T.C. Agro Pvt. Ltd, V. Joint Commisioner of Income Tax,

ITA 1215/CHANDI/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5112 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 24-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Assessee Lawyers: RAKESH JAIN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES(SMC), CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA NO. 1215/CHD/2016 ASSESSMENT YEAR: 2011-12 T.C. AGRO PVT. LTD., VS. THE JCIT VILL. AJRAWER, KURUKSHETRA KURUKSHETRA RANGE, HARYANA KURUKSHETRA, HARYANA PAN NO. AACCT2399C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAKESH JAIN RESPONDENT BY : SHRI S.K. MITTAL DATE OF HEARING : 29/05/2017 DATE OF PRONOUNCEMENT : 29/05/2017 ORDER THIS APPEAL BY THE ASSESSEE HAS BEEN DIRECTED AGAIN ST THE ORDER OF LD. CIT(A), KARNAL DT. 20/09/2016 FOR ASSESSMENT YEAR 2 011-12, CHALLENGING THE ADDITION OF RS. 20,00,000/- FOR INCREASED IN EXPEND ITURE. 2. I HAVE HEARD THE LD. REPRESENTATIVES OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY IS RUNNING THE BUSINESS OF SOLVENT EXTRACTION PLANT, DEALING IN RI CE BRAN OIL AND SUNFLOWER OIL WHEREIN THE AUTHORIZED SHARE CAPITAL IS RS. 45 LAKH S ONLY, WHICH HAS BEEN FULLY SUBSCRIBED AND PAID UP AND THERE IS NO FRESH SHARE CAPITAL DURING THE YEAR. THE AO OBSERVED THAT DURING THE ASSESSMENT PROCEEDING T HE ASSESSEE HAS SUBMITTED THAT BOOKS OF ACCOUNT OF THE COMPANY HAVE BEEN LOST IN FIRE AND FIR WAS LODGED ON 23/01/2014. ACCORDINGLY, NO BOOKS OF ACCOUNT WERE AVAILABLE HOWEVER THE COPY OF THE AUDIT REPORT WAS FILED ALON GWITH COMPUTATION OF INCOME. THE AO OBSERVED THAT ASSESSEE HAS SHOWN NET PROFIT OF RS. 1,57,048/- WHICH INCLUDED OTHER INCOME OF RS. 4,72,256/-. THIS IMPLIED THAT EVEN WITH A TURNOVER OF RS. 11.84 CRORES, THERE WAS A LOSS SHOW N IN THE BUSINESS WHICH INCLUDES HUGE EXPENSES OF 1.21 CORES. IT WAS ALSO HIGHLIGHTE D THAT IN THE EARLIER YEARS WITH A TURNOVER OF RS. 16.07 CRORES, THERE WAS AN EXPEND ITURE ONLY OF RS. 1.06 CORES. THIS IMPLIED THAT THE ACCOUNTS OF THE ASSESSEE WERE NOT PROPERLY JUSTIFIED. THE AO HIGHLIGHTED THAT EARLIER THERE WERE NO MENTION ABOU T THE BOOKS HAVE BEEN DESTROYED HOWEVER LATER ON IT WAS INFORMED THAT IN FIRE BOOKS OF ACCOUNT WERE 2 DESTROYED. THE AO IN THE ABSENCE OF PRODUCTION OF B OOKS OF ACCOUNT REJECTED THE BOOK RESULT UNDER SECTION 145(3) OF THE INCOME TAX ACT. THE AO IN THE ASSESSMENT ORDER HAS ANALYSED THE VARIOUS EXPENSES CLAIMED DURING THE YEAR ALONGWITH REASONS FOR ESTIMATING THE PROFIT AND INC OME OF THE ASSESSEE. THE AO ACCORDINGLY MADE THE ADDITION OF RS. 20.00 LACS TO PLUG THE LEAKAGE OF REVENUE IF ANY, AND LOOKING INTO THE CHANGE OF OIL BUSINESS DURING THE YEAR. 4. THE ADDITION WAS CHALLENGED BEFORE THE LD. CIT(A ) AND IT WAS EXPLAINED THAT SINCE BOOKS HAVE BEEN DESTROYED IN THE FIRE AN D ASSESSEE HAS EXPLAINED THE COMPARATIVE GP AND NP RATES IN EARLIER YEARS, T HEREFORE, THE AO HAS FAILED TO MAKE A FAIR ESTIMATE OF THE PROFIT OF THE ASSESSEE. LD. CIT(A) HOWEVER DISMISSED THE APPEAL OF THE ASSESSEE. 5. I HAVE HEARD THE LD. REPRESENTATIVES OF BOTH THE PARTIES. LD. COUNSEL OF THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND REFER TO PAPER BOOK PAGE NO. 102 WHICH IS COPY OF T HE FIR , PAPER BOOK PAGE NO. 103 WHICH IS THE NEWS ITEM GIVEN IN THE NEWS PAPER FOR FIRE IN THE BUSINESS PREMISES OF THE ASSESSEE AND PAPER BOOK PAGE NO. 10 4 WHICH IS COMPARATIVE CHART OF PRECEDING THREE YEARS TO SHOW THAT GP AND NP RATE OF THE ASSESSEE IS BETTER AS COMPARED TO EARLIER YEARS. HE HAS RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF BRIJ BHUSHAN L AL PARDUMAN KUMAR VS. CIT 115 ITR 524(SC) IN WHICH IT WAS HELD AS UNDER: THE AUTHORITY MAKING A BEST JUDGMENT ASSESSMENT MU ST MAKE AN HONEST AND FAIR ESTIMATE OF THE INCOME OF THE ASSESSEE AND THOUGH A RBITRARINESS CANNOT BE AVOIDED IN SUCH ESTIMATE THE SAME MUST NOT BE CAPRI CIOUS BUT SHOULD HAVE A REASONABLE NEXUS TO THE AVAILABLE MATERIAL AND THE CIRCUMSTANCES OF THE CASE.- CIT VS. LAXMINARAIN BADRIDAS (1937) 5 ITR 170 (PC) : TC11R.192 FOLLOWED; RAGHUBAR MANDAL HARIHAR MANDAL VS. STATE OF BIHAR (1957) 8 S TC 770 (SC) AND STATE OF KERALA VS. C. VELUKUTTY (1966) 60 ITR 239 (SC) APPL IED. 6. ON THE OTHER HAND LD. DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT AVERAGE OF THE LAST YEAR COULD B E APPLIED AS PROFIT. 7. AFTER CONSIDERING THE RIVAL SUBMISSION, I AM OF THE VIEW THAT ADDITION OF RS. 20,00,000/- IS WHOLLY UNJUSTIFIED. IT IS NOT IN DIS PUTE THAT THERE WAS FIRE IN THE PREMISES OF THE ASSESSEE AND THE BOOKS OF ACCOUNT A ND THE OTHER DOCUMENTS OF THE ASSESSEE HAVE BEEN LOST IN THE FIRE. HOWEVER IT IS ALSO A FACT THAT DUE TO ABOVE REASON BOOKS OF ACCOUNT AND OTHER DOCUMENTS H AVE NOT BEEN PRODUCED BEFORE THE AUTHORITIES BELOW. THEREFORE, A O MAY BE JUSTIFIED IN REJECTING THE BOOK RESULT UNDER SECTION 145(3) OF T HE INCOME TAX ACT. THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF COMMISS IONER OF INCOME-TAX VS GOTAN LIME KHANIJ UDHYOG 256 ITR 243 HELD THAT MERE REJECTION OF THE BOOKS OF ACCOUNT DOES NOT MEAN THAT ADDITION HAS TO BE NECES SARILY MADE TO THE 3 RETURNED INCOME OF THE ASSESSEE. IN THE PRESENT CAS E THE ASSESSEE DESPITE DID NOT PRODUCE THE BOOKS OF ACCOUNT BEFORE THE AUTHORI TIES BELOW BUT FILED THE COMPARATIVE CHART OF LAST PRECEDING THREE YEARS TO SHOW THAT IN ASSESSMENT YEAR UNDER APPEAL ASSESSEE HAS SHOWN GP OF 5.71% WITH NP OF 0.13%. IN THE PRECEDING ASSESSMENT YEAR 2010-11 THE GP RATE OF TH E ASSESSEE WAS 4.28% WITH NP RATE OF 0.12%. SIMILARLY IN ASSESSMENT YEAR 2009 -10 THE GP RATE OF ASSESSEE WAS 6.78% WITH NP RATE OF 0.12%. THEREFORE THE GP R ATE AND NP RATE OF THE ASSESSEE AS DECLARED IN ASSESSMENT YEAR UNDER APPEA L WAS BETTER AS COMPARED TO THE IMMEDIATE PRECEDING ASSESSMENT YEAR 2010-11. HOWEVER IN ASSESSMENT YEAR 2009-10 GP RATE WAS SLIGHTLY BETTER BUT NP RAT E WAS 0.12%. THEREFORE CONSIDERING THE HISTORY OF THE ASSESSEE, IT IS CLEA R THAT EVEN IF BOOKS OF ACCOUNT OF THE ASSESSEE HAVE BEEN REJECTED BUT ASSESSES HAS SH OWN MORE PROFIT IN ASSESSMENT YEAR UNDER APPEAL AS COMPARED TO THE EAR LIER YEAR. THEREFORE THE BEST JUDGMENT MADE BY THE AUTHORITIES BELOW. IN THE FACTS AND CIRCUMSTANCES OF THE CASE WAS NOT HONEST AND FAIR ESTIMATE OF INCOME . FURTHER AO HAS NOT BROUGHT ANY COMPARATIVE CASES ON RECORD TO PROVE TH AT THE INCOME DECLARED BY THE ASSESSEE WAS NOT PROPER. AO MADE THE ADDITIO N OF RS. 20,00,000/- IN ORDER TO PLUG THE LEAKAGE OF REVENUE IF ANY, THEREFORE IT APPEARS TO ME THAT ESTIMATE OF INCOME BY DISALLOWING EXPENDITURE WAS MERELY ADH OC IN NATURE. IN VIEW OF ABOVE JUDGMENTS AND CONSIDERING THE ABOVE DISCUSSIO N IN LIGHT OF THE HISTORY OF THE ASSESSEE, I AM OF THE VIEW THAT THE ADDITION OF RS. 20,00,000/- TO THE INCOME OF THE ASSESSEE IS NOT JUSTIFIED. I ACCORDINGLY SET ASIDE THE ORDER OF THE AUTHORITIES BELOW AND DELETED THE ENTIRE ADDITION. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- (BHAVNESH SAINI) JUDICIAL MEMBER DATED : 29/05/2017 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, THE CIT(A), THE DR