MESERS AXON LABORATORIES, HOSHIARPUR V. INCOME TAX OFFICER, WARD -3 , HOSHIARPUR

ITA 316/ASR/2018

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 6169 (ITAT-AMRITSAR)
• Duration Of Justice: 3 year(s) 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 20-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Gross profit estimation; Principle of natural justice; Set aside
• Section: 68; 69; 142(1); 133A; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH: AMRITSAR BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER I.T.A No. 316/ASR/2018 (ASSESSMENT YEAR: 2013-14) M/s. Axon Laboratories P. Ltd. Heera Colony, Hoshiarpur [PAN:AABCA1425F] (Assessee) Vs. ITO, Ward-3 Hoshiarpur (Revenue) Assessee by Sh. J.S. Bhasin, Adv. Revenue by Sh.S. M. Surendranath, D. R. Date of Hearing 29.11.2021 Date of Pronouncement 20.12.2021 ORDER Per Manish Borad, A. M.: This appeal is filed by the assessee feeling aggrieved by the order of Ld. CIT(A)-1,Jalandhar dated 22.02.2018 for Assessment Year 2013-14. 2.Brief facts of the case as culled out from the records are that the assessee is a Pvt. Ltd. Company engaged in the business of manufacturing medicines. Survey action u/s 133A of the Act was conducted at the assessee’s business premises on 15.02.2013. During the survey sum of Rs. 50 lac was surrendered towards excess stock, excess cash in hands and advance toSangeetaSood. Return of ncome for A.Y. 2013-14 was filed on 31.03.2014 declaring net taxable income on Rs.10,65,020/- after including the surrendred income of Rs.50 lac. Case was I.T.A No. 316/ASR/2018 2 manualy selected for scrutiny followed by serving of notices u/s 142(1) & 143(2) of the Act, assessee made various submissons and considering the same income assessed at Rs.51,21,024/- after making various additions of Rs.40,56,004/- only. The assessee challenged these additions before the Ld. CIT(A) and partly succeeded but now the assessee is in appeal before this Tribunal raising following grounds of appeal:- 1.That in the facts and circumstances of the case, the Id.Ur(A) has grossly erred in confirming the GP addition of Rs.9,95,OOO/- as made by the Id.ITO, all wholly erroneous and insufficient grounds. 3. That the Id.C1T(A) also erred in confirming the addition of Rs.17,43,OOO/ , as made by the Ld. AOfor the alleged excess claim of wages and salaries, in total disregard to the facts of the case and the explanation tendered by assessee. 3.That the Id.CIT(A) further erred to uphold the addition of Rs.2,37,510/- under thehead building repair, contrary to the fact that evidence of payment there of tnroughbank was duly produced in assessment as also in appeal. 4.That the Id.CIT(A) was not justified in law and on facts, to dispute ti c nature of income surrendered during survey, when not disputed by the Id.ITO, to hold that while cash surrendered amounting to Rs.18,75,500/- was assessable u/s.68 the cash amounting to Rs.1.0,OO 000/- invested in construction of house "ClS .rsscssableu/s.69, read with the provisions of section 158BBE. 4.1 That the Id.CIT(A) failed to appreciate that neither the source of cash recordeu iii books was ever disputed, nor for that matter, the books of account were rejected by the Id.ITO. Therefore, tIle provisions of section 68 & 69 r.w s. 158BBE have been wrongly invoked by the Id.CIT(A) resulting into illegal ennunccmcnt of income/demand. 5.That the order under appeal, is liable to be Sf. aside being contrary to Iacts and fdWas also the principles of natural justice. 3. Ld. counsel for the assessee vehemently argued referring to the paper book containing 35 pages. He also submitted that even though the assessee company was incurring losses surrender of Rs.50 lac was made and Ld. CIT(A) ought to have given the telescoping benefit for the surrender made.Also the instant appeal relates to A.Y.2013-14 and the assessee is entitled to set off of losses against the I.T.A No. 316/ASR/2018 3 unexplained income u/s 68/69C of the Act as provided in sub-section (2) of section 115BBE which came into effect from 1 st April 2017. 4. Per contra, the Ld. DR supporting the order of Ld. CIT(A) and both the lower authorities. 5. We have heard the rival contention and perused the record placed before us. The assessee has challenged the finding of ld. CIT(A) confirming the following additions/disallowance: i. G.P. Addition 9,95,000/- ii. Disallowance of wages and salary 17,43,000/- iii. Disallowance of respensess on building repair 2,37,510/- 6. From perusal of the records we find that so far as gross profit addition is concerned the turnover of the assessee declined drastically during the year from 93.09 lac to 67.11 las and gross profit rate also declined from 33.67% to 14.45%. The assessee has contended that in business loss can also occur so as the profits. We notice that the ld. AO has not rejected the book results and also not pointed out any specific defect in the books and records to show that the assessee is intentionaly showing lower profit. However, looking to the fact that on some occasions assessee failed to file necessary docuents required by the Ld. AO,we are of the view that estimating gross profit @ 20% of the gross turnover shall meet the ends to justice. We also find that assessee surrendered Rs.50 lacsduring the course of survey on account of following: i. Surrender on account of excess stock 2124500.00 ii. Surrnder on account of excess cash in hand 1875500.00 I.T.A No. 316/ASR/2018 4 iii. Advance to SangeetaSood Against salary for Construction of her house 1000000.00 --------------------------------- 50,00,000.00 Under these fact we also hold that the assessee should be given telescoping benefit against the surrender of Rs.50 lac made during the course of survey which will thus result in no addition towards gross profit estimation. Ground No.1 of the assessee’s appeal is allowed. 7. As fars as ground No.2 is concerned relating to disallowance of wages and salary at Rs.17,43,000/-,we notice that the expenses of wages and salaries have increased dramastically even though the sales have decreased.Reasons given by the assessee are general not plausible and thus find no merit. However, since the assessee has already surrendered Rs.50 lac during the course of survey. It deserves the telescoping benefit against such surrender of Rs.50 lac after which no addition will remain in the hands of assessee under this ground. Thus, ground no.2 raised by the assessee is allowed. 8. As far as the disallowance of repair expenses of Rs.2,37,510/- is concerned we find no justification in the finding of both lower authorities sustaining this disallowance as it is purely ad hoc in nature without pointing any defect in records and the same cannot be sustained. We, therefore, delete the addition of Rs.2,37,510/- and allow gorund no.3 raised by the assessee. 9. Now we take up ground no.4 through which the assessee has stated that the ld. CIT(A) erred in invoking the provisions of section 115 BBE r.w.s.t.68 & 69 of the I.T.A No. 316/ASR/2018 5 Act for the cash surrendered amounting to Rs. 18,75,500/- and cash amounting to Rs.10,00,000/- invested in construction of house. We find that so far as the cash surrender of Rs.18,75,500/- is concerned, same is not excess cash. Rather it is inverse. Survey team found that in the books of account cash balance is there but the physical cash in hand was less by Rs.18,75,500/-. This basically can be categorized as unexplained expenditure but the source of such expenditure is purely coming from business source as the cash in hands is appearing in the books and therefore, invoking of provisions of section 115BBE of the Act was not justified. Similarly with regard to surrender of Rs.10 lac made towards amount given to SangeetaSood for construction of house again the source is a business income of the company. There is no evidence to show that the assessee company has any other source of income or it has stated that the source of such investment is not known. Therefore, for this surrender also Ld. CIT(A) erred in invoking the provisions of section 115BBE of the Act. Even otherwise the assessee is entitiled to set off of losses against such income added u/s 68 & 69 of the Act as the relevant amendment which denies the assessee from claiming set off of losses against such income provided u/s 68 & 69 (c) of the Act came into effect from 1 st April 2017 whereas the year under appeal is A.Y. 2013-14. We, therefore, are of the view that this finding in the Ld. CIT(A) deserves to be set aside. Thus, gorund no.4 of the assessee’s appeal is allowed. Ground No.5 is general in nature which needs no adjudication. I.T.A No. 316/ASR/2018 6 10. In the result, the appeal of the assesse in ITANo.316/ASR/2018 is allowed. Order pronounced in the open court on 20/12/2021. Sd/- Sd/- (MAHAVIR PRASAD) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated 20/12/2021 *Patel/ P.S.* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT True Copy By Order