Asst. Commissioner of Income Tax, Circle- 1(1), Panaji V. M/s . Rani Construction, Panaji

ITA 219/PAN/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93448 (ITAT-PANAJI)
• Duration Of Justice: 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 11-06-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 27-06-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: BANGARI
• Assessee Lawyers: K P M RAJAN
• Keywords: Rejection of books of accounts; Depreciation; Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI GEORGE MATHAN , HONBLE JUDICIAL MEMBER AND SHRI N.K. BILLAIYA , HONBLE ACCOUNTANT MEMBER ITA NO. 2 1 9/PNJ/201 4 (ASST. YEAR : 200 5 - 0 6 ) ACIT, CIRCLE - 1(1), PANAJI GOA. VS. M/S. RANI CONSTRUCTION S P. LTD. , 407, SHIV TOWERS, 4 TH FLOOR, PATTO PLAZA, PANAJI GOA. PAN NO. AAACR 9056 N (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K.P.M. RAJAN ADV. DEPARTMENT BY : SHRI M.R. BANGARI - D.R. DATE OF HEARING : 11 / 0 6 /2015 . DATE OF PRONOUNCEMENT : 11 / 0 6 /201 5 . O R D E R PER N.K. BILLAIYA THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF L D. CIT (A), PANAJI, DATED 05 /0 3 /201 4 PERTAINING TO A.Y. 200 5 - 0 6 . 2. THE GROUNDS OF APPEAL FILED WITH THE APPEAL MEMO WERE AMENDED VIDE LETTER DATED 22/12/2014. THE AMENDED GROUNDS OF APPEAL R EAD AS UNDER : 2 ITA NO. 219 /PNJ/2014 1. THE ORDER OF THE LEARNED CIT(A) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.24,56,892/ - ON ACCOUNT OF ENHANCEMENT OF INCOME ON THE BASIS OF ESTIMATION ON SURVEY FINDINGS, WHEN A.O FOUND TWO SETS OF ACCOUNTS AND THE ASSESSEE COMPANY COULD NOT RECONCILE THE DEFERENCE NOR COULD PROVIDE EXPLANATION FOR THE SAME WHEN OPPORTUNITY WAS OFFERED. 3. THE LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT ADDITION WAS RIGHTLY MADE BY THE AO OVER THE DISCREPANCY FOUND DURING THE COURSE OF SURVEY AS THE ASSESSEE HAS DECLARED TOTAL RECEIPTS & TOTAL EXPENDITURE OF R S.46,26,64,211/ - & RS.43,09,93,180 / - RESPECTIVELY AS PER TALLY PACKAGE (PAGE 82 OF ANNEXURE A/RANI CONST R UCTIONS/SEC'BAD/3) WHEREAS AS PER COPY OF THE BALANCE SHEET (PAGE 40 OF ANNEXURE A/RANI CONSTRUCTIONS /SEC'BAD/3 TOTAL RECEIPTS & TOTAL EXPENDITURE WAS SHOWN AS RS.45,11,56,099/ - & RS.42,19,41,960/ - RESPECTIVELY. 4. EVEN THOUGH THE ONUS WAS ON THE ASSESSEE TO RECONCILE THE DIFFERENCE AND TO OFFER EXPLANATION FOR THE SAME IN SPITE OF GIVING SUFFICIENT OPPORTUNITY WHO FAILED TO DO SO, IT IS INCORRECT ON THE PART OF THE LD CIT(A) TO CONCLUDE THAT THE AO HAS NOT BROUGHT OUT ANY SPECIFIC DEFECT BEFORE REJECTING THE FIGURE OF NET PROFIT AS PER THE ASSESSEE BALANCE SHEET AND PROFIT AND LOSS ACCOUNT ENCLOSED WITH ITS RETURN OF INCOME. 5. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASIDE AND ORDER OF ASSESSING OFFICER IS RESTORED. 6. THE APPELLANT CRAVES, LEAVE TO ADD, AMEND OR ALTER ANY OF THE GROUNDS OF THE APPEAL EITHER BEFORE OR AT THE TIME OF HEARING. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT A SURVEY OPERATION WAS CONDUCTED ON VARIOUS BUSINESS PREMISES OF THE ASSESSEE ON 3 ITA NO. 219 /PNJ/2014 21/09/2006. THE RELEVANT QUESTIONS ASKED DURING THE COURSE OF SURVEY, WHICH READ AS UNDER: - Q.23 PLEASE GO THROUGH THE ANNEXURE A/RANI CONSTRUCTIONS/SEC'BAD/3 WHEREIN PAGES 1 TO 40 ARE THE COPIES OF BALANCE SHEET AND PROFIT & LOSS ACCOUNTS FOR DIFFERENT YEARS FOUND IN YOUR BUSINE SS PREMISES. SIMILARLY PAGES 94 TO 119 OF ANNEXURE A/RANI CONSTRUCTIONS/SEC'BAD/9 ARE THE FINANCIAL STATEMENTS. PLEASE COMPARE THEM WITH THE PRINT OUTS FROM TALLY PACKAGE TAKEN FROM YOUR COMPUTER AND IMPOUNDED AS PAGES 41 TO 83 AND PAGES 1 TO 37 OF THE ANNEXURE A/RANI CONSTRUCTIONS/SEC BAD/3 AND 9 RESPECTIVELY AND EXPLAIN THE DIFFERENCE? Q. 24 PLEASE CONFIRM THAT THE FIGURES TAKEN ABOVE AS PER TALLY PACKAGE ARE THE TOTALS OF THE BOOKS OF ACCOUNTS OFFICE/SITE WISE MAINTAINED IN YOUR COMPUTER AND RECONCILE THE ABOVE DIFFERENCES? DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO EXPLAIN THE DIFFERENCE HOWEVER , NO SUBMISSION WAS FURNISHED BY THE ASSESSEE WITH RESPECT TO SUCH DISCREPANCY . ONCE AGAIN THE ASSESSEE WAS GIVEN A N OPPORTUNITY TO EXPLAIN THE DIFFERENCE. THE ASSESSEE FILED A DETAILED REPLY WHICH READS AS UNDER: - IN REPLY THE ASSESSEE SUBMITTED 'INCOME OF RS. 462664211/ - AND EXPENDITURE OF RS.430993180/ - AS PER DATA SEEMS TO HAVE BEEN LOCATED AT HY D ERABAD OFFICE AND ACTUAL INCOME OF RS.451156099/ - AND EXPENDITURE OF RS.42141960/ - FOR THE YEAR ENDED 31ST MARCH, 2005 CANNOT BE RECONCILED IN THE ABSENCE OF ENTIRE SET OF PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2005 AND THE BALANCE SHEET AS ON 31ST MARCH, 2005. MOREOVER THE BALANCE SHEET AND PROFIT AND LOSS ACCOUNT DO NOT FORM PART OF THE BOOKS OF ACCOUNTS AS PER SECTION 44AA OF THE INCOME TAX ACT, 1961 READ WITH RULE 6F OF INCOME TAX RULES 1962. SIMILARLY WE HAVE BEEN HANDED OVER A COPY OF BALANCE SHEET AS AT 3 1ST MARCH, 20 05 AND PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2005 TO EXPLAIN THE DIFFERENCES, BUT THE SAID BALANCE SHEET DOES NOT TALLY. THE FIGURES OF TOTAL ASSETS AND TOTAL LIABILITIES AS 31ST MARCH, 2005 DIFFER BY 4 ITA NO. 219 /PNJ/2014 RS.323302.51/ - WHICH IS TOTALLY AGAINS T THE ACCOUNTING PRINCIPLE WHICH REQUIRES THAT BOTH THE ASSET SIDE AND LIABILITY SIDE OF BALANCE SHEET MUST TALLY. ASSET SIDE TOTAL IS RS.292926509/ - AND LIABILITY SIDE TOTAL IS RS. 2605 9625 8/ - . DEPRECIATION, BALANCE CARRIED FORWARD OF PROFIT AND LOSS AC COUNT, PROVISION FOR INCOME TAX ARE NOT AT ALL CONSIDERED/ CONSIDERED WRONGLY IN ITS PREPARATION. A COPY OF ACCOUNTS ARE ENCLOSED MARKED ANNEXURE XI. HENCE, THERE IS NO BASIS FOR THE FIGURES STATED TO BE SENT BY INCOME TAX OFFICE, HYDERABAD, A.P. THE SU BMISSIONS MADE BY THE ASSESSEE DID NOT FIND ANY FAVOUR WITH THE ASSESSING OFFICER, WHO PROCEEDED BY REJECTING THE BOOKS OF ACCOUNTS AND ADD ING THE ADDITIONAL INCOME OF RS. 24,56,893/ - . 4 . AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) . BEFORE LD. CIT(A), IT WAS STRONGLY CONTENDED THAT THE ACIT IS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNTS WHEN THE BOOKS OF ACCOUNTS ARE AUDITED AND AUDITORS REPORT IN FORM N O . 3CA & 3CD ALONG WITH OTHER STATEMENT ACCOMPAN Y ING THE RETURN WERE BEFORE THE ASSESSING OFFICER. IT WAS FURTHER SUBMITTED THAT THE ADDITION MADE BY THE ASSESSING OFFICER HAS NO LEGAL BASIS AND IT IS NOT IN ACCORDANCE WITH LAW. AFTER CONSIDERING THE FACTS AND THE DETAILED SUBMISSIONS MADE BY THE ASSESSEE, THE LD. CIT(A) OBSERVED AS UNDER: - I HAVE GONE THROUGH THE ASSESSMENT ORDER, ASSESSEES SUBMISSION AND THE CONTENTS OF THE REMAND REPORT FILED BY THE A.O. A SURVEY WAS CONDUCTED AND FIGURES FROM T ALLY PACKAGE WERE OBTAINED. IN MY OPINION, THERE HAS TO BE A DIFFERENCE IN THE FIGURES OF TRIAL BALANCE AND THE FIGURES OF AUDITED FINAL ACCOUNTS. THIS DIFFERENCE C A N BE FOR VARIOUS REASONS, LIKE 5 ITA NO. 219 /PNJ/2014 DIFFERENT HEADINGS, CLASSIFICATIONS, GROUPINGS ETC. IT CAN BE SEEN FROM THE BODY OF THE ORDER ITSELF THAT COMPARED TO THE TURNOVER THE DIFFERENCE IS VERY SMALL. THE A.O. HAS ALSO NOT BROUGHT OUT ANY SPECIFIC DEFECT BEFORE REJECTING THE BOOKS OF ACCOUNTS AND MECHANICALLY ADDING THE DIFFERENCE. THEREFORE, IN MY O PINION, THE ADDITION AMOUNTING TO RS. 24,56,892/ - MADE ON ACCOUNT OF ESTIMATION OF INCOME CANNOT BE SUSTAINED AND THE SAME IS DELETED. THIS GR O UND OF APPEAL OF THE APPELLANT IS ALLOWED . IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. 5. AGGRIEVED BY THIS, REVENUE IS BEFORE US. 6. LEARNED DR STRONGLY SUPPORTED THE ASSESSMENT ORDER. IT IS THE SAY OF THE DR THAT THE ASSESSEE HAS MISERABLY FAILED TO RECONCILE THE DIFFERENCES IN THE ACCOUNTS BROUGHT TO HIS NOTICE DURING THE COURSE OF SURVEY AND ALSO DURING THE COURSE OF ASSESSMENT PROCEEDINGS . THEREFORE, THE ADDITIONS MADE BY THE ASSESSING OFFICER ARE JUS TIFIED AND LD. CIT(A) S ORDER NEED S TO BE REVERSED. 7. PER CONTRA , THE COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN SUBMITTED BEFORE THE LOWER AUTHORIT I ES. 8. WE HAVE CAREFULLY PERUSED THE ORDER OF THE AUTHORITIES BELOW. WE FAILED TO PERSUADE OU R SELVES TO UNDERSTAND THE BASIS OF ADDITION OF RS. 24,56,892/ - MADE BY THE ASSESSING OFFICER BECAUSE THERE IS NOT EVEN AN IOTA OF REFERENCE TO ANY FACTUAL FIGURES WHICH HAVE RESULTED INTO THE ADDITION OF RS. 24,56,892/ - ASSUMING THAT IT IS AN ESTIMATED FIGURE, THEN THE ASSUMPTION HAS TO BE BASED ON SOME FACTUAL FIGURES. 6 ITA NO. 219 /PNJ/2014 WE FIND THAT THE LD. CIT(A) HAS NOT GIVEN ANY FI N D I NG ON THI S COMPUTATION OF RS. 24,56,892/ - . IN OUR CONSIDERED OPINION, THE REJECTION OF BOOKS OF ACCOUNTS IS NOT ON SOUND PRINCIPLE , HOWEVER, AT THE SAME TIME, WE DO NOT KNOW WHAT IS THE BASIS OF THE ADDITION OF RS. 24,56,892/ - . WE, THEREFORE , IN THE INTEREST OF JUSTICE AND FAIR PLAY , RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A FINDING THAT THE REJECTION OF BOOKS OF ACCOUNTS WERE ON FLIMSY GROUND. THE ASSESSING OFFICER IS DIRECTED TO EXPLAIN HOW THE FIGURE OF RS. 24,56, 892/ - HAS BEEN ARRIVED . THE ASSESSING OFFICER IS FURTHER DIRECTED TO GIVE ONE MORE OPPORTUNITY TO THE ASSESSEE TO RECONCILE THE DIFFERENCE AND IF THE ASSESSEE IS UNABLE TO RECONCILE THE DIFFERENCE, THE UN - RECONCILED AMOUNT SHOULD BE ADDED TO THE INCOME OF THE ASSESSEE. NEEDLESS TO MENTION , THE ASSESSING OFFICER SHALL GIVE A REASONABLE AND SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 9. IN THE RESULT, APPEAL OF THE REVENUE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ( ORDER P RONOUNCED IN THE OPEN COURT ON 1 1 TH JUNE , 201 5 ). S D / - S D / - ( GEORGE MATHAN ) ( N.K. BILLA I YA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 1 1 T H JUNE , 201 5 . 7 ITA NO. 219 /PNJ/2014 VR/ - COPY TO: 1 . THE APPELLANT 2 . THE RESPONDENT 3 . THE LD. CIT 4 . THE CIT(A) 5 . THE D.R 6 . GUARD FILE. BY ORDER ASSISTANT REGISTRAR I.T.A.T., PANAJI 8 ITA NO. 219 /PNJ/2014 DATE INITIAL ORIGINAL DICTATION PAD IS ENCLOSED IN THE FILE 1. DRAFT DICTATED ON 1 1 .06.2015 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 1 1 .06.2015 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 1 1 /06/2015 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 1 1 /06/2015 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 1 1 /06/2015 SR.PS 6. DATE OF PRONOUNCEMENT 1 1 /06/2015 SR.PS 7. FILE SENT TO THE BENCH CLERK 1 2 /06/2015 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER