SHRI BALDEV SINGH, Sonebhadra V. DY. COMM. OF INCOME TAX CIRCLE-III, MIRZAPUR

ITA 315/ALLD/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 3774 (ITAT-ALLAHABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 22-12-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Depreciation; Opportunity of being heard
• Section: 143(3); 40(b); 145(3); 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ALLAHABAD (SMC) BENCH, ALLAHABAD (THROUGH VIRTUAL COURT) BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER I.T.A. NO.315/ALLD/2017 ASSESSMENT YEAR: 2012-13 SHRI BALDEV SINGH, PWD COLONY, ROBERTSGANJ, SONEBHADRA [PAN: ATDPS3935L] VS DY. COMMISSIONER OF INCOME TAX, CIRCLE-III, MIRZAPUR (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI PRAVEEN GODBOLE, ADVOCATE FOR REVENUE : SHRI A.K.SINGH, SR.DR DATE OF HEARING : 05-11-2020 DATE OF PRONOUNCEMENT : 06-11-2020 O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 20-09-2017 OF THE COMMISSIONER OF INCOME TAX(APPEALS)-ALLAHABAD FOR THE AY.2012-13. IN THIS A PPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. THAT IN ANY VIEW OF THE MATTER THE ASSESSMENT FR AMED U/S 143(3) OF THE INCOME TAX ACT AND VIDE ORDER DATED 12/02/20 15 THE INCOME SO DETERMINED AT RS. 24,80,470/- AS AGAINST THE RETURN ED INCOME OF RS. 14,67,720/- IS BAD BOTH ON THE FACTS AND IN LAW. TH EREFORE THE DECLARED INCOME SHOULD HAVE BEEN ACCEPTED IN THE FA CTS AND CIRCUMSTANCES OF THE CASE. 2. THAT IN ANY VIEW OF THE MATTER INVOKING SECTION 145(3) OF THE INCOME TAX ACT FOR REJECTION THE BOOKS OF ACCOUNTS HIGHLY UNJUSTIFIED AND ILLEGAL IN THE FACTS AND CIRCUMSTANCES OF THE C ASE BECAUSE BOOKS OF ACCOUNT ARE AUDITED BY THE QUALIFIED CHARTERED A CCOUNTANT AND EXPENSES ARE FULLY VOUCHED AND RECORDED IN BOOKS OF ACCOUNTS WHICH WERE EXAMINED HENCE APPLICATION OF PROVISION IS HIG HLY UNJUSTIFIED. 3. THAT IN ANY VIEW OF THE MATTER THE ADDITION OF R S. 2,78,395/- AS MADE BY THE ASSESSING OFFICER BY INVOKING THE PROVI SIONS OF SECTION ITA NO.315 /ALLD/2017 :- 2 -: 145(3) OF THE INCOME TAX ACT FOR REJECTION OF BOOKS OF ACCOUNT AND BY APPLYING A NET RATE OF 0.91% OVER AND ABOVE THE DEC LARED NET RATE IN ARBITRARY MANNER IS HIGHLY UNJUSTIFIED AND ILLEGAL. 4. THAT IN ANY VIEW OF THE MATTER ENHANCEMENT IN TH E DECLARED NET RATE AS MADE BY THE ASSESSING OFFICER AND CONFIRMED BY CIT(A) FOR MAKING THE ADDITION OF RS.2,78,395/- IS WRONG AND I LLEGAL AND EVEN THE CITED CASE LAW IS NOT APPLICABLE IN THE ASSESSE E'S CASE BECAUSE FACTS OF THE CITED CASE ARE DIFFERENT THAN THE FACT S OF THE ASSESSEE'S, HENCE THE ADDITION IS LIABLE TO BE DELETED. 5. THAT IN ANY VIEW OF THE MATTER OBSERVATIONS AND FINDINGS OF THE ASSESSING OFFICER MADE IN THE ASSESSMENT ORDER TO I NVOKE SECTION 145(3) AND REJECTING THE BOOKS OF ACCOUNT AND ENHAN CING THE NET RATE BY 0.91% OVER AND ABOVE THE DECLARED NET RATE BY IG NORING THE PAST RECORDS OF THE ASSESSEE ARE UNJUSTIFIED, INCORRECT, ILLEGAL AND CONTRARY TO THE ACTUAL FACTS OF THE CASE, HENCE THE ADDITION AS MADE BY ASSESSING OFFICER AND CONFIRMED BY CIT(A) IS HIGHLY UNJUSTIFIED. 6. THAT IN ANY VIEW OF THE MATTER THE ADDITION OR R S. 3,218/- AS MADE ON ACCOUNT OF ALLEGED INTEREST RECEIVED ON INCOME T AX REFUND IN HIGHLY OBJECTIONABLE AND ILLEGAL IN THE FACTS AND CIRCUMST ANCE OF THE CASE. 7. THAT IN ANY VIEW OF THE MATTER DISALLOWANCE OF R S. 7,30,134/- AS MADE UNDER THE HEAD DEPRECIATION AS PER PARA 5 OF T HE ASSESSMENT ORDER IS HIGHLY UNJUSTIFIED AND ILLEGAL IN THE EYES OF LAW BECAUSE THE ASSESSING OFFICER FAILED TO APPRECIATE THE FACTS OF THE CASE CORRECTLY AND EVEN NO PROPER OPPORTUNITY OF BEING HEARD WAS P ROVIDED TO THE ASSESSEE TO FURNISH FURTHER FACTS AND EVIDENCES HEN CE ENTIRE ACTION OF TWO LOWER AUTHORITIES ARE HIGHLY UNJUSTIFIED. 8. THAT IN ANY VIEW OF THE MATTER ADDITIONS OF RS. 2,78,395/- AS PER PARA 3.2 OF THE ORDER AND DISALLOWANCE OF RS. 7,73, 134/- RS. 8,28.793/- AS PER PARA 5 OF THE ORDER WERE MADE IN HASTE ON THE BASES OF PRESUMPTIONS AND GUESS LOOK BY THE ASSESSI NG OFFICER IN CASUAL MANNER WHICH IS NOT CORRECT THEREFORE THE ADDITIONS/DISALLOWANCE ARE UNJUSTIFIED AND ILLEGAL IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 9. THAT IN ANY VIEW OF THE MATTER THE CHARGE OF PEN AL INTEREST UNDER DIFFERENT SECTIONS OF THE INCOME TAX ACT IS HIGHLY UNJUSTIFIED AND ILLEGAL IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 10. THAT IN VIEW OF THE MATTER THE APPELLANT RESERV ES HIS RIGHT TO TAKE ANY FRESH GROUND OF APPEAL BEFORE HEARING OF THE AP PEAL. 2. AT THE TIME OF HEARING, LD.COUNSEL FOR THE ASSESSEE STATED AT BAR THAT EXCEPT GROUND NO.7, THE ASSESSEE DID NOT PRE SS THE OTHER GROUNDS. ACCORDINGLY, THE ONLY EFFECT GROUND RE MAINS IN ITA NO.315 /ALLD/2017 :- 3 -: THIS APPEAL FOR ADJUDICATION IS GROUND NO.7, REGARDI NG DISALLOWANCE OF DEPRECIATION, AFTER ESTIMATION OF INCO ME BY ADOPTING NET PROFIT @6%. HENCE, THE REMAINING GROUNDS ARE DISMISSED BEING NOT PRESSED 3. I HAVE HEARD LD.AR AS WELL AS LD.DR AND CONSIDER ED THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE IS AN IND IVIDUAL AND DERIVES INCOME FROM CIVIL CONSTRUCTION BUSINESS. THE ASSESSEE FILED HIS RETURN OF INCOME ON 28-09-2012, DECLARING TOTAL INCOME AT RS.14,68,720/-. 4. DURING THE COURSE OF SCRUTINY ASSESSMENT, THE ASSES SING OFFICER NOTED THAT THE ASSESSEE HAS DECLARED NET PROFI T @5.09%, WHICH IN VIEW OF THE ASSESSING OFFICER WAS O N THE LOWER SIDE. THE ASSESSING OFFICER ALSO REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE BY INVOKING THE PROVISIONS O F SECTION 145(3) OF THE ACT AND THEN PROPOSED TO ESTIMATE THE INCO ME OF THE ASSESSEE BY ENHANCING THE NET PROFIT TO 6% AS AGAIN ST THE DECLARED NET PROFIT OF 5.09%. AFTER ESTIMATION OF THE INCOME BY ADOPTING NET PROFIT @6%, THE ASSESSING OFFICER HAS AL SO PROCEEDED TO DISALLOW THE DEPRECIATION ON THE GROUND T HAT ONE OF THE TRUCKS PURCHASED DURING THE YEAR UNDER CONSIDER ATION WAS NOT TO PUT TO USE AND THEREFORE THE DEPRECIATION IS NOT ALLOWABLE. IT IS PERTINENT TO NOTE THAT WHEN THE INCOME OF THE ASSESSEE WAS ESTIMATED BASED ON THE REJECTION OF BOOK S OF ACCOUNTS BY ADOPTING THE NET PROFIT @6%, THEN, FURTHER DISALLOWANCE OF DEPRECIATION IS NOT WARRANTED. 5. LD.AR HAS RELIED UPON THE DECISION OF THE HON'BLE ANDHRA PRADESH HIGH COURT IN THE CASE OF INDWELL CONSTRUCTIONS VS. ITA NO.315 /ALLD/2017 :- 4 -: CIT [232 ITR 776], WHEREIN THE HON'BLE HIGH COURT HAS HELD AS UNDER: NO DOUBT THERE IS A BIG DIFFERENCE BETWEEN PROFIT EARNED WITH OWN CAPITAL AND PROFIT EARNED WITH BORROWED CAPITAL AND SUCH A DIFFERENCE COULD HAVE BEEN TAKEN INTO ACCOUNT BY THE INCOME-TA X OFFICER WHILE MAKING AN ESTIMATE. IF THE COMMISSIONER HAD SET ASI DE THE ESTIMATE ON THE GROUND THAT THE VITAL FACT THAT THE BUSINESS WAS CARRIED ON WITH OWN CAPITAL AND NOT WITH BORROWED CAPITAL HAS BEEN IGNORED BY THE INCOME-TAX OFFICER, THERE MAY NOT HAVE BEEN ANY DIFFICULTY IN UPHOLDING THAT ORDER. BUT, WHEN HE PROPOSES TO ADD BACK AN EXACT ITEM IN THE PROFIT AND LOSS ACCOUNT, HE WAS RELYING ON THE REJECTED BOOKS WHICH HE COULD NOT DO AS HELD BY THE BENCH OF THIS COURT IN MADDI SUDARSANAM OIL MILLS CO. V. CIT [1959] 37 ITR 369. THERE IS ALSO A FURTHER DIFFICULTY IF SECTION 40, AS ARGUED BY LEARNED COUNSEL, IS TO BE TAKEN INTO ACCOUNT EVEN AFTER MAKING AN ESTIM ATE. WHEN THERE ARE CERTAIN OTHER DEDUCTIONS WHICH ARE TO BE DISALL OWED SUCH AS WEALTH-TAX PAYMENT IN SECTION 40, CAN IT BE SAID TH AT AFTER MAKING AN ESTIMATE, THE WEALTH-TAX CHARGED IN THE PROFIT AND LOSS ACCOUNT SHOULD AGAIN BE ADDED BACK TO THE PROFIT. THIS EXAMPLE ILL USTRATES HOW THE CONTENTION OF THE REVENUE, THAT SECTION 40(B) MAKES A DIFFERENCE IN THE SITUATION, IS UNTENABLE. IN OUR CONSIDERED OPIN ION, THE ANSWER TO THE QUESTION HAS TO BE IN THE NEGATIVE AND IN FAVOU R OF THE ASSESSEE. 6. ONCE THE ASSESSING OFFICER HAS ESTIMATED THE INCOME BY ADOPTING THE NET PROFIT, THEN SCOPE OF FURTHER DISALLOWA NCE ON ACCOUNT OF DEPRECIATION IS RULED OUT. HENCE, THE DISAL LOWANCE OF DEPRECIATION BY THE ASSESSING OFFICER IS HIGHLY AR BITRARY AND INAPPROPRIATE AND THE SAME IS LIABLE TO BE DELETED. G ROUND NO.7 RAISED BY THE ASSESSEE IS ALLOWED. 7. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH NOVEMBER, 2020 SD/- (VIJAY PAL RAO) JUDICIAL MEMBER ALLAHABAD, DATED: 06-11-2020 TNMM ITA NO.315 /ALLD/2017 :- 5 -: COPY OF THE ORDER FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT 6. GUARD FILE TRUE COPY BY ORDER (ITAT, ALLAHABAD)