M/s. Shiv & Company, Anand V. The Income Tax Officer, Ward-1, Anand

ITA 1596/AHD/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6821 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 05-06-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: NIRMIT ME H TA
• Keywords: Rejection of books of accounts; Business income; Source of fund; Question of law; Onus to prove
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND MS. MADHUMITA ROY, JUDICIAL MEMBER ./ITA NO.1596/AHD/2015 ( / ASSESSMENT YEAR : 2010-11) M/S. SHIV & COMPANY 3 RD FLOOR, RADHESHYAM COMPLEX GAMDI ROAD ANAND 388 001 / VS. THE INCOME TAX OFFICER WARD-1 ANAND - 388 001 ./ ./ PAN/GIR NO. : AAXES 9829 E ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI NIRMIT MEHTA, AR / RESPONDENT BY : SHRI JAYANT JHAVERI, SR.DR / DATE OF HEARING 14/12/2018 !'# / DATE OF PRONOUNCEMENT 01/01/2019 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TA X (APPEALS)2, VADODARA [CIT(A) IN SHORT] VIDE APPEAL NO.CAB/(A)-2 /442/2014-15 DATED 13/03/2015 ARISING IN THE ASSESSMENT ORDER PASSED UNDER S.143(3) OF THE INCOME TAX ACT, 1961(HEREINAFTER REFERRED TO AS 'THE ACT') DATED 01/03/2013 RELEVANT TO ASSESSMENT YEAR (AY) 2009-10 . 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL:- ALL THE GROUNDS OF APPEAL IN THIS APPEAL ARE MUTUAL LY EXCLUSIVE AND WITHOUT PREJUDICE TO EACH OTHER. ITA NO.1596/AHD/2015 M/S. SHIV & COMPANY VS. ITO ASST .YEAR - 2010-11 - 2 - 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-2 , VADODARA [THE CIT(A)] ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE INCOME TAX OFFICER, WA RD-1, ANAND (THE ASSESSING OFFICER) IN MAKING ADDITION OF RS.9,87,500/- BY DISALLOWING M.O. COMMISSION. 2. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONF IRMING THE ACTION OF THE ASSESSING OFFICER IN REJECTING THE BO OKS OF ACCOUNT WITHOUT POINTING OUT ANY DEFECTS THEREIN AND THEREB Y MAKING ADDITION OF RS.5,39,692/- TO THE INCOME OF THE APPE LLANT. 3. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONF IRMING THE ACTION OF ASSESSING OFFICER IN MAKING ADDITION OF RS.12,72,990/- ON ACCOUNT OF CESSATION OF LIABILITY BY INVOKING THE PROVISIONS OF SECTION 41(1) OF THE INCOME TAX A CT, 1961 (THE ACT). 4. WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTIONS OF ASSESSING OFFICER IN MAKING ADDITION ON ACCOUNT OF M.O. COMMI SSION AND CESSATION OF LIABILITY DESPITE THE FACT THAT THE BO OKS OF ACCOUNT WERE HELD TO BE UNRELIABLE AND REJECTED BY THE ASSE SSING OFFICER. 5. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONF IRMING THE ACTION OF ASSESSING OFFICER IN CHARGING INTEREST U/ S.234B OF THE ACT. 6. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONF IRMING THE ACTION OF ASSESSING OFFICER IN INITIATING PENALTY P ROCEEDING U/S.271(1)(C) OF THE ACT. 3. FIRST, WE TAKE UP GROUND NO. 4 OF THE APPEAL. T HE ISSUE RAISED BY THE ASSESSEE IN GROUND NO.4 IS THAT THE LD.CIT(A) E RRED IN CONFIRMING DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOU NT OF M.O. COMMISSION AND CESSATION OF LIABILITY DESPITE THE B OOKS OF ACCOUNT WERE REJECTED U/S 145(3) OF THE ACT. 4. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM AND ENGAGED IN THE BUSINESS OF TRADING IN STEEL AND COM MISSION AGENCY. AS ITA NO.1596/AHD/2015 M/S. SHIV & COMPANY VS. ITO ASST .YEAR - 2010-11 - 3 - PER FORM NO. 26AS, THE ASSESSEE RECEIVED MO COMMISS ION FROM M/S. BINANI CEMENT CO.LTD. AMOUNTING TO RS. 45,86,195/-, BUT IT HAS SHOWN COMMISSION INCOME FOR RS. 35,98,695/- ONLY IN ITS P &L ACCOUNT. THUS, THE DIFFERENCE OF RS.9,87,500/- WAS FOUND OUT BY TH E ASSESSING OFFICER. 5. THE ASSESSEE EXPLAINED THAT IT HAS PAID COMMISSI ON EXPENSES TO M/S SHIV & ASSOCIATES FOR RS. 9,87,500/- WHICH HAS BEEN ADJUSTED AGAINST THE COMMISSION INCOME. HOWEVER, THE TDS ON SUCH COMMISSION EXPENSE WAS DULY DEDUCTED BEFORE MAKING THE PAYMENT TO M/S SHIV & ASSOCIATES. THE ASSESSEE IN SUPPORT OF HIS CLAIM F ILED THE LEDGER COPY OF MO COMMISSION, COPIES OF THE BILL TO M/S BINANI CEM ENT CO.LTD., THE INCOME-TAX RETURN OF M/S SHIV ASSOCIATES AND THE CO PY OF THE BILL ISSUED TO M/S.SHIV & ASSOCIATES. 6. HOWEVER, THE ASSESSING OFFICER DURING THE ASSESS MENT PROCEEDINGS OBSERVED CERTAIN FACTS AS DETAILED UNDER: (I) THE ASSESSEE FAILED TO FILE THE DETAILS OF THE BUS INESS PROCURED THROUGH SHIV & ASSOCIATES. (II) THE ASSESSEE HAS ISSUED THE INVOICE OF RS.9,87,500/ - TO M/S SHIV & ASSOCIATES WHICH IS AGAINST THE PREVAILING ACCOUNTING PRACTICE. AS SUCH, M/S SHIV & ASSOCIATE S WAS SUPPOSED TO ISSUE THE BILL TO THE ASSESSEE FOR THE AMOUNT OF COMMISSION INCOME EARNED FROM THE ASSESSEE. (III) ONE OF THE PARTNERS, NAMELY SHRI RAMABHAI N.PATEL W AS ALSO THE PARTNER IN M/S.SHIV & ASSOCIATES HAVING 50% SHA RE. ITA NO.1596/AHD/2015 M/S. SHIV & COMPANY VS. ITO ASST .YEAR - 2010-11 - 4 - HOWEVER, THIS FACT WAS NOT BROUGHT IN THE TAX AUDIT REPORT UNDER THE PROVISIONS OF SECTION 40A(2)(B) OF THE AC T THOUGH THE IMPUGNED TRANSACTION WAS BETWEEN THE RELATED PA RTIES. (IV) M/S SHIV & ASSOCIATES HAS DECLARED THE TOTAL INCOME AT RS.1,04,410/-AND CLAIMED THE REFUND OF RS.68,727/- IN ITS INCOME-TAX RETURN. BESIDES THIS, THE SALARY EXPENS ES CLAIMED BY M/S.SHIV ASSOCIATES AMOUNTING TO RS.3,35,610/- I S GREATER THAN THE SALARY EXPENSES CLAIMED BY THE ASS ESSEE DESPITE THE FACT THE TURNOVER OF THE ASSESSEE EXCEE DS THE TURNOVER OF M/S SHIV & ASSOCIATES. THUS, IT WAS CL EAR THAT M/S.SHIV & ASSOCIATES CLAIMED MORE EXPENSES TO CLAI M FROM THE INCOME TAX DEPARTMENT. (V) THE ASSESSEE FAILED TO DISCHARGE HIS ONUS TO PROVE THAT THE COMMISSION EXPENSES WERE PAID TO M/S.SHIV ASSOCIATE S IN CONNECTION WITH THE BUSINESS. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER DISALLO WED COMMISSION EXPENSES OF RS. 9,87,500.00 AND ADDED THE SAME TO T HE TOTAL INCOME OF THE ASSESSEE. 7. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS SHOWN GROSS LOSS OF RS. 2,06,744/- IN RESPECT OF ITS TRADING BUSINES S. THE DETAILS OF THE GROSS LOSS CLAIMED BY THE ASSESSEE ARE GIVEN AS UND ER: SL.NO(S) PARTICULARS AMOUNT (IN RS.) 1. OPENING STOCK NIL ITA NO.1596/AHD/2015 M/S. SHIV & COMPANY VS. ITO ASST .YEAR - 2010-11 - 5 - 2. PURCHASES 1,68,54,190/- TOTAL 1,68,54,190/- LESS : SALES 1,66,47,446/- 3. CLOSING STOCK NIL 4. GROSS LOSS 2,06,744/- 7.1. THE ASSESSEE EXPLAINED THAT IT RECEIVED THE OR DER IN ADVANCE AT A PARTICULAR RATE AND AT THE TIME OF SALE THE RATE CA ME DOWN. THEREFORE, THE LOSS WAS INCURRED ON THE SALE OF THE GOODS AMOUNTIN G TO RS.2,06,744/- ONLY. 7.2. THE ASSESSEE ALSO SUBMITTED THAT IT HAS CLOSED DOWN ITS TRADING BUSINESS OF STEEL SUBSEQUENTLY. HOWEVER, THE ASSES SING OFFICER OBSERVED CERTAIN FACTS AS DETAILED UNDER: (I) THE ASSESSEE HAS FURNISHED PHOTOCOPIES OF PURCHASE BILLS IN SOME OF THE CASES. (II) THE ASSESSEE DID NOT PRODUCE THE SALE BILL. (III) THERE WERE NO QUANTITATIVE DETAILS MENTIONED IN THE TAX AUDIT REPORT IN FORM NO.3CD. 7.3. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER RE JECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND ESTIMATED PROFIT @ 2% OF THE TURNOVER ITA NO.1596/AHD/2015 M/S. SHIV & COMPANY VS. ITO ASST .YEAR - 2010-11 - 6 - AMOUNTING TO RS. 3,32,948/- BEING 2% OF TOTAL SALES . THUS, THE ADDITION OF RS.5,39,692/- (RS.3,32,948 + AMOUNT OF GROSS LO SS 2,06,744) AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 7.4. SIMILARLY, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD SHOWN SUNDRY CREDITORS OF RS.12,72,990/- IN THE NAM E OF M/S HANS ISPAT LTD. HOWEVER, ON THE CONFIRMATION RECEIVED U/S 133( 6) OF THE ACT M/S HANS ISPAT LTD. HAS SHOWN NIL CLOSING BALANCE. THE REFORE, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE LIABILIT Y OF RS. 12,72,990/- CEASED TO EXIST. THEREFORE, THE ASSESSING OFFICER TREATED SUCH AMOUNT OF TRADING LIABILITY AS INCOME U/S 41(1) OF THE ACT AN D ACCORDINGLY ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 8. THE AGGRIEVED ASSESSEE, PREFERRED AN APPEAL TO L D. CIT(A). 9. THE ASSESSEE BEFORE THE LD.CIT(A) SUBMITTED THAT IT HAD FILED ALL THE NECESSARY DETAILS OF PURCHASES AND SALES OF STE EL ALONG WITH THE COPIES OF THE VAT RETURNS. 10. AS THE ASSESSEE HAS NOT SHOWN ANY OPENING AND C LOSING STOCK OF THE QUANTITY. THEREFORE, THE COLUMN OF THE TAX AUD IT REPORT DISCLOSING THE DETAILS OF THE QUANTITY WAS LEFT BLANK. HOWEVER, T HE ASSESSEE HAS FURNISHED THE NECESSARY DETAILS OF PURCHASES AND SA LES ALONG WITH COPIES OF THE LEDGERS. BUT THERE WAS NO DEFECT POINTED OU T BY THE ASSESSING OFFICER, AND HE REJECTED THE BOOKS OF ACCOUNTS WITH OUT REJECTING THE PURCHASES AND SALES. HOWEVER, THE LD.CIT(A) CONFIR MED THE REJECTION OF ITA NO.1596/AHD/2015 M/S. SHIV & COMPANY VS. ITO ASST .YEAR - 2010-11 - 7 - THE BOOKS OF ACCOUNTS OF THE ASSESSEE BY OBSERVING THAT THE ASSESSEE HAS NOT FURNISHED THE COMPLETE DETAILS OF THE PURCHASE AND SALES. THE ASSESSEE HAS ALSO NOT FURNISHED THE QUANTITATIVE DE TAILS IN THE TAX AUDIT REPORT. THEREFORE, THE ORDER OF THE ASSESSING OFFI CER WAS CONFIRMED BY THE LD.CIT(A). 11. THE COMMISSION EXPENSES OF RS.9,87,500/- WAS AL SO CONFIRMED ON THE GROUND THAT IT WAS NOT SHOWN IN THE PROFIT AND LOSS ACCOUNT. THE LD. CIT-A ALSO CONFIRMED THE AMOUNT OF LIABILIT Y IN THE NAME OF M/S HANS ISPAT LTD. BY OBSERVING THAT THESE LIABILITIES HAVE CEASED TO EXIST. 12. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 13. THE LD.AR BEFORE US FILED A PAPER-BOOK RUNNING FROM PAGE 1 TO 109 AND SUBMITTED THAT NO ADDITION COULD BE MADE IN RESPECT OF COMMISSION EXPENSES AND CESSATION OF LIABILITY IN T HE EVENT OF REJECTION OF BOOKS OF ACCOUNTS U/S 145(3) OF THE ACT. AS PER THE LD.AR, ONCE THE BOOKS OF ACCOUNTS GOT REJECTED, THEN A PROFIT ON RE ASONABLE BASIS CAN BE ESTIMATED FOR DETERMINING THE INCOME OF THE ASSESSE E. 14. ON THE OTHER HAND, THE LD.DR SUBMITTED THAT THE BOOKS OF ACCOUNTS WERE REJECTED IN RESPECT OF ITS TRADING BUSINESS OF STEEL. BUT THE PROFIT DECLARED BY THE ASSESSEE IN RESPECT OF COMMISSION I NCOME WAS DULY ITA NO.1596/AHD/2015 M/S. SHIV & COMPANY VS. ITO ASST .YEAR - 2010-11 - 8 - ADMITTED AS PER THE BOOKS OF ACCOUNTS OF THE ASSESS EE. THE LD.DR VEHEMENTLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 15. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE ASSESSEE IN THE INSTANT CA SE HAS DECLARED INCOME FROM TWO DIFFERENT SOURCES UNDER THE HEAD BUSINESS AND PROFESSION. THE 1 ST SOURCE OF INCOME WAS FROM ITS TRADING BUSINESS OF STEEL, AND THE 2 ND SOURCE OF INCOME WAS COMMISSION INCOME EARNED FROM THE BINANI CEMENT LTD. THE ASSESSEE WAS MAINTAINING A SINGLE SET OF THE BO OKS OF ACCOUNTS IN RESPECT OF BOTH THE SOURCES OF INCOME. THE CONSOLID ATED FINANCIAL STATEMENTS WERE PREPARED DECLARING A NET PROFIT OF RS. 8,30,153/- ONLY. THUS IT IS CLEAR THAT THE ASSESSEE DERIVED SUCH PRO FIT AFTER CLAIMING COMBINED INDIRECT EXPENSES AGAINST BOTH THE SOURCES OF INCOME. 15.1. HOWEVER, THE AO FOUND THAT THE ASSESSEE HAS SHOWN THE GROSS LOSS IN RESPECT OF ITS TRADING BUSINESS AMOUNTING TO RS. 2,06,744/-. BUT THE AO WAS NOT SATISFIED WITH THE CLAIM OF THE ASSESSEE IN RESPECT OF ITS TRADING BUSINESS OF STEEL WHERE THE ASSESSEE SHOWED THE GRO SS LOSS. ACCORDINGLY, THE AO REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESS EE IN RESPECT OF ITS TRADING BUSINESS AND ESTIMATED THE PROFIT AT THE RA TE 2% OF THE TURNOVER OF ITS STEEL BUSINESS AMOUNTING TO RS. 3,32,948/- (BEI NG 2% OF RS. 1,66,47,446/-). IT IS ALSO IMPORTANT TO NOTE THAT T HERE WAS NO OPENING AND CLOSING STOCK OF MATERIAL IN THE STEEL BUSINESS. ITA NO.1596/AHD/2015 M/S. SHIV & COMPANY VS. ITO ASST .YEAR - 2010-11 - 9 - 15.2. THE AO DID NOT DISTURB THE NET PROFIT DECL ARED BY THE ASSESSEE IN ITS CONSOLIDATED PROFIT AND LOSS ACCOUNT. AS SUCH I T WAS IMPLIED THAT ALL THE EXPENSES RELATE TO THE COMMISSION INCOME WHICH WAS ALLOWED BY THE AO AS IT IS. NO DEFECT OF WHATSOEVER WAS POINTED OU T IN THE EXPENSES CLAIMED IN THE PROFIT AND LOSS ACCOUNT. 15.3. THUS THE INCOME OF THE ASSESSEE WAS DETERMI NED BY THE AO AS DETAILED UNDER: INCOME FROM STEEL TRADING, 2% OF THE TURNOVER: 3,32,948/- ADD: THE GROSS LOSS CLAIMED IN THE CONSOLIDATED PRO FIT AND LOSS ACCOUNT: 2,06,744/- INCOME AS PER STATEMENT OF INCOME : 12,20,150/- 15.4. BESIDES THE ABOVE, THE AO MADE THE SEPARATE ADDITIONS AS DETAILED UNDER: COMMISSION EXPENSES : 9,87,500/- LIABILITY WRITTEN OF UNDER SECTION 41(1) OF THE ACT : :12,72,990/- 15.5. IT IS IMPORTANT TO NOTE THAT THE ASSESSEE DI D NOT CHALLENGE THE REJECTION OF THE BOOKS OF ACCOUNTS. BUT IT WAS ARGU ED THAT THERE COULD NOT BE ANY SEPARATE ADDITION IN THE EVENT OF REJECTION OF BOOKS OF THE ASSESSEE. AS SUCH THE ADDITIONS TOWARDS COMMISSION EXPENSES AND THE LIABILITY WRITTEN OFF UNDER SECTION 41(1) OF THE AC T WERE CHALLENGED. 15.6. IT IS AN UNDISPUTED FACT THAT THE BOOKS OF ACCOUNTS WERE REJECTED ONLY IN RESPECT OF ITS STEEL BUSINESS. THUS IT IS I MPLIED THAT THE AO DID NOT ITA NO.1596/AHD/2015 M/S. SHIV & COMPANY VS. ITO ASST .YEAR - 2010-11 - 10 - REJECT THE BOOKS OF ACCOUNTS MAINTAINED IN RELATION TO COMMISSION INCOME. 15.7. THUS, THE 1 ST CONTROVERSY THAT ARISES BEFORE US FOR THE ADJUDICA TION WHETHER THE BOOKS OF ACCOUNT CAN BE PARTIALLY REJEC TED. IN THIS REGARD, WE NOTE THAT THE PROVISIONS CONCERNING THE REJECTION O F THE BOOKS OF ACCOUNTS ARE CONTAINED UNDER SECTION 145(3) OF THE ACT WHICH READS AS UNDER: SECTION 145 (3) WHERE THE ASSESSING OFFICER IS NOT SATISFIED ABOUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE, OR WHERE THE METHOD OF ACCOUNTING PROVIDED IN SUB-SECTION (1) [ HAS NOT BEEN REGULARLY FOLLOWED BY THE ASSESSEE, OR INCOME HAS NOT BEEN CO MPUTED IN ACCORDANCE WITH THE STANDARDS NOTIFIED UNDER SUB-SECTION (2) ], THE ASSESSING OFFICER MAY MAKE AN ASSESSMENT IN THE MANNER PROVIDED IN SECTIO N 144. 15.8. ON PERUSAL OF THE ABOVE PROVISIONS, WE N OTE THAT IT IS NOWHERE MENTIONED THAT THE AO CAN REJECT THE BOOKS OF ACCOU NTS PARTIALLY. IT IS ALSO AN UNDISPUTED FACT THERE WAS A SINGLE SET OF B OOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE. WE UNDERSTAND THAT THE INCOME SHOWN BY THE ASSESSEE IN THE INSTANT CASE CAN BE BIFURCATED WITH OUT MUCH EFFORT I.E. TRADING BUSINESS AND THE COMMISSION BUSINESS. BUT W HEN THE ISSUE COMES TO BIFURCATE THE EXPENSES WHICH HAVE BEEN INCURRED COMBINEDLY FOR BOTH THE SOURCES OF INCOME, WE FIND THAT IT IS NOT EASY RATHER IMPRACTICAL TO BIFURCATE THE EXPENSES. 15.9. BESIDES, THE ABOVE WE ALSO NOTE THAT THE AS SESSEE TO EARN COMMISSION INCOME HAS TO DISCHARGE CERTAIN FUNCTION S WHICH ARE DESCRIBED BELOW: ITA NO.1596/AHD/2015 M/S. SHIV & COMPANY VS. ITO ASST .YEAR - 2010-11 - 11 - 1. ASSESSEE ACTS AS A MIDDLE CHAIN BETWEEN THE BINANI CEMENT AND ITS CUSTOMERS. 2. ASSESSEE ENSURES THE TIMELY PROCUREMENT OF ORDER AS WELL AS ORDER THEREOF. 3. THE ASSESSEE HAS TO ENSURE THE TIMELY PAYMENT REACH TO THE BINANI CEMENT. 15.10. FROM THE ABOVE, WE FIND THAT THE ASSESSEE D ID NOT EARN COMMISSION INCOME JUST BY MAKING ANY REFERENCE OR I T WAS NOT JUST THE BROKERAGE INCOME EARNED BY ARRANGING A DEAL BETWEEN TWO PARTIES. THE ASSESSEE TO EARN COMMISSION INCOME HAS TO PUT CONTI NUOUS EFFORTS BY EMPLOYING A LOT OF RESOURCES OF WORKFORCE, INFRASTR UCTURE FACILITIES ETC. THEREFORE, IT CAN BE INFERRED THAT THE GROSS COMMIS SION INCOME DOES NOT REPRESENT ITS FULL INCOME OR MAJOR INCOME. 15.11. WE ALSO NOTE THAT THE AO HAS TREATED ALL TH E EXPENSES CLAIMED BY THE ASSESSEE AGAINST THE COMMISSION INCOME. THUS TH E OVERALL POSITION SHOWS THAT THE ASSESSEE HAS TO INCUR EXPENSES AGAIN ST THE COMMISSION INCOME. 15.12. AFTER CONSIDERING THE FACTS IN TOTALITY, WE ARE OF THE VIEW THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE CANNOT BE REJECTE D PARTIALLY. IT IS BECAUSE THE ASSESSEE INCURRED THE EXPENSES FOR ITS BOTH THE ACTIVITIES AND THERE WERE NO SEPARATE BOOKS MAINTAINED BY THE ASSE SSEE SEPARATELY FOR ITS BOTH SOURCES OF INCOME. THUS WE ARE OF THE VIE W THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE CANNOT BE REJECTED PARTIAL LY IN THE GIVEN FACTS & ITA NO.1596/AHD/2015 M/S. SHIV & COMPANY VS. ITO ASST .YEAR - 2010-11 - 12 - CIRCUMSTANCES. HOWEVER, IF THE BOOKS OF THE ACCOUNT S ARE REJECTED THEN THE INCOME FROM BOTH THE SOURCES NEEDS TO BE ESTIMA TED. 15.13. IN THIS REGARD, WE PLACE OUR RELIANCE ON THE JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. DHIRAJ R RUNGTA REPORTED IN 40 TAXMANN.COM 284 WHERE THE HEAD NOTE READS AS UNDER: SECTION 145, OF THE INCOME-TAX ACT, 1961 - METHOD OF ACCOUNTING - REJECTION OF ACCOUNTS [ADDITIONS TO INCOME BASED ON REJECTED BOOKS OF ACCOUNT] - ASSESSMENT YEAR 2007-08 - ASSESSEE ENGAG ED IN TRADING OF DRESS MATERIALS FILED HIS RETURN OF INCOME DECLARIN G CERTAIN INCOME - ASSESSING OFFICER FINDING NUMBER OF GLARING MISTAKE S, REJECTED BOOKS OF ACCOUNT - HE, HOWEVER, MADE SOME ADDITIONS BY RELYI NG UPON SAME BOOKS OF ACCOUNT WHICH HAD BEEN REJECTED - TRIBUNAL HELD THAT ASSESSING OFFICER ONCE HAVING REJECTED BOOKS OF ACCOUNT, COUL D NOT HAVE MADE FURTHER ADDITIONS BY RELYING UPON SAME BOOKS AND TH AT IT WOULD HAVE BEEN BETTER IF ASSESSING OFFICER HAD ESTIMATED A RE ASONABLE PROFIT OF ASSESSEE CONSIDERING HISTORY AND NATURE OF BUSINESS - ACCORDINGLY, TRIBUNAL GRANTED PARTIAL RELIEF TO ASSESSEE - WHETH ER FINDING RECORDED BY TRIBUNAL BEING A FINDING OF FACT, NO SUBSTANTIAL QUESTION OF LAW AROSE THEREFROM - HELD, YES [PARA 7] [IN FAVOUR OF ASSESS EE] 15.14 . THE LOWER AUTHORITIES ERRED IN ESTIMATING THE INCOME ONLY FOR ONE SOURCE AND SECOND SOURCE RELYING ON THE SAME SET OF THE BOOKS. ONCE THE BOOKS OF ACCOUNTS ARE REJECTED WHICH WAS ALSO NOT C HALLENGED BY THE ASSESSEE, THEN THE INCOME NEEDS TO BE ESTIMATED ON SOME REASONABLE & SCIENTIFIC BASIS AFTER TAKING INTO CONSIDERATION TH E PAST HISTORY AND THE POSITION OF THE SUCCEDING YEARS AND OTHER RELEVANT FACTORS. 15.15. AS THERE IS NO DISPUTE THAT BOTH THE SOURC ES OF INCOME OF THE ASSESSEE, AS DISCUSSED IN THE PRECEDING PARAGRAPH, CANNOT FETCH THE SAME RATE OF PROFIT IN THE EVENT OF THE REJECTION OF THE BOOKS OF ACCOUNTS. IT IS ITA NO.1596/AHD/2015 M/S. SHIV & COMPANY VS. ITO ASST .YEAR - 2010-11 - 13 - BECAUSE THE NATURE OF BOTH THE SOURCES OF INCOME IS DIFFERENT AND DISTINCT FROM EACH OTHER. THUS THE QUESTION ARISES WHAT SHOU LD BE THE RATE OF PROFIT IN THE CASE OF COMMISSION BUSINESS. FOR THIS PURPOSE WE DEEM IT FIT TO RESTORE THIS ISSUE TO THE FILE OF AO FOR FRESH A DJUDICATION IN THE LIGHT OF THE ABOVE DISCUSSION AND AS PER THE PROVISIONS OF L AW. 15.16. WE ALSO FIND PERTINENT TO DIRECT THE AO T O ESTIMATE THE INCOME IN RESPECT OF COMMISSION BUSINESS AT THE GROSS COMMISS ION INCOME DECLARED IN THE FORM 26AS AS DISCUSSED ABOVE. THE AO WILL NO T MAKE ANY SEPARATE ADDITION FOR THE COMMISSION INCOME DIRECTLY PAID BY BINANI LTD TO SHIV & ASSOCIATES. 15.17. WE ALSO DIRECT THAT THERE WILL NOT BE AN Y SEPARATE ADDITION UNDER THE PROVISIONS OF SECTION 41(1) OF THE ACT AS MADE BY THE AO IN THE ASSESSMENT PROCEEDINGS. IT IS BECAUSE THE ASSESSEE HAS NOT WRITTEN OFF ITS LIABILITIES IN ITS BOOKS OF ACCOUNTS. THIS FACT CAN BE VERIFIED FROM THE COPIES OF THE LEDGERS FILED BY THE ASSESSEE WHICH A RE PLACED ON PAGE 27 OF THE PAPER BOOK. MOREOVER, ONCE THE BOOKS GOT REJECT ED, THEN THERE WILL NOT BE ANY SEPARATE ADDITION UNDER SECTION 41(1) OF THE ACT. 16. THUS, ALL THE GROUNDS OF APPEAL OF THE ASSES SEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. 17. THE OTHER GROUNDS RAISED BY THE ASSESSEE DO NOT REQUIRE ANY SEPARATE ADJUDICATION IN TERMS OF OUR DIRECTION AS STATED ABOVE. ITA NO.1596/AHD/2015 M/S. SHIV & COMPANY VS. ITO ASST .YEAR - 2010-11 - 14 - 18. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER PRONOUNCED IN OPEN COURT ON 01/01/2019 SD/- SD/- (MS.MADHUMITA ROY) (WASEEM AH MED) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 01/01/2019 &.., .(.. / T.C. NAIR, SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. )*+ , / CONCERNED CIT 4. , ( ) / THE CIT(A)-2, VADODARA 5. /01 ((*+ , *+# , ) / DR, ITAT, AHMEDABAD 6. 145 6 / GUARD FILE. / BY ORDER, / ( //TRUE COPY// / ( DY./ASSTT.REGISTRAR) $%, / ITAT, AHMEDABAD 1. DATE OF DICTATION 24.12.18 (DICTATION PAD 20-PA GES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 26.12.18 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.4.1.19 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 4.1.19 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER