M/S LA VISION PVT LTD, RANCHI V. JCIT RANGE-2 , RANCHI

ITA 181/RAN/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 9686 (ITAT-RANCHI)
• Duration Of Justice: 1 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 05-04-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2005-2006
• Appeal Filed On: 28-07-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P K MONDAL
• Assessee Lawyers: R K KAUSHAL
• Keywords: Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RANCHI BENCH, RANCHI BEFORE SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO S . 181 & 182 / RAN/201 7 ASSESSMENT YEAR S : 2005 - 06 & 2007 - 08 M/S. LA VISION PVT LTD., 93, KUSAI COLONY, DORANDA, RANCHI VS. JCIT RANGE - 2, RANCHI. PAN/GIR NO. AAACL 3148 H (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY: SHRI R.K. KAUSHAL, CA REVENUE BY : SHRI P.K.MONDAL, JCIT DATE OF HEARING : 31 /05 / 201 8 DATE OF PRONOUNCEMENT : 26 /0 6 / 2018 O R D E R PER P.K.GADALE, JM TH ESE ARE APPEAL S FILED BY THE ASSESSEE AGAINST THE SEPARATE ORDER S OF THE CIT(A) , RANCHI DATED 23.12.2013 FOR THE ASSESSMENT YEAR 20 05 - 06 DATED 26.3.2015 FOR THE ASSESSMENT YEAR 2007 - 08 . ITA NO.181/RAN/2017: A.Y. 2005 - 06 2 2. ALTHOUGH THE ASSESSEE HAS RAISED THE VARIOUS GROUNDS OF APPEAL BUT THE SOLE GRIEVANCE OF THE ASSESSEE IS THAT THE CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION ON ESTIMATE BASIS @ 4.35%. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A C OMPANY CARRYING ON BUSINESS & PROFESSION OF TRADING OF COMPUTERS AND ITS PERIPHERALS. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS SHOWN TOTAL TURNOVER OF RS.152,87904.26. THE ASSESSING OFFICER, ON PERUSAL OF PROFIT AND LOSS ACCOUNT, FOUND THAT TH E EXPENSES IN DIRECTORS REMUNERATION CLAIMED BY THE ASSESSEE WAS RS.5,52,000/ - BUT ON VERIFICATION OF LEDGER OF THE DIRECTORS REMUNERATION, THE AMOUNT IN THIS HEAD WAS SHOWN AT RS.6,60,000/ - . IN VIEW OF THIS DIFFERENCE IN THE DIRECTORS REMUNERATION, TH E ASSESSING OFFICER DOUBTED THE MAINTENANCE OF BOOKS OF ACCOUNT AND NOTED THAT THE ENTRIES MADE IN THE BOOKS OF ACCOUNT COULD NOT BE SUBSTANTIATED . THEREFORE, THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE U/S.145(3) OF THE ACT AND, AC CORDINGLY, ESTIMATED THE PROFIT OF THE ASSESSEE @ 5% OF THE TOTAL TURNOVER BEING RS.7,64,395/ - AND ADDED DIFFERENCE OF RS.5,94,306/ - TO THE TOTAL INCOME OF THE ASSESSEE. 4. ON APPEAL, THE CIT(A) RESTRICTED THE ESTIMATION OF PROFIT AT 4.35% AS AGAINST 5% DETERMINED BY THE ASSESSING OFFICER. 5. BEFORE US, LD A.R. OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE MAINTAINS PROPER BOOKS OF ACCOUNT UNDER THE COMPANIES ACT AND UNDER THE 3 INCOME TAX ACT. HE SUBMITTED THAT THE DIFFERENCE IN DIRECTORS REMUNERATION WAS DUE TO TYPOGRAPHICAL ERROR BY THE COMPUTER OPERATOR. IT WAS SUBMITTED THAT THE ASSESSEE HAS DEBITED IN ITS PROFIT AND LOSS ACCOUNT A SUM OF RS.5,52,000/ - AS DIRECTORS REMUNERATION WHICH WAS ARRIVED AT WRITING BACK EXCESS REMUNERATION TO THE EXTENT OF RS. 1,08,000/ - FROM THE ORIGINALLY FIXED REMUNERATION OF RS.6,60,000/ - , WHICH FACT WAS FOUND DURING THE COURSE OF VERIFICATION AND THAT EXCESS PROVISION OF RS.1,08,000/ - WAS WRITTEN BACK ON 31.3.2005. THEREFORE, IT WAS HIS SUBMISSION THAT THE REJECTION OF BOO KS OF ACCOUNT UNDER SECTION 145(3) IS NOT PROPER AND ESTIMATION OF PROFIT @ 5% OF TURNOVER AS COMPARED TO THE ACTUAL NET PROFIT @ 1. 1 % IS ALSO NOT PROPER. HE ALSO SUBMITTED THAT THE ASSESSEE HAS SHOWN NET PROFIT @ 0.52% IN THE PRECEDING ASSESSMENT YEAR AN D @ 0.51% IN THE SUCCEEDING ASSESSMENT YEAR. 6. LD D.R. SUPPORTED THE ORDER OF THE CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE ASSESSEE DID N OT PRODUCE COMPLETE VOUCHERS FOR VERIFICATION BY THE ASSESSING OFFICER AND THEREFORE, THE ACTION OF THE A SSESSING OFFICER IN REJECTING THE BOOKS OF ACCOUNT IS JUSTIFIED AND THE LD. CIT(A) HAS ALSO UPHELD THE REJECTION OF BOOKS OF ACCOUNT. NOW, AFTER REJECTION OF BOOKS OF ACCOUNT, THE A SSESSING OFFICER IS BOUND TO ESTIMATE THE INCOME OF THE ASSESSEE IN A BEST MANNER FROM THE AVAILABLE MATERIAL AND KEEPING IN VIEW THE PAST HISTORY OF THE ASSESSEE. AND 4 FROM HISTORY OF OTHER PERSONS ENGAGED IN SIMILAR TRADE. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAD DECLARED NET PROFIT RATE OF 1.1 % IN THE ASSESSMENT YEAR UNDER CONSIDERATION AND ASSESSEE HAS SHOWN NET PROFIT @ 0.52% IN THE PRECEDING ASSESSMENT YEAR AND @ 0.51% IN THE SUCCEEDING ASSESSMENT YEAR. THE NET PROFIT RATE DECLARED BY THE ASSESSEE IS PROGRESSIVE DESPITE OF THE FACT THAT THE TURNOVER OF THE ASSESSEE HAS ALSO INCREASED . HOWEVER, IN ORDER TO RENDER SUBSTANTIAL JUSTICE AND CONSIDERING THE TURNOVER AND THE AUDITED ACCOUNTS AND THE BUSINESS OPERATION OF THE ASSESSEE, WE RESTRICT THE PERCENTAGE OF NET PROFIT TO 3% AS AGAINST 4.35% DETERMINED BY THE CIT(A) AND PARTLY ALLOWED TH E APPEAL OF THE ASSESSEE. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ITA NO.182/RAN/2017: A.Y. 2007 - 08. 9. IN THIS APPEAL, THE ASSESSEE IS AGGRIEVED BY THE ADDITION ON ADHOC BASIS ON CERTAIN EXPENSES @ 20% OF THE TOTAL EXPENSES WITHOUT GOING THROUGH THE DETAILS SUBMITTED BY THE ASSESSEE. 10 . THE FACTS OF THIS CASE ARE THAT THE ASSESSEE DERIVED INCOME FROM TRADING AND ASSEMBLING OF COMPUTERS. DURING THE COURSE OF ASSESSMENT P ROCEEDINGS, THE ASSESSEE SUBMITTED AUDITED ACCOUNTS INCLUDING AUDITED BALANCE SHEET AND TRADING & PROFIT AND LOSS ACCOUNT ALONGWITH AUDITORS REPORT. THE ASSESSEE MAINTAINS BOOKS OF ACCOUNTS I.E. CASH BOOK, LEDGER, BANK BOOK, ETC ON MERCANTILE METHOD OF ACCOUNTING. THE ASSESSING OFFICER 5 REQUIRED THE ASSESSEE TO FURNISH THE BOOKS OF ACCOUNT AND OTHER DETAILS. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS SHOWN GROSS PROFIT RATE OF 4.68% IN COMPARISON TO GROSS PROFIT RATE SHOWN IN THE LAST YEAR AT 9.46%. AS THE ASSESSEE FAILED TO FURNISH BOOKS OF ACCOUNT AND OTHER REQUIRED DETAILS, THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNT U/S.145(3) OF THE ACT AND APPLIED GROSS PROFIT RATE OF 7.5% ON TOTAL TURNOVER OF RS.4,73,69,992/ - GIVING A GROSS PROFIT OF RS.35,52,749/ - IN PLACE OF GROSS PROFIT DISCLOSED AT RS.22,17,731/ - MAKING ADDITION OF R S.13,35,018/ - . 11. ON APPEAL, THE CIT(A) PASSED THE EXPARTE ORDER AND CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. 12. BEFORE US, LD A.R. OF THE ASSESSEE SUBMITTED THAT IN THE ASSESSMENT PROCEEDINGS BEFORE THE ASSESSING OFFICER, ALL THE DETAILS ALONGWITH BILLS OF PURCHASES, ETC WERE FURNISHED. HENCE, THE ASSESSING OFFICER IS NOT JUSTIFIED IN MAKING ADHOC DISALLOWANCE AND THE CIT(A) ERRED IN CONFIRMING THE SAME. HE S UBMITTED THAT THE CIT(A) HAS PASSED THE ORDER EXPARTE WITHOUT AFFORDING AN OPPORTUNITY TO THE ASSESSEE. 13. LD D.R. SUPPORTED THE ORDERS OF LOWER AUTHORITIES. 14. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING THE MATERIALS AVAILABLE ON RECORD, WE F IND THAT THE CIT(A) HAD FIXED THE HEARING SEVERAL TIMES AS IS EVIDENT FROM THE IMPUGNED ORDER AND SINCE THE ASSESSEE FAILED TO APPEAR BEFORE HIM, HE HAS DISPOSED OF THE APPEAL EXPARTE. BEFORE US, LD 6 A.R. HAS REQUESTED TO ALLOW ONE MORE OPPORTUNITY TO PR ESENT ITS CASE BEFORE THE CIT(A). IN VIEW OF ABOVE AND IN ORDER TO RENDER SUBSTANTIAL JUSTICE TO THE ASSESSE, ALL MATERIALS FACTS ARE REQUIRED TO BE BROUGHT ON RECORD TO ADJUDICATE THE ISSUE. FOR DOING SO, AN OPPORTUNITY HAS TO BE ALLOWED TO THE ASSESSEE S. WE , THEREFORE, SET ASIDE THE ORDER OF LD CIT(A) AND RESTORE THE MATTER BACK TO THE FILE OF THE LD CIT(A) TO RE - ADJUDICATE THE APPEAL AFRESH AFTER ALLOWING REASONABLE AND PROPER OPPORTUNITY OF HEARING TO BOTH THE PARTIES. 15 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER P RONOUNCED ON 26 /06/2018 UNDER RULE 34(4) OF ITAT RULES BY PUTTING IN THE NOTICE BOARD AT RANCHI. S D/ - SD/ - (N.S SAINI) (PAVAN KUMAR GADALE) A CCOUNTANT MEMBER JUDICIAL MEMBER RANCHI; DATED 26 /0 6 /201 8 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER, SR.PS, ITAT, CAMP AT RANCHI 1. THE APPELLANT : M/S. LA VISION PVT LTD., 93, KUSAI COLONY, DORANDA, RANCHI 2. THE RESPONDENT: JCIT RANGE - 2, RANCHI 3. THE CIT(A), RANCHI 4. PR. CIT , RANCHI 5. DR, ITAT, RANCHI 6. GUARD FILE. //TRUE COPY//