Sh. Om Prakash, New Delhi V. DCIT, Gurgaon

CO 311/DEL/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0080 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s) 14 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 20-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2011-2012
• Appeal Filed On: 06-10-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Keywords: Rejection of books of accounts; Depreciation; Tax effect

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G, NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO.3004/DEL/2015 ASSESSMENT YEAR : 2011-12 DCIT, CIRCLE- 3, GURGAON. VS. OM PRAKASH, C/O. KAPIL GOEL, ADVOCATE, F- 26/124, SECTOR- 7, ROHINI, NEW DELHI. PAN : AGEPP4609G (APPELLANT) (RESPONDENT) C.O. NO.311/DEL/2016 (IN ITA NO.3004/DEL/2015) ASSESSMENT YEAR : 2011-12 OM PRAKASH, C/O. KAPIL GOEL, ADVOCATE, F- 26/124, SECTOR- 7, ROHINI, NEW DELHI. VS. DCIT, CIRCLE- 3, GURGAON. PAN : AGEPP4609G (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI S. S. RANA, CIT-DR ASSESSEE BY : SHRI KAPIL GOEL, ADV. DATE OF HEARING : 05-09-2018 DATE OF PRONOUNCEMENT : 20-09-2018 O R D E R PER R. K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 12.03.2015 OF THE CIT(A)- 1, GURGAON RELATING TO AS SESSMENT YEAR 2011-12. THE ASSESSEE HAS FILED THE CROSS OBJECTION AGAINST THE APPEAL FILED BY THE 2 ITA NO.3004/DEL/2015 C.O. NO.311/DEL/2016 REVENUE. FOR THE SAKE OF CONVENIENCE, THESE WERE H EARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. ITA NO.3004/DEL/2015 (BY REVENUE) : 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER : - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN FACT AND IN LAW IN NOT ACCEPTING THE RATE OF 2% APPLIED BY THE A.O. TO ESTIMATE THE PROFIT OF BUSINESS CARRIED OUT BY THE ASSESSEE INSPITE OF THE FACT THAT THE RATE IS ADOPTED ON THE BASIS OF A COMPARABLE CASE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN FACT AND IN LAW IN HOLDING THAT THE NET PROFIT RATE AS S HOWN BY THE ASSESSEE IN EARLIER YEARS SHOULD FORM THE BASIS TO ESTIMATE THE PROFIT IN THE YEAR UNDER CONSIDERATION WHEN IT IS CLEARLY ESTABLISHED BY THE A.O. AND ACCEPTED BY THE CIT(A) THAT THE BOOK RESULTS SHOWN BY THE ASSESSEE ARE NOT RELIABLE. 3. THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET, SUBMITTED THAT THE TAX EFFECT INVOLVED IN THE GROUNDS RAISED BY THE REVENUE IS BE LOW RS.20 LAKHS. THEREFORE, IN VIEW OF THE LATEST CBDT CIRCULAR NO.03/2018 [F.N O.279/MISC.142/2007-ITJ (PT)] DATED 11 TH JULY, 2018 WHICH IS APPLICABLE EVEN TO PENDING APP EALS, THE APPEAL FILED BY THE REVENUE IS NOT MAINTAINABLE. 4. THE LD. DR ON THE OTHER HAND FAIRLY ADMITTED THA T THE TAX EFFECT INVOLVED IN THE IMPUGNED APPEAL IS LESS THAN RS.20 LAKHS AND THEREFORE, THE APPEAL FILED BY THE REVENUE HAS TO BE DISMISSED. HE, HOWEVER, R EQUESTED THAT IF AT ANY POINT OF TIME IT IS NOTICED THAT THE CASE OF THE REVENUE FALLS UNDER ANY OF THE AMENDED 3 ITA NO.3004/DEL/2015 C.O. NO.311/DEL/2016 PARA 10 OF THE CIRCULAR VIDE NOTIFICATION DATED 20. 08.2018, THE REVENUE SHOULD BE ALLOWED TO FILE MISCELLANEOUS APPLICATION FOR RE VIVAL OF THE APPEAL. 5. AFTER HEARING BOTH THE SIDES, WE FIND THE TAX EF FECT INVOLVED IN THE GROUNDS RAISED BY THE REVENUE IN THE IMPUGNED APPEA L IS ADMITTEDLY BELOW RS.20 LAKHS. THEREFORE, THE APPEAL FILED BY THE RE VENUE IS NOT MAINTAINABLE IN VIEW OF THE CBDT CIRCULAR NO.03/2018 DATED 11 TH JULY, 2018 WHICH IS APPLICABLE EVEN TO PENDING APPEALS. HOWEVER, IF TH E REVENUE AT ANY POINT OF TIME FINDS THAT THE CASE OF THE REVENUE FALLS UNDER ANY OF THE CLAUSES AS PER AMENDED PARA 10 OF THE SAID CIRCULAR VIDE NOTIFICAT ION DATED 20.08.2018, THE REVENUE IS AT LIBERTY TO FILE MISCELLANEOUS APPLICA TION FOR REVIVAL OF THE APPEAL. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED IN THE TERMS INDICATED ABOVE. C.O. NO.311/DEL/2016 (BY ASSESSEE) : 7. THE GROUNDS RAISED BY THE ASSESSEE IN CROSS OBJE CTION ARE AS UNDER :- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF C ASE AND IN LAW, THE LD. CIT-A ERRED IN SUSTAINING THE ADDITION TO THE EXTENT OF R S.,51,78,000/- BY CONFIRMING THE ACTION OF LD. A.O. IN TAKING THE ENHANCED RECEIPTS ON BASIS 26AS, WHICH STOODFULLY RECONCILED. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF CA SE AND IN LAW, THE LD. CIT-A ERRED IN SUSTAINING THE ACTION OF LD. A.O. IN INVOC ATION OF SECTION- 143(3), (REJECTION OF BOOKS OF ACCOUNTS) WITHOUT GIVING FINDING THAT I T IS IMPOSSIBLE TO COMPUTE TAXABLE INCOME FROM MATERIAL ON RECORD. 4 ITA NO.3004/DEL/2015 C.O. NO.311/DEL/2016 8. FACTS OF THE CASE, IN BRIEF, ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER PROVIDED A NUMBER OF OPPORTUNITIES TO THE ASSESSEE TO PRODUCE BOOKS OF ACCOUNT ALONG WITH BIL LS/VOUCHERS BUT THERE WAS NO COMPLIANCE ON THE PART OF THE ASSESSEE. AS A RESUL T OF NON-PRODUCTION OF BOOKS OF ACCOUNT, THE ASSESSING OFFICER EXAMINED OTHER DO CUMENTS TO FACILITATE ASCERTAINMENT OF THE INCOME OF THE ASSESSEE. WHILE EXAMINING ONE OF THESE DOCUMENTS I.E. FORM 26AS, THE ASSESSING OFFICER FOU ND THAT THE GROSS RECEIPTS OF THE ASSESSEE AS PER FORM 26AS WERE RS.71,01,51,3 52/- WHEREAS THE ASSESSEE HAS SHOWN GROSS RECEIPTS OF RS.62,66,07,388/-. WHE N ASKED TO RECONCILE, THE ASSESSEE SUCCEEDED TO SOME EXTENT BUT HE COULD NOT RECONCILE THE TWO ACCOUNTS COMPLETELY. THE ASSESSING OFFICER THEREFORE ADOPTE D THE GROSS RECEIPTS TO BE RS.64,44,99,299/- INSTEAD OF RS.62,66,06,933/- DUE TO INABILITY OF THE ASSESSEE TO PRODUCE BOOKS OF ACCOUNT AND OTHER NECESSARY EVIDEN CE COUPLED WITH HIS FAILURE TO RECONCILE THE GROSS RECEIPTS AS PER HIS PROFIT & LOSS ACCOUNT ON THE ONE HAND AND GROSS RECEIPTS AS PER FORM 26AS. THE ASSESSING OFFICER ACCORDINGLY REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE AND E STIMATED THE PROFIT OF THE ASSESSEE AT 2% OF THE GROSS RECEIPTS WHICH RESULTED IN A TOTAL ADDITION OF RS.84,99,091/- TO THE INCOME OF THE ASSESSEE. 9. BEFORE THE LD. CIT(A), IT WAS SUBMITTED THAT VAR IOUS REPLIES FILED BY THE ASSESSEE WERE NEVER CONSIDERED BY THE ASSESSING OFF ICER PROPERLY AND THE 5 ITA NO.3004/DEL/2015 C.O. NO.311/DEL/2016 ASSESSING OFFICER HAS WRONGLY MENTIONED THAT COMPLE TE BOOKS OF ACCOUNT ARE NOT MAINTAINED. HOWEVER, THE FACT REMAINS THAT ALL BOOKS OF ACCOUNT WERE PRODUCED BEFORE THE ASSESSING OFFICER ALONG WITH RE QUISITE BILLS AND VOUCHERS. REFERRING TO VARIOUS DECISIONS, IT WAS SUBMITTED TH AT THE ESTIMATION OF PROFIT @ 2% OF GROSS RECEIPT BY THE ASSESSING OFFICER IS NOT JUSTIFIED. 10. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE AND CONSIDERING THE PAST RESULTS, THE LD. CIT(A) RESTRICTED SUCH GP RAT E TO 1.5% OF THE GROSS RECEIPTS BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE I.T. ACT. 11. AGGRIEVED WITH SUCH PART RELIEF GRANTED BY THE LD. CIT(A), THE REVENUE FILED AN APPEAL AGAINST WHICH THE ASSESSEE HAS FILE D THE CROSS OBJECTION. 12. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. IT IS AN ADMITTED FACT THAT BEFORE THE ASSESSING OFFICER THE ASSESSEE COULD NOT EXPLAIN TH E DIFFERENCE THE TURNOVER REFLECTED IN THE PROFIT & LOSS ACCOUNT AND THE AMOU NT IN FORM 26AS FOR WHICH THE ASSESSING OFFICER RESORTED REJECTION OF BOOK RE SULTS AND ESTIMATION OF THE PROFIT BY ADOPTING GP RATE OF 2% OF THE GROSS TURNO VER. WE FIND THE ASSESSEE BEFORE THE LD. CIT(A) RECONCILED SUCH DIFFERENCE TO SOME EXTENT BUT AT THE SAME TIME AN AMOUNT OF RS.1,78,92,755/- COULD NOT BE REC ONCILED FOR WHICH THE LD. CIT(A) WHILE UPHOLDING THE REJECTION OF BOOK RESULT S RESTRICTED SUCH GP RATE TO 1.5% AS AGAINST 2% ADOPTED BY THE ASSESSING OFFICER ON THE BASIS OF PAST 6 ITA NO.3004/DEL/2015 C.O. NO.311/DEL/2016 RESULTS. IT IS THE SUBMISSION OF THE LD. COUNSEL F OR THE ASSESSEE THAT SUCH GP RATE WAS ACCEPTED AT 1.23% FOR ASSESSMENT YEARS 2008-09 AND 2009-10 AND 0.96% FOR ASSESSMENT YEAR 2010-11. THEREFORE, AS AGAINST 0.70% DECLARED BY THE ASSESSEE DURING THE IMPUGNED ASSESSMENT YEAR THE AD OPTION OF GP RATIO AT 1.5% BY THE LD. CIT(A) IS ON THE HIGHER SIDE. WE HAVE G ONE THROUGH THE PAST RESULTS AND FIND THAT THE TURNOVER OF THE ASSESSEE IN ASSES SMENT YEAR 2008-09 WAS AT RS.24,59,78,295.53, RS.29,69,73,739.26 FOR ASSESSME NT YEAR 2009-10, RS.42,07,31,520.56 FOR ASSESSMENT YEAR 2010-11 AND RS.62,66,07,387.68 FOR ASSESSMENT YEAR 2011-12. WE FIND WHILE TURNOVER OF THE ASSESSEE IS INCREASING FROM YEAR TO YEAR THE GP RATE IS DECREASING. IT IS ALSO NOT UNDERSTOOD AS TO HOW THE INCOME AS PER RETURN OF INCOME FOR ASSESSMENT Y EARS 2008-09 AND 2009-10 ARE SAME AT RS.36,48,898.75 WHEREAS THE TURNOVER FO R ASSESSMENT YEAR 2008-09 IS RS.24.60 CRORES AND FOR ASSESSMENT YEAR 2009-10 IS RS.29.70 CRORES. HOWEVER, IT IS ALSO AN ADMITTED FACT THAT THE CASE OF THE ASSESSEE WAS UNDER SCRUTINY FOR ASSESSMENT YEAR 2008-09 WHEREIN THE BO OK RESULTS WERE ACCEPTED WITH SOME MINOR DISALLOWANCES. SIMILARLY FOR ASSES SMENT YEAR 2009-10 THE BOOK RESULTS WERE ACCEPTED WITH MINOR DISALLOWANCES SUCH AS VEHICLE RUNNING EXPENSES AND DEPRECIATION ON MOTOR CAR. UNDER THES E CIRCUMSTANCES AND CONSIDERING THE PAST RESULTS, WE ARE OF THE CONSIDE RED OPINION THAT THE ADOPTION OF GROSS PROFIT RATE OF 1.5% APPEARS TO BE ON HIGHE R SIDE. CONSIDERING THE 7 ITA NO.3004/DEL/2015 C.O. NO.311/DEL/2016 TOTALITY OF THE FACTS OF THE CASE, THE ESTIMATION O F GP RATE AT 1.25% OF THE GROSS RECEIPTS FOR THE IMPUGNED ASSESSMENT YEAR, IN OUR O PINION, WILL MEET THE ENDS OF JUSTICE. WE HOLD AND DIRECT ACCORDINGLY. THE GROU NDS RAISED BY THE ASSESSEE IN CROSS OBJECTION ARE ACCORDINGLY PARTLY ALLOWED. 13. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED ON ACCOUNT OF LOW TAX EFFECT AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 20 TH SEPTEMBER, 2018. SD/- SD/- (SUCHITRA KAMBLE) (R. K. P ANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 20-09-2018. SUJEET COPY OF ORDER TO: - 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT 4) THE CIT(A) 5) THE DR, I.T.A.T., NEW DELHI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, NEW DELHI