Sanjeev Kumar Kuberdas Shah, Hyderabad V. ITO,Ward 8(2), Hyderabad

ITA 1772/HYD/2013

• Counselvise Citation: 177222514 RSA 2013
• Duration Of Justice: 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 14-07-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 20-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R MOHAN REDDY
• Assessee Lawyers: G VEKATESWARLU

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 1772/HYD/2013 ASSESSMENT YEAR : 2009-10 SRI SANJEEV KUMAR KUBERDAS SHAH HYDERABAD PAN: AITPS2462D VS. THE INCOME TAX OFFICER WARD-8(2) HYDERABAD APPELLANT RESPONDENT APPELLANT BY: S RI G. VEKATESWARLU RESPONDENT BY: SRI R. MOHAN REDDY DATE OF HEARING: 26 .0 8 .2014 DATE OF PRONOUNCEMENT: 27 .0 8 .2014 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT(A)-III, HYDERABAD DATED 14.10.2013 FOR ASSESSMENT YEAR 2009-10. 2. THE ASSESSEE IS A PROPRIETOR OF M/S. KBM INTERNATIONAL AND CARRYING ON BUSINESS OF PURCHASE AND SALE OF MACHINERY AND SPARE PARTS USED IN RICE MILL S. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT THE G ROSS PROFIT DECLARED BY THE ASSESSEE WORKED OUT TO ONLY 11.20% WHICH WAS ON THE LOWER SIDE. THE ASSESSING OFFICER ESTIMATED THE GROSS PROFIT AT 15%. THE ASSESSING OF FICER OBSERVED THAT THE MARGIN OF PROFIT IN THIS LINE OF BUSINESS WOULD NOT BE LESS THAN 20%. THE ASSESSING OFFICER ADDED AN AMOUNT OF RS. 18,19,484 TO THE TOTAL INCOME OF T HE ASSESSEE. THE ASSESSING OFFICER ALSO MADE AN ADDIT ION OF 2 ITA NO. 1772/HYD/2013 SRI SANJEEV KUMAR KUBERDAS SHAH ========================== AN AMOUNT OFF RS. 15,08,965 TOWARDS COMMISSION PAID AND A SUM OF RS. 5,59,980 TOWARDS COMMISSION RECEIV ED BY THE ASSESSEE. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE'S BOOKS OF ACCOUNT HAVE BEEN AUDITED A ND THE AUDIT REPORT IS UNQUALIFIED. IT WAS FURTHER SU BMITTED THAT DURING THE COURSE OF SCRUTINY OF THE RETURN FI LED BY THE ASSESSEE, THE ASSESSING OFFICER CALLED FOR BOOK S OF ACCOUNT, PURCHASE VOUCHERS, SALES INVOICES, BANK STATEMENTS AND VAT RETURNS WHICH THE ASSESSEE PRODU CED ON 28.2.2011. THE ASSESSING OFFICER HAD MADE A THOROUGH EXAMINATION OF THE DETAILS SUBMITTED BY TH E ASSESSEE. IT WAS FURTHER POINTED OUT BY THE LEARNE D COUNSEL FOR THE ASSESSEE THAT THIS WAS THE FIRST YE AR OF BUSINESS AND THOUGH THE BUSINESS IS VERY COMPETITIV E THE ASSESSEE HAD EARNED A TAXABLE PROFIT OF NEARLY RS. 8 LAKHS. IT WAS SUBMITTED THAT THE BOOK RESULTS CANNOT BE RE JECTED UNLESS THE BOOKS ARE DEFECTIVE AND THE ASSESSEE'S B OOKS WHICH ARE REGULARLY MAINTAINED CANNOT BE REJECTED O N MERE CONJECTURES AND SURMISES WHEN NO FAULT HAS BEE N FOUND AND NO MATERIALS HAVE BEEN SUPPRESSED. 4. WITH RESPECT TO THE ADDITION TOWARDS COMMISSION, THE CIT(A) DELETED THE DISALLOWANCE MADE BY THE ASS ESSING OFFICER. HOWEVER, THE CIT(A) CONFIRMED THE GROSS P ROFIT ADDITION MADE BY THE ASSESSING OFFICER. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES. WE ARE OF THE OPINION THAT BOOK RESULTS CANNOT BE REJECTED UNLESS THE BOOKS ARE DEFECTIVE. THERE ARE CASE-LAWS FULLY SUP PORTING 3 ITA NO. 1772/HYD/2013 SRI SANJEEV KUMAR KUBERDAS SHAH ========================== THE PROPOSITION THAT BOOKS WHICH HAVE BEEN REGULARL Y MAINTAINED CANNOT BE REJECTED ON MERE CONJECTURES A ND SURMISES AND WE SHALL ENUMERATE A FEW OF THEM. 6. IN VISHAL INFRASTRUCTURE LTD V S. ACIT ( 2007 ) 104 ITD 537, THIS TRIBUNAL HAS HELD THAT IT IS SINE QUA NON FO R THE DEPARTMENT TO PROVE SATISFACTORILY THAT THE ACCOUNT BOOKS ARE UNRELIABLE OR INCORRECT OR INCOMPLETE BEFORE IT CAN REJECT THE ACCOUNTS. THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT V. BALLABH DAS AND SONS RELYING ON THE DECISIONS IN S. N. NAMASIVAYAM CHETTIAR V. CIT [196 0] 38 ITR 579 (SC); P ANDIT BROS. V. CIT [1954] 26 ITR 159 (PUNJ); S. VEERIAH REDDIAR V. CIT [1960] 38 ITR 152 (KER) AND INTERNATIONAL FOREST CO. V. CIT [1975] 101 ITR 721 (J &K) OBSERVED THAT LOWER PROFIT SHOWN BY THE ASSESSE E BY ITSELF CANNOT BE GROUND FOR REJECTION OF THE BOOKS OF ACCOUNT. IN C I T V. PARADISE HOLIDAYS [2010] 325 I T R 13 (DELHI), THE HIGH COURT HAS HELD THAT THE ACCOUNTS WHICH ARE REGULARLY MAINTAINED, DULY AUDITED, FREE FROM A NY QUALIFICATION BY THE AUDITORS, SHOULD NORMALLY BE T AKEN AS CORRECT UNLESS THERE ARE ADEQUATE REASONS TO INDICA TE THAT THEY ARE INCORRECT OR UNRELIABLE. IN PYARELAL MITTAL V. ACIT 291 ITR 214 (GUAHATI), IT WAS HELD THAT THE INCOME HAS TO BE DEDUCED FROM THE BOOKS OF ACCOUNT AND OTHER DOCUMENTS FURNISHED AND THERE IS NO SCOPE FOR ANY CONJECTURES AND SURMISES. IF THE METHOD OF ACCOUNTI NG IS NOT FAULTY AND THERE IS NO SUPPRESSION OF MATERIAL FACTS, THE AUTHORITY CANNOT EMBARK UPON A SPECULATIVE ASSESSMENT OF NOTIONAL PROFIT. IN DHAKESWARI COTTON MILLS LTD. V. CIT [1954] 26 ITR 775, THE HONBLE SUPREME COURT WAS OF THE VIEW THAT THE INC O ME-TAX OFFICER IS NOT ENTITLED 4 ITA NO. 1772/HYD/2013 SRI SANJEEV KUMAR KUBERDAS SHAH ========================== TO MAKE A PURE GUESS AND MAKE AN ASSESSMENT W ITHOUT REFERENCE TO ANY EVIDENCE OR ANY MATERIAL AT ALL. 7. FURTHER, WE TAKE NOTE OF THE FACT THAT THIS IS THE FIRST YEAR OF BUSINESS OF THE ASSESSEE AND ALSO THE ASSES SING OFFICER HAS NOT SUPPORTED HIS ORDER BY GIVING ANY COMPARABLE CASES. IN THESE CIRCUMSTANCES, WE ARE O F THE OPINION THAT THE CIT(A) HAS ERRED IN UPHOLDING THE ASSESSMENT OF GROSS PROFIT AT 15% WHICH HAS RESULTE D IN AN ADDITION OF S. 18,19,484 INSTEAD OF ACCEPTING TH E BOOK RESULTS OF THE ASSESSEE SHOWING THE GROSS PROFIT AT 11.20%. 8. IN THE RESULT, ASSESSEE'S APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 27 TH AUGUST, 2014 SD/ - (P.M. JAGTAP) ACCOUNTANT MEMBER SD/ - (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER HYDERABAD, DATED THE 27 TH AUGUST, 2014 TPRAO COPY TO: 1. SRI SANJEEV KUMAR KUBERDAS SHAH, PROP. M/S. KUBER INTERNATIONAL, 7-3-137/1, KATTEDAN, HYDERABAD. 2. THE INCOME TAX OFFICER, WARD - 8(2), I.T. TOWERS, AC GUARDS, HYDERABAD. 3. THE CIT(A) - III, HYDERABAD. 4. THE CIT - II, HYDERABAD. 5 . THE DR, A - BENCH, ITAT, HYDERABAD.