Kandasamy Rajendran, CHENNAI V. ACIT Non Corporate Circle 6(1), CHENNAI

ITA 2728/CHNY/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7314 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 24-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts
• Section: 22

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . , , $ % BEFORE SHRI DUVVURU RL REDDY, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ I.T.A.NO.2728/CHNY/2018 ( / ASSESSMENT YEAR: 2015-16) SHRI KANDASAMY RAJENDRAN, PROP. SRI SHANMUGA PRIME TANNERY, NO.62, PERIANNA MAISTRY STREET, PERIAMET, CHENNAI 600 003. VS THE ACIT, NON-CORPORATE CIRCLE 6(1), CHENNAI PAN: ABCPR2257B ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI G. BASKAR & I. DINESH, ADVOCATES / RESPONDENT BY : SHRI AR.V. SREENIVASAN, JCIT /DATE OF HEARING : 09.07.2019 /DATE OF PRONOUNCEMENT : 24.07.2019 / O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THE ASSESSEE FILED THIS APPEAL AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-5, CHENNAI IN ITA NO.196/CIT(A)-5/2017-18 DATED 29.06.2018 FOR THE AS SESSMENT YEAR 2015-16. 2. SHRI KANDASAMY RAJENDRAN, PROPRIETOR OF SRI SHAN MUGA PRIME TANNERY, THE ASSESSEE, HAVING A TANNERY AT TRICHY, ENGAGED IN THE 2 ITA NO.2278/CHNY/2018 BUSINESS OF TANNING & EXPORTING OF FINISHED GOAT & SHEET SKINS TO VARIOUS COUNTRIES AND ALSO SELLS LOCALLY. WHILE MA KING THE ASSESSMENT FOR THE ASSESSMENT YEAR 2015-16, THE AO FOUND, INTE R-ALIA, THAT THE AVERAGE NET PROFIT OF LAST 3 YEARS WAS AT 32.88%. HOWEVER, THE NET PROFIT RATIO FOR THE ASSESSMENT YEAR 2015-16 WAS 22 .54%. AFTER CONSIDERING THE ASSESSEES REPLY ETC, HE HELD THAT SINCE THE ASSESSEE IS IN THE BUSINESS FOR MANY YEARS, THERE MAY NOT BE ANY POSSIBILITY OF REDUCTION IN NET PROFIT, THEREFORE, HE FOUND THAT T HE DIFFERENCE BETWEEN THE LAST THREE YEARS AVERAGE NET PROFIT VIZ-A-VIZ C URRENT NET PROFIT WAS 10.34%. CONSIDERING THE ASSESSEES SUBMISSION, HE A DDED 50% OF 10.34% I.E., 5.17% ON THE ADMITTED TURNOVER AND COM PLETED THE ASSESSMENT. AGGRIEVED, THE ASSESSEE FILED AN APPEA L BEFORE THE CIT(A). THE LD.CIT(A) HELD, INTER-ALIA, THAT THE A O FOUND DIFFICULTY IN THE RESULTS THOUGH HE DID NOT SPECIFY REJECTION OF BOOKS OF ACCOUNTS IN THE ASSESSMENT ORDER, YET HE ESTIMATED THE NET PROF IT AFTER FINDING A VITAL DEFECT IN THE BOOK RESULTS MEANS THAT HE REJE CTED THE BOOKS OF ACCOUNTS. THE LD.CIT(A) ALSO DREW STRENGTH FROM TH E FACT THAT THE AO DID NOT MAKE ANY OTHER ADDITION OR DISALLOWANCE, TH EREFORE THE AO HAD REJECTED THE BOOKS OF ACCOUNTS AND HE CONFIRMED THE ADDITION MADE BY THE AO. AGGRIEVED AGAINST THAT ORDER, THE ASSESSEE FILED THIS APPEAL. 3 ITA NO.2278/CHNY/2018 3. THE LD.AR SUBMITTED THAT THE LD.CIT(A) ERRED IN CONFIRMING THE ADDITION WITHOUT INDEPENDENT EXAMINATION OF FACTS. THE LD.CIT(A) HAD FAILED TO CONSIDER THE FACT THAT THERE WAS A DECLIN E IN EXPORT TURNOVER AND HIGH REDUCTION IN AVERAGE SALES RATE EI-TANNED LEATHER WHICH WOULD AFFECT ALL THE PROFIT MARGIN. IN THIS REGARD , THE LD.AR TOOK OUR ATTENTION TO THE PAPER-BOOK WHEREIN, THE ASSESSEE E XPLAINED THE REASON FOR REDUCTION IN HIS NET PROFIT, PART OF WHI CH WAS ALSO EXTRACTED BY THE AO IN THE ASSESSMENT ORDER. TAKING TO VARIO US MATERIALS IN THE PAPER-BOOK, THE LD.AR MADE STRENUOUS EFFORTS TO SAY THAT THE AO HAD NOT SEEN THE NET PROFIT ASSOCIATED WITH THE EXPORT TURNOVER, NET PROFIT ASSOCIATED WITH THE LOCAL TURNOVER VIS-A-VIS VARIOU S REASONS SUBMITTED BY THE ASSESSEE FOR THE LOW NET PROFIT ON THE CURRE NT YEAR. UNFORTUNATELY, THE LD.CIT(A) ALSO FAILED TO APPRECI ATE. THEREFORE, HE PLEADED TO ALLOW THE APPEAL. PER CONTRA, THE LD.DR SUPPORTED THE ORDER OF THE LD.AO AND THE LD.CIT(A) BY TAKING US T HROUGH THE ORDERS. 4. WE HEARD THE RIVAL SUBMISSIONS. WE FIND PRIMA-F ACIE THAT THE ASSESSEE HAD MADE AN ATTEMPT TO EXPLAIN THE REASONS FOR ITS LOW NET PROFIT. IT APPEARS THAT THE ASSOCIATED FACTS AND C IRCUMSTANCES HAVE NOT BEEN PROPERLY EXAMINED. THE VARIOUS FACTORS AND THE CORRESPONDING FIGURES GIVEN BY THE ASSESSEE NEEDS T O BE EXAMINED 4 ITA NO.2278/CHNY/2018 VIS-A-VIS THE EXPORT TURNOVER AS WELL AS FOR THE LO CAL TURNOVER TO DRAW CONCLUSION AS TO WHETHER THE RETURNED INCOME IS REA SONABLE OR NOT. SINCE SUCH EXAMINATION HAS NOT BEEN DONE, WE DEEM I T FIT TO REMIT THE ISSUE BACK TO THE FILE OF THE LD.AO FOR A FRESH EXA MINATION. THE ASSESSEE SHALL LAY ALL THE MATERIAL IN SUPPORT OF I TS CONTENTION BEFORE THE ASSESSING OFFICER AND SHALL COMPLY WITH THE REQ UIREMENTS OF THE ASSESSING OFFICER IN ACCORDANCE WITH LAW. THE ASSES SING OFFICER IS FREE TO CONDUCT APPROPRIATE ENQUIRY AS DEEMED FIT. HOWEVER, HE SHALL FURNISH DUE OPPORTUNITY TO THE ASSESSEE AGAINST THE MATERIAL, IF ANY, TO BE USED AGAINST IT AND THEN DECIDE THE ISSUES IN AC CORDANCE WITH LAW. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 24 TH JULY, 2019 AT CHENNAI. SD/- SD/- $ /CHENNAI, % /DATED 24 TH JULY, 2019 RSR () *) /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. - ( ) /CIT(A) 4. - /CIT 5. ) 0 /DR 6. /GF ( ) (DUVVURU R.L REDDY) /JUDICIAL MEMBER ( ) (S. JAYARAMAN) /ACCOUNTANT MEMBER