M/s. S.B. Industries, Muzaffarnagar V. ITO, Muzaffarnagar

ITA 1056/DEL/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7154 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC 1
• Next Hearing Date: 14-09-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 20-02-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts
• Section: 10; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES SMC - 1 , NEW DELHI BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER ITA NO. 1056 /DEL/2015 AY: 20 10 - 11 M/S SB INDUSTRIES VS. ITO, WARD 1 PREM CASTING RAINBOW ROAD MUZAFFARNAGAR MUZAFFARNAGAR PAN: ABPFS 4829 M (APPELLANT) (RESPONDENT) APPELLANT BY : SH. ANKIT GUPTA, ADV. RESPONDENT BY : SH. N.K.BANSAL, SR.D.R. DATE OF HEARING : 14.09.2016 DATE OF PRONOUNCEMENT : 16 .09.2016 ORDER THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER PASSED BY THE LD. CIT(A) , MUZAFFARNAGAR ON 31.3.2014 IN RELATION TO THE ASSESSMENT YEAR (A.Y.) 20 10 - 11 . 2. THE FIRST ISSUE IN THIS APPEAL IS AGAINST THE CONFIRM ATION OF ADDITION OF RS.18 LAKH MADE BY ESTIMATING PROFIT. 3. SUCCINCTLY , THE FACTS OF THE CASE ARE THAT THE ASSESSEE DERIVES INCOME FROM MANUFACTURE OF AGRICULTURAL IMPLEMENTS , ITA 1056/DEL/2015 A.Y. 2010 - 11 S.B.INDUSTRIES, MUZAFFARNAGAR 2 SUCH AS , TASLA, FAWRA ETC. THE R AW MATERIAL USED FOR MANUFACTURING THESE IMPLEMENTS IS SCRAP . AGAINST THE SALES FOR THE CURRENT YEAR AMOUNTING T O RS.1.67 CRORES , WHICH ALSO INCLUDED THE SCRAP SALES OF RS. 8 .15 LAKHS , THE ASSESSEE SHOWED GROSS PROFIT AT THE RATE OF 3. 3 3%. ON THE PERUSAL OF DETAILS , THE ASSESSING OFFICER (A.O.) OBSERVED THAT OUT OF TOTAL PURCHASES OF RAW MATERIAL (SCRAP) AMOUNTING TO R S.1.42 CRORE , THE ASSESSEE COULD PRODUCE BILLS WORTH RS.37.26 LAC AND THE REMAINING P URCHASES OF RS.1.05 CRORE WERE NOT VERIFIABLE . SIMILARLY , IT WAS FOUND THAT DIRECT EXPENSES AMOUNTING TO RS.22.32 LAK H UNDER VARIOUS HEADS , SUCH AS , L ABOUR CHARGES, M ANUFACTURING EXPENSES AND W AGES ETC. , W ERE NOT PROPERLY VOUCHED. IN THE LIKE MANNER, CERTAIN OTHER DEFICIENCIES WERE ALSO FOUND QUA THE INCURRING OF EXPENSES . THE A.O. NOTED THAT THE ASSESSEE ALSO FAILED TO PRODUCE SALE BILLS IN RELATION TO SALES SHOWN AT RS.1.67 CRORE . IN THE ABOVE FACTUAL BACKGROUND , HE ESTIMATED SALES AT RS.1.80 CRORES. BY APPLYING AN ESTIMATED NET PROFIT RATE OF 10% , HE COMPUTED INCOME FROM BUSINESS AT RS.18 LAKHS. THE LD. CIT(A) SUSTA INED THE ADDITION, AGAINST WHICH THE ASSESSEE HAS COME UP IN APPEAL BEFORE THE TRIBUNAL. 4. AFTER CONSIDERING RIVAL SUBMISSIONS AND PERUSING RELEVANT MATERIAL ON RECORD, IT IS OBSERVED THAT THERE ARE CERTAIN CONTRADICTIONS IN RECORDING OF THE FACTUAL POSITION BY THE AO AND THE ASSERTIONS MADE ON BEHALF OF THE ASSESSEE. WHERE AS THE A.O. HAS RECORDED THAT THE ASSESSEE PRODUCED PURCHASE BILLS ONLY FOR RS.37.26 LAKHS OUT OF TOTAL OF RS. 1.42 CRORES, THE LD. A.R. HAS PLACED ON RECORD COPIES OF ALL THE I NVOICES AND SUBMITTED THAT THESE WERE AVAILABLE BEFORE THE A.O. AS WELL. SIMILARLY THERE ARE ITA 1056/DEL/2015 A.Y. 2010 - 11 S.B.INDUSTRIES, MUZAFFARNAGAR 3 CONTRADICTIONS QUA THE SUPPORT FOR EXPENSES. IT IS ALSO FOUND THAT THE A.O. HAS NOT GIVEN ANY BASIS FOR ES TIMATING SALES AT RS.1.80 CRORE AND FURTHER TH E APPLICATION OF PROFIT RATE AT 10%. AS THE ASSESSEE NOW CLAIMS TO HAVE THE ENTIRE MATERIAL AVAILABLE WITH IT E NABLING THE A.O. TO COMPLETE ASSESSMENT ON THE BASIS OF DECLARED RESULTS, I CONSIDER IT EXPEDIENT TO SET ASIDE THE IMPUGNED ORDER AND REMIT THE MATTER TO THE FILE OF THE A.O. FOR DETERMINING INCOME AS PER LAW ON THE BASIS OF EVIDENCE NOW AVAILABLE WITH THE ASSESSEE. I ORDER ACCORDINGLY. 5. THE LAST GROUND OF THIS APPEAL IS AGAINST THE CONFIRM ATION OF ADDITION OF RS.10 LAKH . THE ASSESSEE HAD SHOW N TWO CREDITORS, NAMELY , M/S S HREE K R I SHNA WITH A BALANCE OF RS.7 , 28 , 708 / - AND M/S GUPTA SALES WITH A BALANCE OF RS.2 , 71 , 292 / - . ON BEING CALLED UPON TO ESTABLISH THE GENUINENESS OF THESE CREDITORS , THE ASSESSEE FILED PHOTO COPIES OF THE BILLS. THE A.O. OBSERVED THAT THE INVOICES WERE NOT CHECK ED UP BY ANY TRADE TAX AUTHORITY . THE ASSESSEE SUBMITTED THAT THE OU TSTANDING BALANCE OF RS.10 LAKH TO THESE TWO PARTIES WAS PAID BY CHEQUES IN THE FOLLOWING YEAR. SINCE THE ASSESSEE COULD NOT PRODUCE THE RELEVANT BANK ACCOUNT, THE A.O. OPINED THAT THE ASSESSEE PAID THE SAID AMOUNTS IN CASH FROM ITS UNDISCLOSED SOURCES DURING THE YEAR ITSELF . THIS LED TO THE MAKI NG OF AN ADDITION OF RS.10 LAKH . THE LD. CIT(A) SUSTAINED THE SAME. 6. AFTER HEARING RIVAL SUBMISSIONS AND PERUSING MATERIAL ON RECORD, IT IS OBSERVED THAT THE BALANCE OF RS.10 LAKH APPEARING IN THE ACCOUNTS OF THESE TWO PARTIES DO ES NOT APPEAR IN THE BALANCE SHEET OF THE ASSESSEE FOR THE SUCCEEDING YEAR, A COPY OF WHICH IS ITA 1056/DEL/2015 A.Y. 2010 - 11 S.B.INDUSTRIES, MUZAFFARNAGAR 4 A VAILABLE ON RECORD. THIS SHOWS THAT THE OUTSTANDING BALANCES AT THE END OF THE CURRENT YEAR W ERE DULY DISCHARGED BY THE ASSESSEE IN THE SUCCEEDING YEAR. THE OBSERVATION OF THE A.O. THAT THE INVOICES WERE NOT CHECKED BY ANY T RADE T AX A UTHORITY IS AGAIN INCORRECT AS IS APPARENT FROM THE COPIES OF THE BILLS. IT CAN BE SEEN THAT THESE BILLS APPARENTLY CONTAIN ALL THE RELEVANT PARTICULARS , SOME OF WHICH ARE DULY CHECKED. BE THAT AS IT MAY, THESE AMOUNTS TOTALLING RS.10 LAKH REPRESENT TRADE CREDITORS . WHEN THE A.O. REJECTED THE BOOKS OF ACCOUNTS AND PROCEEDED TO ESTIMATE THE INCOME BY APPLYING A PERCENTAGE OF PROFIT ON THE ESTIMATED TRADE SALES, IT WAS NO MORE OPEN TO HIM TO AGAIN REVERT TO THE BOOKS OF ACCOUNTS AND MAKE SEPARATE ADDITION S FROM THE T RANSACTIONS CONCERNING PURCHASES AND SALES. IN VIEW OF THE FOREGOING DISCUSSION , I AM OF THE CONSIDERED OPINION THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN SUSTAI NING THE ADDITION OF RS.10 LAKH, WHICH IS HEREBY DELETE D . THIS GROUND IS ALLOWED. 7. IN THE RESU LT THE APPEAL IS PARTLY ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 16 .09.2016. SD/ - (R.S. SYAL) ACCOUNTANT MEMBER DATED: 16. 09.2016. MANGA ITA 1056/DEL/2015 A.Y. 2010 - 11 S.B.INDUSTRIES, MUZAFFARNAGAR 5 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT (A) 5 . DR, ITAT BY ORDER AR, ITAT, NEW DELHI. ITA 1056/DEL/2015 A.Y. 2010 - 11 S.B.INDUSTRIES, MUZAFFARNAGAR 6 DATE 1. DRAFT DICTATED ON 14.9.16 2. DRAFT PLACED BEFORE THE AUTHOR 3. APPROVED DRAFT COMES TO THE SR.PS/PS 4. FILE SENT TO THE BENCH CLERK 5. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 6. DATE ON WHICH FILE GOES TO THE AR 7. DATE OF DISPATCH OF ORDER.