOWER NEELAM BATA ROAD, N I T FARIDABAD VS . ACIT CIRCLE II FARIDABAD (APPELLANT) (RESPONDENT) A SSESSEE BY : SH. KAPIL GOEL, ADV. DEPARTMENT BY : SH.S.L.ANURAGI, SR.D.R. DATE OF HEARING : 03 . 05. 2018 DATE OF PRONOUNCEMENT : 09.07.2018 ORDER PER BEENA A PILLAI, JUDICIAL MEMBER PRESENT APPEAL HAS BEEN FILED BY REVENUE ALONG WITH CROSS OBJECTION BY ASSESSEE AGAINST ORDER DT. 24.09.2014 PASSED BY LD.CIT(A) - 2, FARIDABAD FOR A.Y. 2011 - 12 ON THE FOLLOWING GROUNDS OF APPEAL. ITA NO. 6604 /DEL/201 4 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS RIGHT ON FACTS AND IN LAW IN DELETING THE ADDITIONS OF RS.87,4 7,359/ - WHICH WAS MADE BY THE AO ITA 6604/DEL/14 A.Y.:2011 - 12 ACIT VS. TIRUPATI INFRABUILD P LTD. C.O. 212/DEL/15 TIRUPATI INFRABUILD P LTD . VS. ACIT 2 ON THE BASIS OF TRANSACTION REPORTED IN AIR INFORMATION WHICH WERE NOT FOUND ACCOUNTED FOR IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS RIGHT ON FACTS AND IN LAW IN DELETING THE ADDITIONS OF RS.87,47 , 359/ - BY ADMITTING ADDITIONAL EVIDENCE/DETAILS WHICH WERE NOT FILED BEFORE THE AO. THE LD. CIT(A) SHOULD HAVE GIVEN AN OPPORTUNITY TO THE AO UNDER RULE 46A. 3. WHETHER ON THE FACTS AND IN THE CIRCUM STANCES OF THE CASE, THE LD. CIT(A) WAS RIGHT ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS.82,19,445/ - WHICH WAS MADE BY THE AO ON ACCOUNT OF UNJUSTIFIED HIGHER COST OF LAND TO THE SALES RATIO IN THE ABSENCE OF COMPLETE DETAILS. EVEN THOUGH THE LD. C IT(A) HAS HIMSELF OBSERVED THAT THE APPELLANT EXPRESSED ITS INABILITY TO MAINTAIN QUANTITATIVE DETAILS OF NUMEROUS ITEMS OF STOCK OF RAW MATERIAL RESULTING IN THE CONCLUSION THAT PROPER STOCK REGISTER WAS NOT MAINTAINED BY THE APPELLANT. 4. WHETHER ON TH E FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS RIGHT ON FACTS AND IN LAW' IN DELETING THE ADDITION OF RS.48,18,260/ - WHICH WAS MADE BY THE AO ON ACCOUNT OF UNJUSTIFIED HIGHER SELLING AND MARKETING EXPENSES TO THE SALES RATIO IN THE ABSENC E OF COMPLETE DETAILS, EVEN THOUGH THE LD. CIT(A) HAS HIMSELF REJECTED THE BOOKS OF THE ASSESSEE OBSERVING THAT THE BOOKS OF ACCOUNTS MAINTAINED BY THE APPELLANT ARE NOT FULLY CORRECT AND COMPLETE. 5. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. C I T(A) WAS RIGHT ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS.2,00,000/ - EVEN WHEN NO DETAILS WITH REGARD TO INSURANCE CLAIM AGAINST THE DAMAGE TO INSURED VEHICLE WAS FILED BY THE ASSESSEE. 6. THAT THE APPELLANT CRAVES FOR THE PERMISSI ON TO ADD, DELETE OR AMEND THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING OF APPEAL. CROSS OBJECTION NO.212/DEL/2015 : 1 . THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF CASE AND IN LAW, THE LD CIT - A ERRED IN NOT DIRECTING THE LD AO TO ACCEPT ITA 6604/DEL/14 A.Y.:2011 - 12 ACIT VS. TIRUPATI INFRABUILD P LTD. C.O. 212/DEL/15 TIRUPATI INFRABUILD P LTD . VS. ACIT 3 RETURNED INCOME AND DECLARED PROFITS AND MADE SERIOUS ERROR OF FACT AND LAW TO INVOKE SECTION 145(3) ON DEFECT FREE AND AUDITED TRADING RESULTS. 2 . THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF CASE AND IN LAW, THE LD CIT - A ERRED IN DIRECTING LD AO TO ASSESS APPELLANT @ 6.44% INSTEAD OF DECLARED RATE OF 2.24% ON BASIS OF PAST HISTORY WHERE THERE IS NO TRADING OUTSIDE THE BOOKS AND NO PARTICULAR INSTANCE OF INFLATED EXPENSE IS PINPOINTED. 3 . THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF CASE AND IN LAW, THE LD C IT - A ERRED IN DIRECTING LD AO TO ENHANCE ASSESSEE'S PROFIT RATE WITHOUT APPRECIATING THAT EVEN AFTER REJECTION OF BOOK RESULT ADDITION TO TRADING PROFITS IS NOT SINE QUA NON. THAT THE CROSS OBJECTOR CRAVES THE LEAVE TO ADD, AMEND, MODIFY, DELETE ANY OF THE GROUND(S) OF C.O. BEFORE OR AT THE TIME OF HEARING. 2. BRIEF FACTS OF THE CASE ARE AS UNDER: ASSESSEE FILED ITS RETURN OF INCOME ON 03/03/12 DECLARING TOTAL INCOME OF RS.19,67,860/ - . LD.AO OBSERVED THAT ASSESSEE WAS ENGAGED IN DEVELOPMENT OF REAL ESTATE BY DEVELOPING PLOTS OF LAND WITHOUT CARRYING ANY CONSTRUCTION OF SUPERSTRUCTURE THEREON AND AS PER THE AUDITED ACCOUNTS COMPANY WAS FOLLOWING PERCENTAGE COMPLETION METHOD. IT WAS OBSERVED BY LD.AO THAT ASSESSMENT FOR PREVIOUS A SSESSMENT Y EAR WAS COMPLETE D UNDER SECTION 143 (3) OF THE A CT , AND ASSESSEE WAS HAVING OPENING STOCK OF VALUE OF RS.5,87,12,67 3 / - , THE DETAILS OF WHICH ARE AS UNDER: L AND - RS.2,30,81,486/ - D EALER COMMISSION CARRIED FORWARD - RS.1,56,57,222/ - W ORK IN PROGRESS - RS.1,99,73,965/ - LD.AO OBSERVED THAT THE CLOSING INVENTORY DECLARED BY ASSESSEE CONSISTED OF THE FOLLOWING: L AND - RS.21,60,508/ - WO RK IN PROGRESS - RS.69,24,001/ - ITA 6604/DEL/14 A.Y.:2011 - 12 ACIT VS. TIRUPATI INFRABUILD P LTD. C.O. 212/DEL/15 TIRUPATI INFRABUILD P LTD . VS. ACIT 4 LD.AO OBSERVED IN THE TAX AUDIT REPORT THAT ASSESSEE HAD NOT MAINTAINED QUALITATIVE DETAILS OF VARIOUS ITEMS OF STOCK OF RAW MATERIALS, AND ACTIVITIES CARRIED ON BY ASSESSEE WAS MENTIONED TO BE CO NSTRUCTION OF BUILDINGS , WHEREAS V IDE LETTER DATED 06/11/13 , ASSESSEE STATED THAT IT WAS ENGAGED IN DEVELOPING RESIDENTIAL PLOTS. THE LD. AO ACCORDINGLY COMPLETED ASSESSMENT BY MAKING FOLLOWING ADDITION: A DDITION ON ACCOUNT OF SALES TRANSACTION AS PER AIR INFORMATION RS.87,47,359/ - C OMPARATIVE ANALYSIS OF COST TO SALES RATIO RS.82,19,445/ - S ELLING AND MARKETING EXPENSES RS. 48,18,260/ - C AR REPAIR EXPENSES RS. 2,00,000/ - 2.1. AGGRIEVED BY ADDITIONS MADE BY LD.AO, ASSESSEE PREFERRED APPEAL BEFORE LD.CIT (A) , WHO PARTLY GRANTED RELIEF TO ASSESSEE. 2.2 . AGGRIEVED BY ORDER OF LD.CIT (A), REVENUE IS IN APPEAL BEFORE US , AND ASSESSEE PRE FERRED C ROSS O BJECTION. 3. WE SHALL FIRST TAKE UP THE APPEAL FILED BY REVENUE. ITA NO. 6640/ D EL/2014 GROUND NO. 1 AND 2 ARE IN RESPECT OF SALES TRANSACTION ON THE BASIS OF AIR INFORMATION BEING DELETED . 3.1 . LD.DR PLACED RELIANCE UPON THE OBSERVATIONS OF LD.AO AND SUBMITTED THAT ASSESSEE FAILED TO PROVIDE DETAILS , DESPITE STATUTORY NOTICES REGARDING BASIS FOR CALCULATING SALES ACCOUNTED FOR ON PERCENTAGE COMPLETION METHOD. IT WAS SUBMITTED BY LD.D.R. THAT PERCENTAGE COMPLETION METHOD H AS BEEN APPLIED BY ASSESSEE ONLY TO ADJUST THE POSSIBILITY AT THE WHIMS , AND THAT THE PROPERT IES PURCHASED , REPORTED IN AIR HAS NOT BEEN ACCOUNTED FOR IN THE BOOKS OF ASSESSEE. ITA 6604/DEL/14 A.Y.:2011 - 12 ACIT VS. TIRUPATI INFRABUILD P LTD. C.O. 212/DEL/15 TIRUPATI INFRABUILD P LTD . VS. ACIT 5 3.2 . ON THE CONTRARY LD.AR PLACED RELIANCE UPON OBSERVATIONS OF LD. CIT (A). HE SUBMITTED THAT TRANSACTIONS REPORTED IN AIR WERE DULY DISCLOSED IN P&L ACCOUNT, WHICH WAS FURNISHED BEFORE LD.AO DURING ASSESSMENT PROCEEDINGS. 4. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN THE LIGHT OF RECORDS PLACED BEFORE US. 4.1 . IT IS VERY MUCH RELEV ANT TO OBSERVE THE FACTUAL FINDINGS RECORDED BY LD.CIT (A), WHICH IS AS UNDER: 4.1. I HAVE CONSIDERED THE FACTS OF THE CASE AND GONE THROUGH THE SUBMISSIONS OF THE APPELLANT. THE ADDITION WAS MADE ON ACCOUNT OF ALLEGED UNREPORTED SALE TRANSACTION AS PER AIR INFORMATION. THE APPELLANT, IN ORDER TO SUBSTANTIATE THAT TRANSACTIONS REPORTED IN THE AIR INFORMATION WERE DULY DISCLOSED BY IT IN ITS P & L ACCOUNT, GAVE A COPY OF ALL RELEVANT DOCUMENTS. IT WAS SUBMITTED THAT ALL THESE DOCUMENTS WERE FURNISHED TO THE A.O. DURING THE COURSE OF ASSESSMENT PROCEEDINGS BUT HE DID NOT LOOK INTO ALL THESE RESULTING IN THE ADDITION. 4.2. O N A PERUSAL OF THESE DOCUMENTS, IT WAS FOUND THAT THESE FOUR SALE TRAN SACTIONS WERE EXECUTED BY THE APPELLANT DURING THE YEAR UNDER C ONSIDERATION. FURTHERMORE, THE APPELLANT ALSO GAVE A DETAILED LEDGER ACCOUNT OF ALL ITS PROJECTS WHICH REVEALED THAT THE AFORESAID RECEIPTS WERE ON ACCOUNT OF SALE TRANSACTIONS IN 'HILL GRANAGE PROJECT.' THE APPELLANT PRODUCED A COPY OF THE SALE DEED IN RE SPECT OF ALL FOUR SALE TRANSACTIONS AND THE MODE OF PAYMENT IN RELATION TO THE SAID SALES. IT WAS REVEALED THAT THE ENTIRE AMOUNT IN RELATION TO THESE SALES TRANSACTIONS WAS RECEIVED BY CHEQUE. A COPY OF THE BANK STATEMENT IN WHICH THE SAID CHEQUE PAYMENTS WERE RECEIVED, WAS ALSO PRODUCED BY THE APPELLANT. ON A CAREFUL EXAMINATION OF THESE DETAILS, IT WAS FOUND THAT THESE FOUR SALES TRANSACTIONS IN RELATION TO 'HILL GRANAGE PROJECT' WERE DULY REFLECTED BY THE APPELLANT IN ITS BOOKS OF ACCOUNT. AS REGARDS T HE PURCHASE TRANSACTION WHICH WAS REDUCED BY THE A.O. FROM ALLEGED UNREPORTED SALES TRANSACTION, THE APPELLANT SUBSTANTIATED, WITH RELEVANT EVIDENCE, THE FACT THAT THE SAME DID NOT RELATE TO IT. ITA 6604/DEL/14 A.Y.:2011 - 12 ACIT VS. TIRUPATI INFRABUILD P LTD. C.O. 212/DEL/15 TIRUPATI INFRABUILD P LTD . VS. ACIT 6 4.3. HENCE, AFTER A CAREFUL CONSIDERATION OF THE FACTS OF TH E CASE TOGET HER WITH THE SUBMISSIONS OF THE APPELLANT, I HOLD THAT THE SALES TRANSACTIONS REPORTED IN AIR INFORMATION WERE DULY REFLECTED BY THE APPELLANT IN ITS BOOKS OF ACCOUNTS. THE ENTIRE PAYMENT IN RELATION TO THE SAID SALES TRANSACTIONS WAS RECEIVED BY CHEQUE IN THE APPELLANT S BANK ACCOUNT. THUS, ON THE BASIS OF THESE SUBMISSIONS AND DOCUMENTS, I HOLD THAT THE A.O. ERRED IN MAKING THE ADDITION OF RS.87,67,359/ - . ACCORDINGLY, GROUND NOS. 3 AND 4 OF THE APPEAL ARE HEREBY ALLOWED. 4.2 . UPON A QUERY BEING RAISED BY THE B ENCH TO LD.DR REGARDING AVAILABILITY OF ANY MATERIAL EVIDENCES TO PROVE FACTUAL OBSERVATIONS RECORDED BY LD.CIT (A) TO BE CONTRARY , LD.DR REPLIED IN NEGATIVE. EVEN THE ORDER OF LD. AO IS SILENT ON ANY INFORMATION/EVIDENCES CONTRARY TO OBSERVATIONS BY LD. CIT (A). UNDER SUCH CIRCUMSTANCES, WE DO NOT FIND IT NECESSARY TO INTERFERE WITH THE DECISION OF LD. CIT (A). 4.3. ACCORDINGLY THE SE GROUNDS RAISED BY REVENUE STAND DISMISSED. 5. GROUND NO. 4&5 ARE IN RESPECT OF COMPARATIVE COST TO SALES RATIO AND SELLING AND MARKETING EXPENSE RATIO, COMPUTED BY LD. CIT (A) BY TAKING AVERAGE OF PRECEDING THREE ASSESSMENT YEARS. 5.1 . LD. DR PLACED RE LIANCE UPON OBSERVATIONS OF LD.AO, AND SUBMITTED THAT A SSESSING O FFICER WAS RIGHT IN REJECTING BOOKS OF ACCOUNT AND ESTIMATING, ON THE BASIS OF IMMEDIATELY PRECEDING A SSESSMENT Y EARS. 5.2 . ON THE CONTRARY LD.AR PLACED RELIANCE UPON OBSERVATIONS OF LD. CIT (A). 6. WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY BOTH THE SIDES IN THE LIGHT OF RECORDS PLACED BEFORE US. ITA 6604/DEL/14 A.Y.:2011 - 12 ACIT VS. TIRUPATI INFRABUILD P LTD. C.O. 212/DEL/15 TIRUPATI INFRABUILD P LTD . VS. ACIT 7 6.1. IT IS OBSERVED THAT LD.CIT(A) CONSIDERED DETAILS OF EXPENSES RESULTING INTO ADDITION. LD.CIT (A) ALSO OBSERVED THAT A SSESSING O FFICER MADE ADDITION OF VARIOUS EXPENSES , ONLY ON THE BASIS THAT THESE WERE HIGHER THAN IMMEDIATELY PRECEDING YEAR, WITHOUT VERIFYING BOOKS OF ACCOUNTS AND VOUCHERS ETC. IT HAS ALSO BEEN OBSERVED BY LD.CIT(A) THAT A SSESSING O FFICER HAS NOT DETECTED ANY BOGUS EXPENSES , PROCEEDED TO APPLY EXPENSE RATIO OF IMMEDIATELY PRECEDING YEAR RESULTING IN ADDITION UNDER TWO HEADS. LD. CIT (A) DECIDED THE ISSUE AS UNDER: 5.8. I HAVE CONSIDERED THE FACTS OF THE CASE AND GONE THROUGH THE DETAIL ED SUBMISSIONS OF THE APPELLANT. THE A.O. MADE THE ADDITION ON ACCOUNT OF HIGHER COST TO SALES RATIO AND SELLING & MARKETING EXPENSES DURING THE YEAR UNDER CONSIDERATION COMPARED TO THE IMMEDIATELY PRECEDING YEAR. THE ADDITION WAS MADE PRIMARILY OWING TO LACK OF SUBMISSIONS OF DETAILS BY THE APPELLANT. ON A COMPARISON OF COST TO SALES RATIO AND SELLING & MARKETING EXPENSES FOR THE YEAR UNDER CONSIDERATION WITH THAT OF IMMEDIATELY PRECEDING YEAR, THE A.O. NOTICED THAT THERE WAS A SUBSTANTIAL INCREASE DURING THE YEAR UNDER CONSIDERATION. ON T HE BASIS OF THESE FACTS, THE A.O. APPLIED THE RATIO FOR THE IMMEDIATELY PRECEDING YEAR RESULTING IN AN ADDITION OF RS.82,19,445/ - ON ACCOUNT OF HIGH COST TO SALES RATIO AND AN ADDITION ON ACCOUNT OF HIGH SELLING & MARKETING EXPENSES AMOUNTING TO RS. 48,18, 260/ - DURING THE YEAR IN QUESTION. 5.9. DURING THE COURSE OF APPELLATE PROCEEDING, THE LD. COUNSEL OF THE APPELLANT SUBMITTED THAT DURING ASSESSMENT PROCEEDINGS ALL DETAILS CALLED FOR BY THE A.O WERE DULY GIVEN TO HIM. THIS INCLUDED DETAILS OF EXPENSES UNDER THE HEAD SITE DEVELOPMENT EXPENSES AND SELLING & MARKETING EXPENSES. HOWEVER, THE ASSESSING OFFICER DID NOT LOOK INTO ALL THESE DETAILS RESULTING IN THE AFORESAID ADDITION. THE LD. C OUNSEL OF THE APPELLANT ALSO SUBMITTED THE FACT THAT THE A.O DID NOT POINT OUT ANY DEFICIENCY IN THE AFORESAID EXPENSES IN TERMS OF HIS FAILURE TO PRODUCE ANY EVIDENCE/VOUCHERS IN SUPPORT OF THESE EXPENSES. IT WAS SUBMITTED THAT THE APPELLANT ITA 6604/DEL/14 A.Y.:2011 - 12 ACIT VS. TIRUPATI INFRABUILD P LTD. C.O. 212/DEL/15 TIRUPATI INFRABUILD P LTD . VS. ACIT 8 HAD ALL THE DETAILS AS WELL AS SUPPORTS IN RELATION TO INCURRING OF THE AFORESAID EXPENSES. IN ADDITION, THE LD. COUNSEL OF THE APPELLANT PROVIDED THE DETAILED BREAKUP AND EXPLANATION FOR INCURRING A HIGHER AMOUNT OF VARIOUS EXPENSES DURING THE YEAR UNDER CONSIDERATION COMPARED TO THE IMMEDIATELY PRECEDING YEAR. ON THE BASIS OF THESE D OCUMENTS, THE L D. COUNSEL OF THE APPELLANT STATED THAT THE A.O. ERRED IN MAKING THE ADDITION. THE APPELLANT ALSO RELIED UPON A NUMBER OF PROMINENT JUDICIAL PRONOUNCEMENTS AS PER WHICH THE A.O. SHOULD NOT HAVE MADE THE ADDITION WITHOUT POINTING OUT ANY DEFE CT/INCOMPLETENESS/LACK OF EVIDENCE IN RELATION TO THESE EXPENSES. FOR INSTANCE IN THE CASE OF CIT VS FRIENDS CLEARING AGENCY(P) LTD 332 ITR 269 (DELHI),IT WAS HELD THAT THERE IS NO BASIS FOR DISALLOWANCE OF EXPENSES ON AN AD - HOC BASIS, WITHOUT POINTING OUT ANY DEFECT IN THE EVIDENCE IN SUPPORT OF THE SAME. A SIMILAR DECISION WAS ARRIVED AT IN THE RECENT JUDGEMENT IN THE CASE OF DCIT VS SERGI TRANSFORMER EXPLOSION PREVENTION(P) LTD(47 TAXMANN.COM370)(DELHI ITAT)(2014). 5.10. AFTER A CAREFUL CONSIDERATION OF THE FACTS OF THE CASE, THE GROUNDS ON WHIC H THE ADDITION WAS MADE, AND THE EXPLANATION GIVEN BY THE APPELLANT, I HOLD THAT THE A.O. COULD NOT HAVE MADE AN ADDITION ON ACCOUNT OF VARIOUS EXPENSES SIMPLY BECAUSE OF THE FACT THAT THESE WERE MUCH HIGHER THAN THE IMMEDIATELY PRECEDING YEAR. IF THE A.O. WANTED TO MAKE AN ADDITION ON THE BASIS OF HIGHER EXPENSES INCURRED BY THE APPELLANT COMPARED TO THE IMMEDIATELY PRECEDING YEAR, THE BOOKS OF ACCOUNT COULD HAVE BEEN EXA M INED ALONG WITH VOUCHERS/OTHER EVIDENCES. IF THE APPELLANT WAS FOUND W ANTING IN RESPECT OF PROVIDING EVIDENCE/SUPPORTS IN RELATION TO INCURRING OF T HESE EXPENSES, THE A. O . COULD HAVE PROCEEDED TO REJECT THE BOOKS OF ACCOUNT U/S 145(3) OF THE I. T. ACT BEFORE MAKING ANY ADDITION ON THIS BASIS. THE A. O . WITHOUT DETECTING ANY BOGUS EXPENSES AND WITHOUT REJECTING THE EXPLANATION OF THE APPELLANT BEHIND HIGHER EXPENSES DURING THE YEAR, SIMPLY PROCEEDED TO APPLY THE EXPENSE RATIO OF THE IMMEDIATELY PRECEDING YEAR RESULTING IN MASSIVE ADDITIONS UNDER TWO HEADS. HENCE, ON THE BASIS OF THESE ARGUMENTS COUPLED WITH VARIOUS JUDICIAL PRONOUNCEMENTS, I HOLD THAT THE ADDITION MADE BY THE A. O . ON ITA 6604/DEL/14 A.Y.:2011 - 12 ACIT VS. TIRUPATI INFRABUILD P LTD. C.O. 212/DEL/15 TIRUPATI INFRABUILD P LTD . VS. ACIT 9 ACCOUNT OF HIGHER COST TO SALES RATIO AND HIGHER SELLING AND MARKETING EXPENSES DURING THE YEAR IS NOT AT ALL JUSTIFIED . 6.2 . UPON A QUERY BEING RAISED BY THE B ENCH TO LD.DR REGARDING AVAILABILITY OF ANY MATERIAL EVIDENCES OR ANY COMPARABLE INSTANCES CONTRARY TO OBSERVATIONS OF LD.CIT (A) , LD.DR REPLIED IN NEGATIVE. EVEN THE ORDER OF LD. AO IS SILENT ON ANY INFORMATION/EVIDENCES CONTRARY TO OBSERVATION BY LD.CIT(A). UNDER SUCH CIRCUMSTANCES, WE DO NOT FIND IT NECESSARY TO INTERFERE WITH THE DECISION OF LD. CIT (A). 6.3. ACCORDINGLY THESE GROUNDS RAISED BY REVENUE STANDS DISMISSED. 7. GROUND NO. 5 IS IN RESPECT OF ADDITION OF RS. 2,00,000/ - WHICH HAS BEEN DELETED BY LD. CIT (A) WITH REGARD TO INSURANCE CLAIM AGAINST DAMAGE TO INSURED VEHICLE. 7.1 . LD. DR PLACED RELIANCE UPON THE ORDER OF LD. AO. 7.2 . LD.AR PLACED RELIANCE UPON THE OBSERVATIONS OF LD. CIT (A). 8. WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY BOTH THE SIDES IN THE LIGHT OF RECORDS PLACED BEFORE US. 8.1 . IT IS OBSERVED THAT BEFORE LD. CIT (A) ASSESSEE PRO DUCED A COPY OF VOUCHER IN RESPECT OF VEHICLE RUNNING AND MAINTENANCE COST INCURRED DURING THE YEAR UNDER CONSIDERATION. ASSESSEE ALSO PROVIDED FULL DETAILS OF SAID EXPENSES WHEREIN THE PAYMENT WAS MADE TO M/S WASAN BROTHERS (P) LTD, NASIK , MAHARASHTRA AMOUNTI NG TO RS.3,57,329/ - . LD.AO MADE AN AD HOC ADDITION OF RS.2,00,000/ - WITHOUT ANY BASIS. AS LD. CIT (A) HAS VERIFIED THE EXPENSES INCURRED BY ASSESSEE AND THAT THE LD. DR HAS FAILED TO PRODUCE BEFORE US ANY CONTRARY MATERIAL/EVIDENCES, WE DO NOT FIND ANY IN FIRMITY IN THE OBSERVATIONS OF LD. CIT (A). 8.2. ACCORDINGLY THIS GROUND RAISED BY REVENUE STANDS DISMISSED. 9. IN THE RESULT APPEAL FILED BY REVENUE STANDS DISMISSED. ITA 6604/DEL/14 A.Y.:2011 - 12 ACIT VS. TIRUPATI INFRABUILD P LTD. C.O. 212/DEL/15 TIRUPATI INFRABUILD P LTD . VS. ACIT 10 10. CO NO. 212 /D EL/2015 GROUND NO. 1 RAISED BY ASSESSEE IS AGAINST THE REJECTION OF BOOKS OF ACCOUNTS BY LD. AO UNDER SECTION 145 (3) OF THE ACT. ADMITTEDLY ASSESSEE HAS FAILED TO PRODUCE BEFORE LD.AO AND THAT ASSESSEE HAS FAILED TO MAINTAIN QUANTITATIVE DETAILS OF OPENING STOCK, PURCHASES M ADE DURING THE PREVIOUS YEAR, SALES DURING THE PREVIOUS YEAR, CLOSING STOCK, SHORTAGE/EXCESS IF ANY. LD. CIT (A) CATEGORICALLY OBSERVED THAT ASSESSEE HAS NOT MAINTAINED STOCK REGISTER PROPERLY , WHICH IS MENTIONED IN THE TAX AUDIT REPORT OF ASSESSEE. LD. AO WAS THUS HANDICAPPED TO VERIFY VALUATION OF CLOSING STOCK SHOWN BY ASSESSEE AND THE GROSS PROFIT DECLARED BY ASSESSEE DURING THE YEAR UNDER CONSIDERATION WHICH WAS NOT MATCHING THE RESULTS DECLARED BY ASSESSEE IN THE IMMEDIATELY PRECEDING A SSESSMENT Y EAR. WE , THEREFORE , ARE OF THE CONSIDERED OPINION THAT LD. CIT (A) WAS RIGHT IN UPHOLDING ACTION OF LD. AO TO REJECT BOOKS OF ACCOUNT OF ASSESSEE. 11. ACCORDINGLY WE REJECT THIS GROUND RAISED BY ASSESSEE. 12. GROUND NO. 2 AND 3 RELATES TO ESTIMATION OF N ET PROFIT RATE OF ASSESSEE AT 6.44% AS AVERAGE NP RATE OF PRECEDING 3 A SSESSMENT Y EARS, WHICH WAS HIGHER THAN NP RATE OF 2.24% DECLARED BY ASSESSEE FOR YEAR UNDER CONSIDERATION. 12.1 . IT IS OBSERVED THAT LD.AO APPLIED NP RATE OF 7.01%, AS AGAINST 2.24% DEC LARED BY ASSESSEE. AS WE HAVE ALREADY UPHELD THE ACTION OF LD. AO IN REJECTING THE BOOKS OF ACCOUNTS, THEREFORE IT IS NECESSARY THAT SOME AMOUNT OF GUESSWORK IS INVOLVED IN THE BEST JUDGMENT ASSESSMENT. THE FACT THAT ASSESSEE HAS NOT MAINTAINED QUANTITATIV E DETAILS OF STOCK REGISTER OF GOODS TRADED BY IT AND THAT THERE WAS NO EVIDENCE ON RECORD TO VERIFY THE BASIS OF VALUATION OF STOCK SHOWN BY ASSESSEE, GP RATE DECLARED BY ASSESSEE DURING THE YEAR DID NOT MATCH THE RESULTS DECLARED BY ASSESSEE IN THE PREVI OUS A SSESSMENT Y EARS, IT COULD NOT BE POSSIBLE TO ACCEPT THE PROFIT RATE SHOWN BY ASSESSEE. HOWEVER IT IS OBSERVED THAT LD. CIT (A) COMPUTED THE NET PROFIT RATE FOR THE YEAR UNDER CONSIDERATION, BY COMPARING GROSS PROFIT AS WELL AS NET PROFIT FOR 3 IMMEDIA TELY PRECEDING A SSESSMENT Y EAR S . WE DO NOT SEE ANY INFIRMITY IN THE COMPUTATION OF LD. CIT (A) AS SOME RELIEF ITA 6604/DEL/14 A.Y.:2011 - 12 ACIT VS. TIRUPATI INFRABUILD P LTD. C.O. 212/DEL/15 TIRUPATI INFRABUILD P LTD . VS. ACIT 11 HAS BEEN GIVEN BY LD. CIT (A) TO THE ASSESSEE IN RESPECT OF THE SAME. 12.2. ACCORDINGLY THIS GROUND RAISED BY ASSESSEE STANDS DISMISSED. 13. IN THE RESULT THE C ROSS O BJECTION FILED BY ASSESSEE STANDS DISMISSED. 14 . I N THE RESULT APPEAL FILED BY REVENUE AS WELL AS THE CROSS OBJECTION FILED BY ASSESSEE BOTH STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 09 TH JU LY , 2018. SD/ - SD/ - ( N.K.SAINI ) (BEENA A PILLAI) ACCOUNTANTMEMBER JUDICIAL MEMBER DT. 09 TH J U LY , 2018 MV COPY FORWARDED TO: - 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR, ITAT - TRUE COPY - BY ORDER, ASSISTANT REGISTRAR ITAT DELHI BENCHES