Sri G T Babu Reddy , Chitradurga V. The Income Tax Officer Ward-1 , Chitradurga

ITA 1320/BANG/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7580 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 09-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: NARENDRA SHARMAN
• Keywords: Question of law
• Section: 144

Judgement Text

ITA.1320/BANG/2017 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU BENCH 'A', BENGALURU BEFORE SHRI. JASON P. BOAZ, ACCOUNTANT MEMBER AND SHRI. LALIET KUMAR, JUDICIAL MEMBER I.T.A NO.1320/BANG/2017) (ASSESSMENT YEAR : 2009-10) SHRI. G. T. BABU REDDY, PROP : M/S. GREEN PARK BAR, 7 TH CROSS, WEST SIDE, JCR EXTENSION, CHITRADURGA .. APPELLANT PAN : AHVPB3332J V. INCOME-TAX OFFICER, WARD -1, BENGALURU .. RESPONDENT ASSESSEE BY : SHRI. NARENDRA SHARMAN, ADVOCATE REVENUE BY : SHRI. B. R. RAMESH, JCIT HEARD ON : 17.07.2018 PRONOUNCED ON :31.07.2018 O R D E R PER LALIET KUMAR, JUDICIAL MEMBER : THE PRESENT APPEAL IS FILED BY THE ASSESSEE AGAINS T THE ORDER OF THE CIT (A), DAVANGERE, DT.22.02.2017, FOR THE ASSE SSMENT YEAR 2009-10, ON THE FOLLOWING EFFECTIVE GROUNDS : 2. THE LEARNED CIT (A) IS NOT JUSTIFIED IN DIRECTIN G THE LEARNED A.O TO ESTIMATE THE GROSS PROFIT AT 12.61% AS AGAINST 20% ADOPTED BY THE LEARNED A. O UNDER THE F ACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS CASE. ITA.1320/BANG/2017 PAGE - 2 3. THE LEARNED CIT (A) OUGHT TO HAVE APPRECIATED TH AT THE APPELLANT HAS MAINTAINED THE BOOKS OF ACCOUNTS WHICH ARE AUDITED U/S.44AB OF THE ACT AND PRODUCED BEFORE THE LEARNED A.O. IN COURSE OF ASSESSMENT PROCEEDINGS AN D NO DEFECTS HAVE BEEN FOUND BY THE LEARNED A.O. FOR REJ ECTING THE INCOME REPORTED BY THE APPELLANT BASED THE BOOK S OF ACCOUNTS MAINTAINED AND CONSEQUENTLY, THE DIRECTION OF THE LEARNED CIT (A) TO ESTIMATE THE INCOME AT 12.61% DESERVES TO BE VACATED. 02. BRIEF FACTS ARE, THE CASE OF THE ASSESSEE WAS S ELECTED FOR SCRUTINY ASSESSMENT. NOTICE WAS ISSUED, IN RESPONS E TO WHICH ASSESSEE FILED THE RETURN OF INCOME ON 30.09.2009 D ECLARING A TOTAL INCOME OF RS.4,95,065/-, GP OF 6.26% AND AGRICULTUR AL INCOME OF RS.9,51,294/-. HOWEVER THE AO MADE ADDITION ON ACC OUNT OF GROSS PROFIT AT THE RATE OF 20% AFTER MAKING ENQUIRIES FR OM KSBCL AUTHORITIES AND HAS OBSERVED AS UNDER IN PARA 2 OF HIS ORDER : 02. THE ASSESSEE IS A RETAILER IN LIQUOR BUSINESS . DURING THE COURSE OF PROCEEDINGS IT IS NOTICED THAT THE AS SESSEE HAS DECLARED LESS GROSS PROFIT I.E., @6.36%, IT IS VERY LESS, FURTHER THE UNDERSIGNED ISSUED AN LETTER TO KSBCL A UTHORITIES CALLING FOR THE PERCENTAGE OF PROFIT ON SALE FIXED BY THE KARNATAKA GOVERNMENT DURING THE PERIOD 01-04-2008 T O 31- 03-2009 TO RETAILERS, IN THIS REGARD THE KSBCL AUTH ORITIES REPLIED STATING THAT THE RETAILER IS GETTING 20% PR OFIT ON SALE OF LIQUOR AND THEY HAVE ALSO FURNISHED ITEM WISE DE TAILS, IN THIS REGARD THE UNDERSIGNED HAS GIVEN AN OPPORTUNIT Y TO EXPLAIN OR OBJECTION IF ANY, BUT THE ASSESSEE WAS N OT ABLE TO EXPLAIN WITH PROPER EVIDENCE AND THE ASSESSEE HAS E XPRESSED AT THE TIME OF HEARING THAT IT IS A COMPETITIVE BUS INESS, WE CANNOT SELL THE LIQUOR WITH HIGHER PROFIT, AS WE HA VE TO SELL ON LOWER RATES ALSO AND HE ALSO TOLD DURING THE COURSE OF VERIFICATION THAT WE HAVE NOT GOT 20% OF GROSS PROF IT, WITHOUT ANY DOCUMENTARY EVIDENCE THE CLAIMS CANNOT BE ACCEP TED. HENCE THE UNDERSIGNED HAS ADOPTED AT 20% GROSS PROF IT AS ITA.1320/BANG/2017 PAGE - 3 PER THE INFORMATION RECEIVED FROM KSBCL , ON HIS SA LES, ACCORDINGLY THE SCRUTINY PROCEEDINGS IS COMPLETED .. FEELING AGGRIEVED BY THE ORDER OF ASSESSMENT, THE A SSESSEE FILED AN APPEAL BEFORE THE CIT (A). 03. BEFORE THE CIT (A) THE ASSESSEE SUBMITTED THAT THE AO SHOULD HAVE CONSIDERED THE GP ON ACTUAL SALES BASIS. FURT HER IT WAS THE CASE THAT ASSESSEE WAS MAINTAINING PROPER BOOKS OF ACCOUNT AND IT WAS EVEN AUDITED. THEREFORE THE GP DECLARED BY THE ASSESSEE SHOULD BE ACCEPTED. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE THAT NO MISTAKE WAS POINTED OUT BY THE AO DESPITE THE FA CT THAT THE ACCOUNTS WERE DULY AUDITED. HOWEVER THE CIT (A) WA S NOT TOTALLY CONVINCED AND THEREFORE, INSTEAD OF 20%, APPLIED 12 .61% AS DECLARED BY THE ASSESSEE IN A. Y 2008-09. BEING AG GRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 04. THE LEARNED AR BEFORE US SUBMITTED THAT THE GP ADDITION BASED ON THE CHART WAS INCORRECT AND THE LOWER AUTH ORITIES HAD NOT CONSIDERED THE FACT THAT THE BOOKS OF ACCOUNT HAVE NOT BEEN REJECTED BY THE AO. THE SOLE CONTENTION OF THE ASSESSEE BEF ORE THE CIT (A) WAS THAT THE LETTER ON THE BASIS OF WHICH THE AO HA D CALCULATED THE GP AT 20% WAS NOT PUT FORTH TO THE ASSESSEE AND THE REFORE THE CIT (A) CONSIDERING THE ORAL SITUATION HAD TAKEN THE PR EVIOUS YEARS GP WHICH WAS ACCEPTED BY THE ASSESSEE. THE ASSESSEE P LEADED THAT THE GP DECLARED BY THE ASSESSEE AT 6.71% SHOULD BE ACCE PTED. 05. THE LD. DR VEHEMENTLY SUPPORTED THE ORDERS OF T HE LOWER AUTHORITIES. ITA.1320/BANG/2017 PAGE - 4 06. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. WE FIND THAT THE HIGH COURTS IN THE MATTER OF CIT V . ANIL KUMAR & CO., [(2016) 67 TAXMANN.COM 278 (KAR)], CIT V. SYMP HONY COMFORT SYSTEM LTD [(2013) 35 TAXMANN.COM 533 (GUJ) ] AND PCIT V. MARG LTD [(2017) 84 TAXMANN.COM 52 (MAD), HAVE H ELD THAT NO ADDITION CAN BE MADE ON ESTIMATED BASIS WITHOUT REJ ECTING BOOKS OF ACCOUNT OF ASSESSEE. IN MARG LTD (SUPRA), THE ASSE SSMENT ORDER IS PASSED U/S.144 OF THE ACT, WITHOUT REJECTING THE BO OKS OF ACCOUNT. HOWEVER, IF WE LOOK INTO THE PROVISION OF SECTION 1 44 OF THE ACT THEN, IT IS CLEAR THAT SECTION 144 WORKS IN VARIOUS SITUATIONS MENTIONED IN 144(1)(A), (B) AND (C). BESIDES THAT A SPECIAL PROVISION IS ALSO GIVEN U/S.145(3) WHERE THE AO HAS BEEN GIVE N THE POWER TO ESTIMATE THE INCOME, IN CASE HE IS NOT SATISFIED WI TH THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNT, TO MAKE AN ASSESSME NT U/S.144 OF THE ACT. IN THE PRESENT CASE, THE AO ESTIMATED THE INCOME BASED ON THE INFORMATION OBTAINED FROM KSBCL AUTHORITIES DIS CLOSING THE PERCENTAGE OF PROFIT ON SALE FIXED BY THE KARNATAKA GOVERNMENT. IT IS NOT THE CASE OF THE AO THAT THE BOOKS WERE NOT P ROPERLY MAINTAINED. NOT EVEN A WORD HAS BEEN WHISPERED BY THE AO THAT THE BOOKS WERE NOT IN ACCORDANCE WITH THE METH OD OF ACCOUNTING, OR WERE INCORRECT / INCOMPLETE. IN OUR VIEW, THE LAWS COMMANDS US TO SET ASIDE THE ASSESSMENT MADE ON THE BASIS OF ESTIMATION, IF THE AO MADE THE ESTIMATION WITHOUT REJECTING ITA.1320/BANG/2017 PAGE - 5 THE BOOKS OF ACCOUNT. IN THE MATTER OF ANIL KUMAR (SUPRA), THE HONBLE JURISDICTIONAL HIGH COURT HAS HELD AS UNDER : 11. IN SO FAR AS THE ESTIMATION OF GROSS PROFIT MAD E BY THE ASSESSING OFFICER MODIFIED BY THE COMMISSIONER OF INCOME-TAX (APPEALS), THE TRIBUNAL HAS RIGHTLY HELD THAT WHEN THE BOOKS OF AC COUNT OF THE ASSESSEE HAD NOT BEEN REJECTED AND ASSESSMENT HAVING NOT BEE N FRAMED UNDER SECTION 144 OF THE INCOME-TAX ACT THE SAID AUTHORIT IES WERE IN ERROR IN RESORTING TO AN ESTIMATION OF INCOME AND SUCH EXERC ISE UNDERTAKEN BY THEM WAS NOT SUSTAINABLE. SECTION 145(3) OF THE ACT LAYS DOWN THAT THE ASSESSING OFFICER CAN PROCEED TO MAKE ASSESSMENT TO THE BEST OF HIS JUDGMENT UNDER SECTION 144 OF THE ACT ONLY IN THE E VENT OF NOT BEING SATISFIED WITH THE CORRECTNESS OF THE ACCOUNTS PROD UCED BY THE ASSESSEE. IN THE INSTANT CASE THE ASSESSING OFFICER HAS NOT REJE CTED THE BOOKS OF ACCOUNT OF THE ASSESSEE. TO PUT IT DIFFERENTLY THE ASSESSING OFFICER HAS NOT MADE OUT A CASE THAT CONDITIONS LAID IN SECTION 145(3) OF THE ACT ARE SATISFIED FOR REJECTION OF THE BOOKS OF ACCOUNT. TH US, WHEN THE BOOKS OF ACCOUNT ARE MAINTAINED BY THE ASSESSEE IN ACCORDANC E WITH THE SYSTEM OF ACCOUNTING, IN THE REGULAR COURSE OF HIS BUSINESS, SAME WOULD FORM THE BASIS FOR COMPUTATION OF INCOME. IN THE INSTANT CAS E IT IS NOTICED THAT NEITHER THE ASSESSING OFFICER NOR CIT(APPEALS) HAVE REJECTED THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE IN THE COURSE OF THE BUSINESS. AS SUCH TRIBUNAL HAS RIGHTLY REJECTED OR SET ASIDE THE PART IAL ADDITION MADE BY ASSESSING OFFICER FOR ARRIVING AT GROSS PROFIT AND SUSTAINED BY THE CIT(APPEALS) AND RIGHTLY HELD THAT ENTIRE ADDITION MADE BY THE ASSESSING OFFICER WAS LIABLE TO BE DELETED. THE SAID FINDING IS BASED ON SOUND APPRECIATION OF FACTS AND IT DOES NOT GIVE RISE FOR FRAMING SUBSTANTIAL QUESTION OF LAW. IN VIEW OF THE ABOVE, WE DO NOT FIND THAT THE ORDER PASSED BY THE CIT (A) IS IN ACCORDANCE WITH LAW. THEREFORE WE HO LD THAT THE ASSESSEE IS ENTITLED TO THE RELIEF CLAIMED. 07. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JULY, 2018. SD/- SD/- (JASON P. BOAZ) (LALIET KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER BENGALURU DATED : 31 .07.2018 ITA.1320/BANG/2017 PAGE - 6 MCN* COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.