Green India Seeds Company, Gandhinagar V. The Income Tax Officer, Ward-2, Gandhinagar

ITA 3028/AHD/2015

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4467 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 29-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G C DAXINI
• Keywords: Rejection of books of accounts; Bad and doubtful debts; Set aside
• Section: 143(3); 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND MS. MADHUMITA ROY, JUDICIAL MEMBER ./ITA NO.3028/AHD/2015 ( / ASSESSMENT YEAR : 2011-12) GREEN INDIA SEEDS COMPANY FLAT NO.802/11, GIDC ESTATE SECTOR-28 GANDHINAGAR 382 028 / VS. THE INCOME TAX OFFICER WARD-2 GANDHINAGAR ./ ./ PAN/GIR NO. : AAGFG 1209 B ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI PRITESH SHAH, AR / RESPONDENT BY : SHRI G.C. DAXINI, SR.DR / DATE OF HEARING 08/05/2019 !'# / DATE OF PRONOUNCEMENT 31/05/2019 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) GANDHINAGAR, AHMEDABAD [CIT(A) IN SHORT] VIDE APPEA L NO.CIT(A)/GNR/105/2014-15 DATED 20/08/2015 ARISING IN THE ASSESSMENT ORDER PASSED UNDER S.143(3) OF THE INCOM E TAX ACT, 1961(HEREINAFTER REFERRED TO AS 'THE ACT') DATED 1 4/02/2014 RELEVANT TO ASSESSMENT YEAR (AY) 2011-12. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND OF APP EAL: THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CON FIRMING THE ADDITION OF RS.9,12,969/- MADE ON ESTIMATE BASIS TO NET PROFIT, WHICH IS REQUESTED TO BE DELETED. ITA NO.3028/AHD/2015 GREEN INDIA SEEDS COMPANY VS. ITO ASS T.YEAR 2011-12 - 2 - THE ONLY ISSUE RAISED BY THE ASSESSEE IS THAT THE L D. CIT (A) ERRED IN ESTIMATING THE PROFIT AT THE RATE OF .75% ON THE GR OSS TURNOVER OF RS.38,96,15,301/- ONLY AND THEREBY MAKING AN ADDITI ON OF RS. 9,12,969.00 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE A PARTNERSHIP FIRM AND ENGAGED IN THE BUSINESS OF TRADING/PRODUCING OF HYB RID SEEDS. THE AO IN THE YEAR UNDER CONSIDERATION WAS NOT SATISFIED WITH THE BOOKS OF ACCOUNTS OF THE ASSESSEE. THEREFORE HE REJECTED THE SAME AND ESTIMATED THE PROFIT OF THE ASSESSEE AT THE RATE OF .75% OF THE GROSS TURNO VER AND THEREBY MAKING AN ADDITION OF RS. 9,12,969.00. THE AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE L D.CIT (A) WHO HAS CONFIRMED THE REJECTION OF BOOKS OF ACCOUNTS AND TH E PROFIT DETERMINED BY THE AO. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT (A), TH E ASSESSEE IS IN APPEAL BEFORE US. 3. THE LD. AR BEFORE US FILED A PAPER RUNNING FR OM PAGES 1 TO 134 AND SUBMITTED THAT THE NET PROFIT DECLARED BY THE ASSES SEE IS BETTER THAN THE EARLIER YEAR IF THE SAME IS CALCULATED WITHOUT CONS IDERING THE BAD DEBTS CLAIMED BY THE ASSESSEE. ITA NO.3028/AHD/2015 GREEN INDIA SEEDS COMPANY VS. ITO ASS T.YEAR 2011-12 - 3 - 4. ON THE OTHER HAND, THE LD. DR VEHEMENTLY SUP PORTED THE ORDER OF THE AUTHORITIES BELOW. 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET, W E NOTE THAT THE ASSESSEE HAD DECLARED ITS NET PROFIT BEFORE INTEREST TO THE PARTNERS IN THE IMMEDIATELY PRECEDING THE ASSESSMENT YEAR 2010-11 A T .75% OF THE GROSS TURNOVER WHICH WAS ACCEPTED UNDER SECTION 143(1) OF THE ACT. ACCORDINGLY, THE AO DETERMINED THE INCOME IN THE AS SESSMENT FRAMED UNDER SECTION 143(3) OF THE ACT AT THE RATE OF .75% OF THE GROSS RECEIPTS BEFORE THE INTEREST TO PARTNERS AND THEREBY MAKING AN ADDITION OF RS. 9,12,969.00. NOW THE ISSUE ARISES FOR THE YEAR UNDER CONSIDERATI ON WHAT SHOULD BE THE REASONABLE RATE OF PROFIT IN THE EVENT OF THE REJEC TION OF THE BOOKS OF ACCOUNTS UNDER THE PROVISIONS OF SECTION 145(3) OF THE ACT. IT IS A SETTLED LAW THAT ONCE THE BOOKS OF ACCOUNTS HAVE BEEN REJEC TED, THE ONLY OPTION AVAILABLE TO THE REVENUE IS TO ESTIMATE THE PROFIT OF THE ASSESSEE BASED ON SOME SCIENTIFIC BASIS. AS THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES IN THE YEAR UNDER CONSIDERATION VIS-A -VIS TO THE FACTS AND CIRCUMSTANCES OF THE PRECEDING ASSESSMENT YEAR EXCE PT THE AMOUNT OF THE TURNOVER AND THE BAD DEBTS, THEREFORE WE ARE OF THE VIEW THAT THE GUIDANCE CAN BE TAKEN FROM SUCH PRECEDING AY. HOWEVER, WE NOTE THAT THE ASSESSEE CLAIMED NO BAD D EBT IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR, WHEREAS THE ASSESSEE HAS ITA NO.3028/AHD/2015 GREEN INDIA SEEDS COMPANY VS. ITO ASS T.YEAR 2011-12 - 4 - CLAIMED BAD DEBT AMOUNTING TO RS. 9,92,776.00 IN TH E YEAR UNDER CONSIDERATION. IN OUR CONSIDERED VIEW, SUCH BAD DEB TS NEED TO BE CONSIDERED WHILE ESTIMATING THE PROFIT FOR THE YEAR UNDER CONSIDERATION. HOWEVER, WE NOTE THAT THE ASSESSEE HAS NOT FURNISHE D SUFFICIENT DOCUMENTARY EVIDENCE IN SUPPORT OF SUCH BAD DEBTS B EFORE THE AUTHORITIES BELOW. BUT AT THE SAME TIME, WE FIND THAT THE ASSES SEE HAS CLAIMED BAD DEBTS IN ITS AUDITED FINANCIAL STATEMENTS FOR THE A MOUNT AS DISCUSSED ABOVE. THUS, IN THE INTEREST OF JUSTICE AND FAIR PL AY, WE ARE INCLINED TO SET ASIDE THE ORDER TO THE FILE OF THE AO FOR ESTIMATIN G THE PROFIT BEFORE INTEREST TO THE PARTNERS BUT AFTER CONSIDERING THE AMOUNT OF THE BAD DEBTS CLAIMED BY THE ASSESSEE AND DECIDE THE ISSUE OF AFR ESH AS PER THE PROVISIONS OF LAW. IT IS ALSO IMPORTANT TO NOTE THA T THE ASSESSEE SHALL FURNISH THE NECESSARY PIECES OF EVIDENCE IN SUPPORT OF THE BAD DEBTS CLAIMED IN THE YEAR UNDER CONSIDERATION. HENCE, THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. THIS ORDER PRONOUNCED IN OPEN COURT ON 31/05/2019 SD/- SD/- (MS. MADHUMITA ROY) (WASEEM A HMED) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 31/05/2019 &.., .(.. / T.C. NAIR, SR. PS ITA NO.3028/AHD/2015 GREEN INDIA SEEDS COMPANY VS. ITO ASS T.YEAR 2011-12 - 5 - / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. )*+ , / CONCERNED CIT 4. , ( ) / THE CIT(A)-GANDHINAGAR 5. /01 ((*+ , *+# , ) / DR, ITAT, AHMEDABAD 6. 145 6 / GUARD FILE. / BY ORDER, / ( //TRUE COPY// / ( DY./ASSTT.REGISTRAR) $%, / ITAT, AHMEDABAD 1. DATE 29.5.2019 (WORD PROCESSED BY HONBLE AM IN HI S COMPUTER BY DRAGON) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER .. 30.5.2019 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.31.5.19 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 31.5.19 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER