M/s. Nuclear Welding Alloys Private Limited, Bangalore V. The Income Tax Officer, Ward- 5(1)(1), Bangalore

ITA 195/BANG/2020

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 7137 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-12-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 10-02-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAGHAVEDRA RAO
• Keywords: Rejection of books of accounts; Depreciation
• Section: 44AB; 13; 22

Judgement Text

ITA No.195/Bang/2020 M/s. Nuclear Welding Alloys Pvt. Ltd., Bangalore IN THE INCOME TAX APPELLATE TRIBUNAL “C’’BENCH: BANGALORE BEFORE SHRI B. R. BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA No.195/Bang/2020 Assessment Year: 2012 – 13 M/s. Nuclear Welding Alloys Private Limited No.7, N.S. Iyengar Street Sheshadripuram BENGALURU 560 020 PAN NO :AABCN7161R Vs. ITO Ward-5(1)(1) Bengaluru APPELLANT RESPONDENT Appellant by : Shri Suresh Muthukrishna, A.R. Respondent by : Shri Raghavedra Rao, D.R. Date of Hearing : 02.12.2021 Date of Pronouncement : 02.12.2021 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: The assessee has filed this appeal challenging the order dated 20.2.2018 passed by Ld. CIT(A)-5, Bengaluru and it relates to the assessment year 2012-13. The assessee is aggrieved by the decision of Ld. CIT(A) in making addition of Rs.1.19 crores on estimated basis. 2. The appeal filed by the assessee is barred by limitation by 646 days. The assessee has filed a petition requesting the bench to condone the delay. The Ld. A.R. submitted that the assessee’s ITA No.195/Bang/2020 M/s. Nuclear Welding Alloys Pvt. Ltd., Bangalore Page 2 of 5 company was struck off by Registrar of Companies and further another group company named M/s. Deepak Cables India Ltd. had incurred huge losses. Hence, all the staff of the company had left the job and further the Directors were pursuing various legal proceedings. Subsequently, when the assessee received recovery notices from the Income Tax department, it approached the present counsel who advised to file the appeal with a petition for condoning the delay. The Ld. A.R. submitted that there was sufficient cause in not presenting the appeal in time and non-condonation of delay would put the assessee in great difficulties. Accordingly, he prayed that the delay may be condoned. 3. We heard Ld. D.R. on this preliminary issue and perused the record. Having regard to the submissions made by the assessee in the petition, we are of the view that there is sufficient cause for filing the present appeal belatedly before the Tribunal. Accordingly, we condone the delay and admit the appeal for hearing. 4. The facts relating to the issue are stated in brief. The assessee is engaged in the business of purchase and sale of bullion. The assessee filed its return of income for assessment year 2012-13 belatedly on 13.6.2013 declaring a loss of Rs.83,091/-. The return of income was taken up for scrutiny. The A.O. completed the assessment by making an addition of Rs.1,19,30,583/- to the total income with following observations:- “On perusal of records, it is seen that the assessee has not furnished any details but the ledger accounts of purchases and sales of bullion. In the Profit & Loss account, the turnover of the assessee is shown at Rs.1193,05,83,896/- and the business loss is shown at (-) Rs.13,03,329/- which cannot be a clear picture of the declaration of profit considering the declaration of profit in similar line of business. Therefore, considering the standard business practices in the same line of business, I adopt the profit of the company at 0.1% of the turnover which comes to Rs.1,19,30,583/-.” ITA No.195/Bang/2020 M/s. Nuclear Welding Alloys Pvt. Ltd., Bangalore Page 3 of 5 5. Before Ld. CIT(A), the assessee challenged the above said addition contending that the books of accounts have been audited under Companies Act as well as u/s 44AB of the Income-tax Act,1961 ['the Act' for short] and hence there is no reason to suspect the book results. Further, it was contended that the A.O. has made this addition without rejecting the books of accounts. Accordingly, it was pleaded that above said addition should be deleted. The Ld. CIT(A) was not convinced with the contentions of the assessee and accordingly confirmed the addition made by the A.O. Aggrieved, the assessee has filed this appeal. 6. The Ld. A.R. submitted that the books of accounts of the assessee are audited under the Companies Act as well as u/s 44AB of the Act. Hence there is no scope for suspecting book results. He submitted that the Ld CIT(A) has confirmed the addition by observing that the assessee has failed to furnish the details. The Ld. A.R. submitted that the profit & loss account placed at page 22 of the paper book is self explanatory and does not require any further details. Inviting our attention to the profit and loss account, the Ld AR submitted that the assessee has claimed expenditure of Rs.1193.18 crores in its profit & loss account, which consisted of Rs.1192.18 crores relating to purchase of stock, Rs.59 lakhs relating to discount on sales, Rs.83,091/- relating to depreciation and Rs.50,587/- relating to interest expenditure. Accordingly, the Ld. A.R. reiterated that the profit & loss account is self-explanatory with regard to expenses claimed by the assessee. Accordingly, he submitted that there is no scope for not accepting the book results. Accordingly he submitted that the AO has estimated the profit of the company @ 0.1% of the turnover without appreciating the above facts and further the A.O. has not rejected the books of accounts before estimating the income. The Ld. A.R. placed his reliance on the decision rendered by Hon’ble High Court of Madras in the case ITA No.195/Bang/2020 M/s. Nuclear Welding Alloys Pvt. Ltd., Bangalore Page 4 of 5 of Principal CIT Vs. Marg Ltd. 396 ITR 580, wherein the Hon’ble High Court upheld the view of the Tribunal that the profit of the assessee could not be estimated without rejecting its books of accounts and consequently, the addition was required to be deleted. The Ld. A.R. submitted that the above said decision will squarely apply to the facts of the present case. Accordingly, he submitted that the addition made by the A.O. and confirmed by Ld. CIT(A) should be deleted. 7. The Ld. D.R. on the contrary, supported the order passed by Ld. CIT(A. 8. We heard the rival contentions and perused the record. As rightly pointed out by Ld. A.R., the Profit and loss account is self explanatory. The major expense is the purchase of stock. The assessee has furnished quantity detail in Appendix VII of the tax audit report placed at page 53 of the paper book. Hence the purchases and sales would get support from it. Another major expenditure is the discount given to customers, which is self explanatory. Thus, we notice that the assessee has hardly claimed any expenditure, which require any detail. Hence, the reasoning of the tax authorities that the assessee has failed to furnish details is against the facts available on record. We have extracted the observations of A.O. for estimating the profit of the assessee in the earlier paragraph. A perusal of the same would show that the AO has also not given any valid reason for estimating this addition. In any case, the A.O. has not rejected the books of accounts before estimating the profit of the company. In fact, the A.O. has added the income estimated by him to the total income returned by the assessee, which itself shows total lack of application of mind by the A.O. ITA No.195/Bang/2020 M/s. Nuclear Welding Alloys Pvt. Ltd., Bangalore Page 5 of 5 9. We also notice that the decision rendered by the Hon’ble Madras High Court in the case of Marg Ltd. (supra) supports the case of the assessee. Accordingly, we are of the view that the Ld. CIT(A) was not justified in confirming the addition made by the A.O. Accordingly, we set aside the order passed by the Ld. CIT(A) and direct the A.O. to delete the addition of Rs.1,19,30,583/- made by the A.O. 10. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 2 nd Dec, 2021 Sd/- (Beena Pillai) Judicial Member Sd/- (B.R. Baskaran) Accountant Member Bangalore, Dated 2 nd Dec, 2021. VG/SPS Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore.