The ITO, Ward-6(4), Ahmedabad V. Shri Pravinkumar Parshottamdas Pitroda, Ahmedabad

ITA 1667/AHD/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8128 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 10-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Assessee Lawyers: A C SHAH; B K PATEL
• Keywords: Rejection of books of accounts; Depreciation; Bad and doubtful debts
• Section: 143(3); 145

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ./ ITA NO.1667/AHD/2015 / ASSTT. YEAR: 2011-12 ITO, WARD-3(2)(9) AHMEDABAD. VS. SHRI PRAVINKUMAR PARSHOTTAMDAS PITRODA PROP. P.P. STEEL PRODUCTS OPP: AMBALAL ESTATE NR.CADILA BRIDGE, GHODASAR, AHMEDABAD. PAN : ACNPP 1772 F / (APPELLANT) / (RESPONDENT) REVENUE BY : SHRI V.K. SINGH, SR.DR ASSESSEE BY : SHRI A.C. SHAH, AR AND SHRI B.K. PATEL, AR ! / DATE OF HEARING : 27/11/2017 '#$ ! / DATE OF PRONOUNCEMENT: 30 /11/2017 %& / O R D E R PER S.S.GODARA, JUDICIAL MEMBER: THIS REVENUES APPEAL FOR ASSTT.YEAR 2011-12 EMANAT ES FROM LD.CIT(A)-3S, AHMEDABAD ORDER DATED 25.3.2015 PASS ED IN CASE NO.CIT(A)-3/ITO/3(2)(9)/504/14-15 IN PROCEEDING UND ER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE A CT). 2. REVENUES SOLE SUBSTANTIAL GROUND PLEADED IN THE INSTANT APPEAL READS AS UNDER: ITA NO.1667/AHD/2015 2 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.77,23,834/- MADE ON ACCOUNT OF REJEC TION OF BOOK RESULT U/S. 145 OF THE ACT AND ESTIMATION OF N ET PROFIT AND NOT CONSIDERING THE FINDINGS OF THE AO THAT IN LETTER DATED 06/01/2014, THE ASSESSEE STATED THAT THEY WER E NOT MAINTAINING LIST OF VEHICLE NUMBER AND SAID RC BOOK S. THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT IN ABSENCE OF THESE TRUE AND FAIR PROFITS CANNOT BE ESTIMATED. 3. IT THEREFORE EMERGE FROM REVENUES ABOVE SOLITAR Y SUBSTANTIAL GROUND THAT IT MAINLY SEEKS TO REVIVE A SSESSING OFFICERS ACTION INTER ALIA REJECTING ASSESSEES BOOKS THEREBY ESTIMATING NET PROFIT AT THE RATE OF 5% RESULTING I N ADDITION OF RS.77,23,834/-. THE AO CONCLUDED IN ASSESSMENT ORD ER THAT ASSESSEES RELEVANT BOOKS DEMONSTRATING ITS INTERES T EXPENDITURE, DEPRECIATION AND DIESEL OUT-GO INCURRED IN THE IMPU GNED ASSESSMENT YEAR HAD CONSIDERABLY REDUCED PROFITS FR OM JOB WORKS. HE THEREFORE HELD IN ASSESSMENT ORDER DATED 21.3.20 14 THAT ASSESSEES TAXABLE INCOME HAD TO BE RE-COMPUTED. A LL THESE REASONING RESULTED IN REJECTION OF BOOK RESULTS AND RE-ESTIMATION OF THE ABOVE NET PROFITS MADE IN ASSESSEES HANDS. 4. THE LD.CIT(A) REVERSES ASSESSMENT FINDINGS AS UN DER: 4.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE IN THE LIGHT OF THE SUBMISSIONS MADE BY THE APPELLANT, AND THE FINDING OF THE ASSESSING OFFICER RECORDED IN THE AS SESSMENT ORDER. THE A O HAS HELD IN HIS ORDER THAT THE APPEL LANT HAD SHOWN A NET LOSS OF RS. 70,31,291/-AS AGAINST SALES AND JOB WORK INCOME OF RS. 1,53,04,551/-. AFTER DETAILED DI SCUSSION AS REPRODUCED ABOVE, THE A O REJECTED THE BOOKS OF ACCOUNTS OF THE APPELLANT. IT WAS HELD THAT THE APPELLANT HA D MADE EXCESSIVE CLAIM IN RESPECT OF EXPENSES AND THE SAME WAS NOT JUSTIFIED. A PERUSAL OF THE REASONS FOR REJECTION O F BOOKS OF ACCOUNTS SHOWS THAT THE A O HAS ESSENTIALLY NOT ACC EPTED THE APPELLANT'S EXPLANATION FOR CLAIM OF EXPENSES AND H AS ITA NO.1667/AHD/2015 3 ACCORDINGLY HELD THAT THE APPELLANT'S BOOK RESULT C ANNOT BE ACCEPTED. DURING APPELLATE PROCEEDINGS, THE APPELLANT SUBMITT ED DETAILS OF ALL THE EXPENSES INCURRED DURING THE YEAR IN RES PECT OF FINDING OF THE A O DURING ASSESSMENT PROCEEDINGS, I N RESPECT OF INTEREST, DEPRECIATION, VEHICLE REPAIRS AND BAD DEBTS. COMPLETE DETAILS AND ACCOUNTS HAVE BEEN SUBMITTED I N RESPECT OF ALL THESE EXPENSES. A PERUSAL OF THE DET AILS FURNISHED IN RESPECT OF PAYMENT OF INTEREST SHOWS T HAT THE EXPENSE ON ACCOUNT OF INTEREST HAS INCREASED FROM R S. 61.91.703/- IN THE PRECEDING YEAR I.E. 2010-11 TO R S. 74,58,378/- IN THE YEAR UNDER CONSIDERATION. THIS H AS BEEN ONLY ON ACCOUNT OF THE INCREASE IN PAYMENT OF INTER EST TO SREI INFRASTRUCTURE FINANCE LTD ON ACCOUNT OF LOAN TAKEN FOR PURCHASE OF CONSTRUCTION EQUIPMENT, THUS, THE EXPEN DITURE ON INTEREST STANDS FULLY EXPLAINED BY THE APPELLANT . MOREOVER, A PERUSAL IF THE ASSESSMENT ORDER SHOWS THAT THE A O HAS HELD THAT INTEREST BEARING FUNDS HAVE BEEN DIVERTED FOR NON BUSINESS PURPOSES BY THE APPELLANT. HOWEVER, NO NEX US HAS BEEN SHOWN TO ESTABLISH THE SAME. AS REGARDS DEPRECIATION, IT IS SEEN THAT THERE IS N O ADDITION TO THE FIXED ASSETS DURING THE CONSIDERATION. DEPREC IATION IN FULL WAS ALLOWED TO THE APPELLANT IN EARLIER YEARS AND AS SUCH THERE WAS NO JUSTIFICATION TO NOT ACCEPT THE SAME A ND USE DISALLOWANCE OF DEPRECIATION EXPENSES AS A CAUSE TO REJECT APPELLANT'S BOOKS OF ACCOUNTS. FURTHER, THE A O HAS ALSO HELD THAT VEHICLE REPAIRI NG EXPENSES WERE EXCESSIVE. THE APPELLANT HAS, SUBMITT ED INVOICES AND BILLS IN RESPECT OF ALL EXPENSES INCUR RED AND A PERUSAL OF THE SAME SHOWS THAT THERE WAS INCREASE I N EXPENSES DUE TO ACCIDENT OF A DUMPER WHICH UNDERWEN T REPAIRS. A PERUSAL OF THE BILLS ALSO SHOWS THAT VEH ICLE REPAIRING EXPENSES HAVE BEEN INCURRED IN RESPECT OF REPLACEMENT OF PARTS ON ACCOUNT OF WEAR AND TEAR. L OOKING AT THE NATURE OF THE BUSINESS OF THE APPELLANT, WHICH IS JOB-WORK OF SALT HARVESTING AND TRANSPORTATION AND EARTH EXC AVATION, THE NATURE OF VEHICLE REPAIR IS ACCEPTABLE. THE APP ELLANT ALSO SUBMITTED COMPLETE DETAILS IN RESPECT OF BAD DEBTS WRITTEN ITA NO.1667/AHD/2015 4 OFF IN HIS BOOKS OF ACCOUNTS ALONG WITH A LEDGER AC COUNTS IN RESPECT OF ALL THE DEBTORS. IT HAS ALSO BEEN SUBMITTED BY THE APPELLANT THAT TH E MAIN RESULT FOR FALL IN GP DURING THE YEAR UNDER CO NSIDERATION WAS INCREASE IN DIESEL EXPENSES, WHICH WAS HIGHER T HAN THE PRECEDING YEAR NOT ONLY IN TERMS OF QUANTITY BUT AL SO IN TERMS OF RATE OF DIESEL PER LITRE. HERE IT WOULD BE APPROPRIATE TO SEE THE PROVISIONS OF SECTION 145 OF THE ACT. SECTION 145(3) OF THE ACT P ROVIDES AS UNDER '- '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 S ECTION (1) OR ACCOUNTING STANDARDS AS NOTIFIED UNDER SUB S ECTION (2) HAVE NOT BEEN REGULARLY FOLLOWED BY THE ASSESSEE, T HE ASSESSING OFFICER MAY MAKE AN ASSESSMENT PROVIDED I N THE MANNER PROVIDED IN SECTION 144.' A READING OF THE ABOVE SECTION IT CLEARLY EMERGES T HAT THE ASSESSING OFFICER CAN REJECT THE BOOKS OF ACCOUNT O F AN ASSESSEE U/S 145 OF THE ACT IF, HE IS NOT SATISFIED ABOUT CORRECTNESS OR COMPLETE NESS OF THE ACCOUNTS ASSESSEE HAS NOT FOLLOWED THE CORRECT METHOD OF ACCOUNTING ASSESSEE HAS NOT FOLLOWED ANY OF THE PRESCRIBED ACCOUNTING STANDARDS THE AO HAS NOT GIVEN ANY CLEAR FINDING AS TO WHY HE WAS NOT SATISFIED ABOUT THE CORRECTNESS OR OF THE APPELLANT 'S ACCOUNT OR THAT THE APPELLANT HAD NOT FOLLOWED THE CORRECT METHOD OF ACCOUNT OR HAD NOT FOLLOWED ANY OF THE PRESCRIBED A CCOUNTING STANDARDS. MOREOVER, IT IS EVIDENT FROM THE ABOVE DISCUSSION THAT THE MAIN REASON TAKEN BY THE AO, WHICH LED HIM TO REJECT THE BOOKS OF ACCOUNT OF THE APPELLANT, WAS T HE FACT THAT THE EXPENSES CLAIMED BY THE APPELLANT WERE VER Y HIGH. NON ACCEPTANCE OF APPELLANT'S CLAIM FOR EXPENSES CA NNOT BE A VALID GROUND FOR REJECTING THE BOOKS OF ACCOUNTS OF ITA NO.1667/AHD/2015 5 APPELLANT U/S. 145 OF THE ACT, ESPECIALLY IN LIGHT OF THE FACT THAT ALL NECESSARY EVIDENCES, BILLS AND EXPLANATION IN RESPECT OF THE SAME HAD BEEN FURNISHED BEFORE THE A O DURIN G ASSESSMENT PROCEEDINGS AS WELL. FURTHER, THE AO HAS NOT GIVEN ANY REASON AS TO WHY HE HAS ESTIMATED THE RAT E OF 5% TO CALCULATE THE NET PROFIT OF THE APPELLANT. MOREO VER, THERE IS NO DISCUSSION IN THE ASSESSMENT ORDER OF THE APPELL ANT'S EXPLANATION FOR HIGHER EXPENSES CLAIMED DURING THE YEAR. IN VIEW OF THE FACTS OF THE CASE AND THE DETAILED D ISCUSSION ABOVE, I AM OF THE VIEW THAT THE A O WAS NOT JUSTIF IED IN REJECTING THE BOOKS OF ACCOUNTS OF THE APPELLANT U/ S.145 OF THE I T ACT AND ESTIMATING THE NET PROFIT @ 5% OF T HE NET TURNOVER. IN VIEW OF THE SAME, THE ADDITION OF RS.77,23,834/- IS DELETED . THE GROUNDS OF APPEAL N O. 2 TO 4 ARE ALLOWED. 5. HEARD BOTH PARTIES. REITERATED THEIR RESPECTIVE STAND IN SUPPORT OF AND AGAINST AOS ACTION REJECTING ASSESS EES BOOKS THEREBY RE-ESTIMATING HIS NET PROFIT AT THE RATE OF 5%. THERE DOES NOT APPEAR TO BE ANY DISPUTE ABOUT THE FACT THAT TH E AO HAD INVOKED SECTION 145 OF THE ACT FOR REJECTING ASSESS EES BOOK QUA THREE ISSUES OF INTEREST EXPENDITURE, DEPRECIATION AND OTHER VEHICLE EXPENSES. IT HAS COME ON RECORD THAT ASSES SEES INTEREST EXPENDITURE SAW AN INCREASE ON ACCOUNT OF INTEREST PAYMENT MADE TO M/S.SREI INFRASTRUCTURE PVT.LTD. PERTAINING TO C ONSTRUCTION EQUIPMENT PURCHASES. THE LD.DR THEREAFTER FAILS TO DISPUTE THE LD.CIT(A)S CLINCHING FINDING THAT THE ASSESSEE HAD NOT MADE ANY ADDITION IN ITS FIXED ASSETS IN THE RELEVANT PREVIO US YEAR. HE THEREFORE CLAIMED DEPRECIATION IN QUESTION QUA EXISTING ASSETS ONLY BY STANDARD RATE PRESCRIBED QUA RELEVANT BLOCK OF A SSETS IN DEPRECIATION SCHEDULE AS PER LAW. REVENUE FURTHER FAILS TO REBUT CIT(A)S OBSERVATION THAT ASSESSEES VEHICLE EXPENS ES ALSO SAW INCREASE IN THE IMPUGNED ASSESSMENT YEAR AS ONE OF HIS DUMPERS ITA NO.1667/AHD/2015 6 MET WITH AN ACCIDENT. WE THEREFORE FIND NO MERIT I N THE REVENUES ARGUMENTS SEEKING TO REVIVE THE ABOVE BOOK REJECTIO N. THE LD.DR THEREAFTER SEEKS TO INVITE OUR ATTENTION TO ASSESSE ES DIESEL EXPENSES (SUPRA). WE FIND THAT THERE IS NO DISPUTE RAISED IN THE LOWER PROCEEDINGS ABOUT GENUINENESS THEREOF. WE AC CORDINGLY CONCLUDE THAT THE LD.CIT(A)HAS RIGHTLY REVERSED THE ASSESSMENT FINDING IN LOWER APPELLATE PROCEEDINGS. REVENUES SOLE SUBSTANTIAL GRIEVANCE IS THEREFORE DECLINED. THIS REVENUES AP PEAL IS DISMISSED. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE COURT ON 30 TH NOVEMBER, 2017. SD/- SD/- (MANISH BORAD) ACCOUNTANT MEMBER (S.S.GODARA) JUDICIAL MEMBER