LA SONIA WINES, MUMBAI V. ACIT CEN CIR 41, MUMBAI

ITA 3164/MUM/2015

• Counselvise Citation: 316419914 RSA 2015
• Duration Of Justice: 2 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2015
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 26-05-2015
• Court: TRIBUNAL
• Department Lawyers: JASBIR S CHOUHAN
• Assessee Lawyers: SATISH R MODY
• Keywords: Rejection of books of accounts; Business income; Search and seizure; Principle of natural justice; Difference of opinion; Change of opinion
• Section: 145; 132; 143(3); 153A

Judgement Text

, . . , IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI . . , BEFORE SHRI R.C.SHARMA , ACCOUNTANT MEMBER ./ ITA NO S . 3163 TO 3168 / MUM/20 1 5 ( / ASSESSMENT YEAR S : 2005 - 06 TO 201 0 - 1 1 ) M/S LA SONIA WINES, SHOP NO.4 GOSWAMI NIWAS, KOKANI PADA, KURAR VILLAGE, MALAD(E), MUMBAI - 400097 VS. ACIT, CC - 41, MUMBAI ./ ./ PAN/GIR NO. : A A BFL 6644 C ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI SATISH R. MODY /REVENUE BY : SHRI JASBIR S. CHOUHAN / DATE OF HEARING : 2 1 /0 7 / 2015 / DATE OF PRONOUNCEMENT 2 5 / 0 8 /2015 / O R D E R TH ESE ARE THE APPEALS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A), MUMBAI FOR THE ASSESSMENT YEARS 2005 - 06 TO 2010 - 11 , RESPECTIVELY. 2. SINCE COMMON GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE IN ALL THE APPEALS, THEREFORE, THE SAME HAVE BEEN HEARD ANALOGOUSLY AND DECIDED BY THIS COMMON ORDER. AS THE GROUNDS ARE SAME IN ALL THE APPEALS, THEREFORE, THE GROUNDS RAISED IN ITA NO.3163/MUM/2015 (AY 2005 - 06) ARE REPRODUCED HEREIN BELOW : - 1] THE LEARNED CIT (A) 49 FOR THE REASONS BEST KNOWN TO HIM HAS PASSED HIS ORDER ARBITRARILY, CAPRICIOUSLY AND BAD IN LAW AND ON FACTS OF THE CASE WITHOUT APPRECIATING THE EXPLANATION AND DOCUMENTARY EVIDENCE FURNISHED BY THE APPELLANT DURING APPELLANT PROCEEDINGS. ITA NO S . 3163 - 3168 /1 5 2 2] ON THE FACTS AND CIRCUMSTANCES AND IN L AW, THE LEARNED COMMISSIONER OF INCOME TAX (A) - 49 TOTALLY ERRED IN ESTIMATING DEEMED PROFI T RATE OF 5% ON THE TURNOVER U/ S. 44AF OF THE INCOME TAX ACT, 1961. THE ASSESSEE HAS MAINTAINED THE BOOK OF ACCOUNTS AS PER SECTION 44AA AND GOT HIS BOOKS OF ACCOUN TS AUDITED U/S. 44AB OF THE INCOME TAX ACT, 1961. 3] ON THE FACTS AND CIRCUMSTANCES AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (A) - 49 HAS ERRED IN INVOKING SECTION 153C OF THE INCOME TAX ACT, 1961 AS THERE IS ABSENCE OF ANY INCRIMINATING MATERI AL AND HENCE NO ADDITION CAN BE MADE IN T HE HANDS OF THE OTHER PERSON U/ S. 153A / 153C OF THE INCOME TAX ACT, 1961 AND HENCE IT IS BAD IN LAW. AS IT IS MANDATORY TO RECORD HIS SATISFACTION VIS - A - VIS THE BELONGING OF THE MATERIAL FOUND TO BE THAT OF OTHER PE RSON. 4] ON THE FACTS AND CIRCUMSTANCES AND IN LAW, THE LEARNED- COMMISSIONER OF INCOME TAX (A) - . 49 HAS ERRED AS APPROVAL OF THE JOINT COMMISSIONER OF INCOME TAX IS ABSEN T U/ S. 153C OF INCOME TAX ACT, 1961. 5 ] ON THE FACTS AND CIRCUMSTANCES AND IN LA W, THE LEARNED COMMISSIONER OF INCOME TAX (A) - 49 HAS ERRED IN MAKING ADDITION IN THE NET PROFIT PURELY ON THE BASIS OF CONJECTURE AND SURMISES WITHOUT ANY SUPPORTING MATERIAL AND HENCE, IT IS SUBMITTED THAT INCOME TO BE COMPUTED IN ACCORDANCE WITH BOOKS OF ACCOUNTS MAINTAINED U/S.145 OF THE INCOME TAX ACT, 1961. 6] ON THE FACTS AND CIRCUMSTANCES AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (A) - 49 HAS ERRED IN MAKING ADDITION BECAUSE BOOKS OF ACCOUNTS WERE NOT REJECTED. 7] PRAYERS: .. (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE APPELLANT SUBMITS THAT THE ORDER PASSED BY THE LEARNED CIT(A) IS BAD IN LAW AS THE. SAID ORDER IS PASSED AGAINST THE PRINCIPLES' OF NATURAL JUSTICE. (II) THE ASSESSMENT ARE MADE ON ASSUMPTION BASIS IS NOT BASE D ON FACTS AND IS BAD IN LAW. (III) THE APPELLANT FURTHER CRAVES LEAVE TO ADD, ALTER OR AMEND HIS GROUNDS OF APPEAL DURING THE COURSE OF APPEAL. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A FIRM CONSTITUTED OF THREE PARTNERS BEING MR. SUBHASH DESHMUKH, MRS. ANU WADHAWANI AND MRS. LATA DESHMUKH. THIS FIRM RUNS A WINE SHOP UNDER ITA NO S . 3163 - 3168 /1 5 3 THE NAME AND STYLE OF M/S LA SONIA WINES. THERE WAS SEARCH AND SEIZURE ACTION U/ S 132 OF THE ACT WAS CONDUCTED IN THE CASE OF SHRI SUBHASH DESHMUKH AND HIS O THER GROUP COMPANIES ALONGWITH THE RESIDENTIAL PREMISES ON 28.03.2011 AND ON SUBSEQUENT DATES. DURING THE COURSE OF SEARCH PROCEEDINGS, DISCLOSURE OF R S .75, 00 , 000/ - WAS MADE BY THE ASSESSEE , THOUGH NO WARRANT WAS ISSUED IN THE NAME OF THE APPELLANT. NOTICE U / S 153C OF THE ACT WAS ISSUED ON 15.06.2012 REQUIRING THE ASSESSEE TO FILE THE RETURN OF INCOME FOR ALL THE SIX ASSESSMENT YEARS. IN RESPONSE TO NOTICE U/ S 153C OF THE ACT THE APPELLANT FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF RS.1 ,39,512/ - F OR A.Y 2005 - 06, RS.2,23,984/- FOR AY.2006 - 07, 2,26,753/ - FOR AY 2007 - 08, RS.1,65,3501 - FOR AY 2008 - 09, RS.3,04,975/ - FOR AY. 2009 - 10 AND RS. 2,26,439/ - FOR AY. 2010 - 11. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF RUNNING A WINE SHOP. THE ASSESSMENT WAS COMP LETED U/ S 143(3) R.W. S . 153C OF THE ACT ON 11.03.2013 DETERMINING TOTAL INCOME AT RS. 6,55,890 / - FOR AY. 2005 - 06, R S .9,95, 000/ - FOR A.Y. 2006 - 07, RS. 9,57,040 / - FOR A.Y 2007 - 08, RS. 8,95,850 / - FOR AY. 2008 - 09, R S .11 ,21 ,580 / - FOR AY.2009 - 1 0 AND RS.14,61,245 / - FOR A.Y.2010 - 11 RESPECTIVELY . 4. GROUND NOS.1&7 ARE GENERAL IN NATURE AND, THEREFORE, NO SPECIFIC ADJUDICATION IS REQUIRED. 5. GROUNDS NO.2,5&6 : 5 .1 GROUND NO.2 PERTAINS TO ADDITION OF RS.4,24,948/ - FOR A.Y.2005 - 06, RS.5,92,653/ - FOR A.Y.2006 - 07, RS.5,9 8,822/ - FOR A.Y.2007 - 08, RS.6,31,704/ - FOR A.Y.2008 - 09, RS.6,74,109/ - FOR A.Y.2009 - 10 AND ITA NO S . 3163 - 3168 /1 5 4 RS.9,95,306/ - FOR A.Y.2010 - 11 ON ACCOUNT OF ESTIMATED PROFIT MARGIN. IN THE ASSESSMENT ORDER THE AO MENTIONED THAT THE ASSESSEE COMPANY HAS CREDITED TOTAL SALES OF R S.1,12,89,203/ - FOR A.Y.2005 - 06, RS.1,48,22,740/ - FOR A.Y.2006 - 07, RS.1,65,11,490/ - FOR A.Y.2007 - 08 , RS.1,59,41,080/ - FOR A.Y.2008 - 09, RS.1,94,94,500/ - FOR A.Y.2009 - 10 AND RS.2,33,04,050/ - FOR A.Y.2010 - 11 AGAINST WHICH IT HAS SHOWN GROSS PROFIT OF RS.10,45 ,557/ - FOR A.Y.2005 - 06, RS.12,33,890/ - FOR A.Y.2006 - 07, RS.19,93,844/ - FOR A.Y.2007 - 08, RS.10,46,652/ - FOR A.Y.2008 - 09, RS.13,42,019/ - FOR A.Y.2009 - 10 AND RS.14,67,807/ - FOR A.Y.2010 - 11 WHICH WORKED OUT TO 9.26% FOR A.Y.2005 - 06, 8.32% FOR A.Y.2006 - 07, 12.0 8% FOR A.Y.2007 - 08, 6.57% FOR A.Y.2008 - 09, 6.88% FOR A.Y.2009 - 10 AND 6.30% FOR A.Y.2010 - 11 OF THE SALES. THE ASSESSEES SALES ARE IN CASH. THE AO MENTIONED THAT DURING THE COURSE OF SEARCH ACTION CONDUCTED ON 28.03.2011, THE ASSESSEE DISCLOSED AN ADDITIONA L INCOME OF RS.75,00,000/ - ON ACCOUNT OF SALE SUPPRESSION OVER AND ABOVE THE DISCLOSED INCOME. THE SAID DISCLOSURE HAS BEEN REFLECTED IN THE RETURN FOR A.Y.2011 - 12. THE NP RATE AS WORKED OUT IN ALL THE ASSESSMENT YEARS IS GIVEN AS UNDER : - 2005 - 06 2006 - 07 2007 - 08 2008 - 09 2009 - 10 2010 - 11 2011 - 12 SALES 11289203 14822740 16511490 15941080 19494500 23304050 24133710 NET PROFIT 139512 148484 226753 165350 300616 169896 7778760 NET PROFIT AS %OF SALES 1.23 1.00 1.37 1.03 1.54 0.72 32.23 5.2 THE AO MENTIONE D THAT THE ASSESSEE OFFERED ADDITIONAL INCOME IN THE YEAR OF SEARCH ONLY. HENCE, IT CANNOT BE SAID THAT THERE WAS NO SUPPRESSION OF INCOME IN THE PRECEDING YEARS. IT IS MENTIONED THAT THE ITA NO S . 3163 - 3168 /1 5 5 ASSESSEE COULD NOT EXPLAIN THE DRASTIC VARIATION IN NET PROFIT RATE. IT IS MENTIONED THAT SECTION 44AF ALSO ENVISAGES A PROFIT RATE OF 5% ON TURNOVER IN THE RETAIL TRADE CASES REFERRED THEREIN. THE AO MENTIONED THAT CONSIDERING THE FACT THAT THE SALES ARE NOT VERIFIABLE, IT WILL NOT BE UNREASONABLE TO COMPUTE THE PROFITS A T THE RATE OF 5% OF THE DISCLOSED SALES. ACCORDINGLY THE AO COMPUTED THE NET PROFIT AT RS. 5,64,460/ - , FOR A.Y.2005 - 06, RS.7,41,137/ - FOR A.Y.2006 - 07, RS.8,25,575/ - FOR A.Y.2007 - 08, RS.7,97,054/ - FOR A.Y.2008 - 09, RS.9,74,725/ - FOR A.Y.2009 - 10 AND RS.11,65,2 02/ - FOR A.Y.2010 - 11 BEING 5% OF SALES. SINCE THE ASSESSEE HAD ALREADY SHOWN A NET PROFIT OF RS.1,39,512/ - , 1,48,484/ - , RS.2,26,753/ - , RS.1,65,350/ - , RS.3,00,616/ - AND RS.1,69,896/ - FOR THE A.YS.2005 - 06 TO 2010 - 11, RESPECTIVELY THE ADDITION OF RS.4,24,948/ - FOR A.Y.2005 - 06, RS.5,92,653/ - FOR A.Y.2006 - 07, RS.5,98,822/ - FOR A.Y.2007 - 08, RS.6,31,704/ - FOR A.Y.2008 - 09,RS.6,74,109/ - FOR A.Y.2009 - 10 AND RS.9,95,306/ - FOR A.Y.2010 - 11 WERE MADE TO THE INCOME OF THE ASSESSEE. 5.3 DURING THE APPEAL PROCEEDINGS THE A SSESSEE FILED WRITTEN SUBMISSIONS WHICH ARE REPRODUCED AS UNDER: - THE LD. AO ERRED IN MAKING ADDITION TOWARDS ALLEGED NET PROFIT ON THE GROUND THAT THE ASSESSEE MUST HAVE ACHIEVED A NET PROFIT OF AT LEAST 5% OF SALES. THE ADDITION IS PURELY ON THE BASIS OF CONJECTURES & SURMISES, WITHOUT ANY SUPPORTING MATERIAL; THE .LD. AO FAILED TO NOTE THAT THE N.P. RATE FOR THE CURRENT YEAR IS NOT ONLY HIGHER THAN 'THE IMMEDIATELY SUCCEEDING YEAR BUT IS HIGHER THAN ANY OF THE EARLIER YEARS AS WELL AS OF THE SUCCEEDING YEAR. IT IS SUBMITTED THAT WHEN EARLIER YEARS' N.P. RATE WAS ACCEPTED, ADDITION IN THE CURRENT YEARS IS NOT JUSTIFIED, MERELY ON THE BASIS OF CONJECTURES & SURMISES {REF: INANI MARBLES P. LTD. 316 ITR 125 (RAJ.)}. THE LD. AO OUGHT NOT TO HAVE APPLIED THE N.P. RATE OF THE YEAR RELEVANT TO A.Y. 2011 - 12, AS A BENCH MARK. IT IS NOT THE CASE OF THE LD. AO THAT ANY EXPENDITURE(S) HAS BEEN INFLATED BY THE ASSESSEE AND/OR SALES ARE NOT MADE AT THE PREVAILING MARKET RATES. MERELY BECAUSE THE ITA NO S . 3163 - 3168 /1 5 6 ASSESSEE HAS MADE CASH SALES, THE SAME IS NOT A GROUND FOR MAKING ADDITION. {REF: R.B. JESSARAM FATEHCHAND 75 ITR 33 (BOM.)}. 1) IT IS SUBMITTED THAT THE INCOME OF AN ASSESSEE HAS TO BE COMPUTED IN ACCORDANCE WITH THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE - THAT IS THE M ANDATE OF SECTION 145 OF THE ACT. 2) IT IS SUBMITTED THAT, IT IS SETTLED POSITION, THAT WHEN BOOKS ARE NOT REJECTED, NO ADDITION CAN BE MADE TO PROFIT RATE. RELIANCE IN THIS REGARD IS PLACED UPON THE DECISION OF THE HON'BLE RAJASTHAN HIGH COURT IN CIT V/ SO MAHARAJA SHREE UMED MILLS 192 ITR 565 - (RAJ.). THE SAID VIEW WAS FOLLOWED BY THE HON'BLE TRIBUNAL IN MEWAR TEXTILE MILLS 64 TT J (JP.) 502. 3) IT IS SUBMITTED THAT THE ASSESSEE IS SUBJECTED TO TAX AUDIT AND WHEN NO INFIRMITIES ARE POINTED OUT IN THE AUDIT, THERE IS NO WARRANT TO MAKE AN ADDITION FOR N.P. RATE ON THE BASIS OF CONJECTURES & SURMISES. AS HELD BY THE HON'BLE JURISDICTIONAL HIGH COURT, THE BOOKS OF ACCOUNT HAVE TO BE ACCEPTED UNLESS, ON VERIFICATION, THEY DISCLOSED ANY FAULTS OR DEFECTS, W HICH CANNOT BE REASONABLY AND SATISFACTORILY EXPLAINED BY THE ASSESSEE {SEE: R.B. JESSARAM FATEHCHAND 75 ITR 33 (BOM.)}. 4) IT IS SUBMITTED THAT THE LD. AO FAILED TO BRING ON RECORD ANY COMPARATIVE INSTANCES OF PROFIT RATE SO AS TO JUSTIFY THE ADDITION. FURTHER, IT IS SETTLED POSITION THAT PROFIT RATE ADDITION CAN ONLY BE MADE ON THE BASIS OF THE ASSESSEE'S OWN FIGURES AND THAT TOO FOR EARLIER YEARS AND NOT SUBSEQUENT YEARS. 5) THE APPELLANT FURTHER SUBMITS THAT THE ASSUMPTION OF 5% NET PROFIT IS O NLY I N THE CASE WHERE THE CONDITIONS OF SECTION 44AF OF THE ACT ARE SATISFIED. IN THE CASE OF THE APPELLANT SINCE THE TURNOVER IS ABOVE 40 LACS THE PROVISIONS OF SECTION 44AF ARE NOT SATISFIED HENCE THE ASSESSING OFFICER IS NOT JUSTIFIED IN RELYING ON THE SAID PROVISIONS TO ASSUME THE PROFIT OF 5%. IN VIEW OF THE ABOVE, IT IS PRAYED THAT YOUR HONOUR MAY KINDLY TREAT THE ASSESSMENT AS NULL & VOID AND DELETE THE ADDITION(S) MADE. 5.4 THE CIT(A) OBSERVED AS UNDER : - I N SUPPORT OF THE APPELLANT CONTENTION THAT THE ADDITION SHOULD BE DELETED VARIOUS JUDGEMENTS ARE RELIED UPON. THE FACTS AND CIRCUMSTANCES IN THOSE CASES ARE NOT APPLICABLE TO THE FACTS OF THE APPELLANT'S CASE. THE APPELLANT RELIED UPON THE DECISION OF THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF INANI MARBLES (P.) LTD.316 ITR 125, IN SUPPORT OF ITS CONTENTION THAT ONCE EARLIER YEARS NET PROFIT RATE WAS ACCEPTED THE ADDITIONS IN THE CURRENT YEARS ARE NOT JUSTIFIED. IT IS ALSO CONTENDED THAT THE AO CANNOT RELY UPON THE ITA NO S . 3163 - 3168 /1 5 7 NET PROFIT RATE OF THE LATER ASSESSMENT YEAR 2011 - 12 AS A BENCH MARK. IN THIS REGARD, IT IS STATED THAT IN THE CASE OF INANI MARBLES (P.) LTD., THE AO APPLIED GROSS PROFIT RATE AT 15% FOR ASSESSMENT YEAR 2000 - 01 AS AGAINST THE GROSS PROFIT RATE OF 2.3% DISCLOSED BY THE APPELLANT. THE AO COMPARED THE EARLIER YEARS GROSS PROFIT RATES OF 2.51% FOR THE ASSESSMENT YEAR 1999 - 2000 AND 16.04% FOR THE ASSESSMENT YEAR 199 8 - 99, WHILE DECIDING THE CASE FOR THE ASSESSMENT YEAR 2000 - 01. THE HON'BLE RAJASTHAN HIGH COURT UPHELD ADOPTION OF 2.51 % AS G P RATE BASED UPON THE G. P. RATE OF 2.51% UPHELD BY THE TRIBUNAL FOR THE EARLIER ASSESSMENT YEAR 1999 - 2000. IN THAT CASE SINCE GP RATE WAS SETTLED AT 2.51 % BY THE HIGHES T FACT FINDING AUTHORITY I.E. IT AT, FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR, T HE SAME WAS FOLLOWED FOR THE RELEVANT ASSESSMENT YEAR 2000 - 01 INSTEAD OF 15% GP RATE. THIS JUDGEMENT SHOWS THAT GP RATE OF OTHER ASSESSMENT YEARS CAN BE ADOPTED AS A BENCH MARK FOR DETERMINING THE GROSS PROFIT RATE FOR THE CURRENT ASSESSMENT YEAR. NOWHERE IN THE ORDER, THE HON'BLE HIGH COURT OF RAJASTHAN HELD THAT THE GROSS PROFIT RATE OF LATER YEAR CANNOT BE ADOPTED. IN THE CASE OF INANI MARBLES (P.) LTD. GROSS PROFIT RATE OF 2.51% WAS ACCEPTED BASED ON FINDING OF THE FINAL FACT FINDING AUTHORITY I.E. ITAT . SIMILAR FINDING IS NOT AVAILABLE IN THE CASE OF THE APPELLANT, HOWEVER, THE NET PROFIT RATE WAS ADOPTED BY THE AO AT 5% OF THE SALES AND THE SAME IS CONSIDERED REASONABLE IN COMPARISON TO 32.23% OF NET PROFIT DISCLOSED BY THE APPELLANT FOR THE ASSESSMENT YEAR 2011 - 12. 5.5 FURTHER THE ASSESSEE RAISED THE GROUND THAT THE AO DID NOT REJECT BOOKS OF ACCOUNT AND IN SPITE OF THAT HE TOOK 5% PROFIT ON TURN OVER. THE ASSESSEE FURTHER MENTIONED THAT BOOKS OF ACCOUNTS WERE PROPERLY MAINTAINED U/S.44AA AND AUDITED U/S.44AB. WHEN THIS GROUND WAS RAISED BEFORE THE LD. CIT(A), HE MENTIONED AS UNDER : - 8.4 IN THE CASE OF THE APPELLANT THE A O DID NOT USE THE WORD 'THE BOOKS OF ACCOUNT ARE REJECT ED ', HOWEVER, HE PROCEEDED TO ESTIMATE THE INCOME AT REASONABLE NET PROFIT RATE, BASED UPON THE HIGHER NET PROFIT RATE DISCLOSED BY THE APPELLANT FOR THE ASSESSMENT YEAR 2011 - 12 CONSEQUENT TO THE FINDINGS IN THE SEARCH. THE VERY FACT THAT THE AO HAD PROCEEDED TO ESTIMATE THE INCOME WHICH IS DIFFERENT FROM THE INCOME AS SHOWN IN T HE BOOKS OF ACCOUNT, BY ITSELF INDICATES, THAT THE A O HAD NOT RELIED UPON THE RESULTS OF THE BOOKS OF ACCOUNT BUT ON THE CONTRARY ESTIMATED THE INCOME BASED UPON THE MATERIAL AVAILABLE ON RECORD. THOUGH THE WORD REJECTION OF THE BOOKS OF ACCOUNT WAS NOT US ED BY THE A O BUT HIS ACTION ULTIMATELY MEANS THAT THE BOOKS OF ACCOUNT HAVE BEEN REJECTED. EVEN IF IT IS ASSUMED THAT THE A O FAILED TO REJECT THE BOOKS OF ACCOUNT, THE CIT(A) BEING VESTED WITH THE POWERS OF THE A O CAN ALSO REJECT THE BOOKS OF ACCOUNT AND I NDEPENDENTLY ESTIMATE THE INCOME BASED UPON THE ITA NO S . 3163 - 3168 /1 5 8 MATERIAL AVAILABLE ON RECORD. IN MY VIEW, THE BOOK RESULTS CANNOT BE RELIED UPON SINCE THEY HAVE BEEN FOUND TO BE DEFECTIVE BASED ON THE DISCLOSURE MADE BY THE APPELLANT DURING THE COURSE OF SEARCH WHICH RESU LTED IN ADMISSION OF ADDITIONAL INCOME OF RS. 75 LACS FOR THE ASSESSMENT YEAR 2011 - 12. GIVEN THE FACT THAT THE NET PROFIT DISCLOSED BY THE APPELLANT FOR THE ASSESSMENT YEAR 2011 - 12 IS 32.23%, OBVIOUSLY THE NET PROFIT FOR THE ASSESSMENT YEARS UNDER CONSIDE RATION CANNOT BE SO LOW VARYING FROM 0.72% TO 1.54% AS THE CASE MAY BE. WHAT IS IMPORTANT IN THIS CASE IS THE REASONABILITY OF THE ESTIMATION MADE BY THE AO. I AM OF THE VIEW THAT IN COMPARISON TO 32.23%, 5% IS REASONABLE. 5.6 . SECTION 145 MENTIONS ABOU T THE METHOD OF ACCOUNTING. IT IS REPRODUCED AS BELOW : - 145. METHOD OF ACCOUNTING 1 (1) INCOME CHARGEABLE UNDER THE HEAD' PROFITS AND GAINS OF BUSINESS OR PROFESSION' OR' INCOME FROM OTHER SOURCES' SHA LL BE COMPUTED IN ACCORDANCE WITH THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE: PROVIDED THAT IN ANY CASE WHERE THE ACCOUNTS ARE CORRECT AND COMPLETE TO THE SATISFACTION OF THE 2 ASSESSING] OFFICER BUT THE METHOD EMPLOYED IS SUCH THAT, IN TH E OPINION OF THE 4 ASSESSING] OFFICER, THE INCOME CANNOT PROPERLY BE DEDUCED THEREFROM, THEN THE COMPUTATION SHALL BE MADE UPON SUCH BASIS AND IN SUCH MANNER AS THE 4 ASSESSING] OFFICER MAY DETERMINE: 5 PROVIDED FURTHER THAT WHERE NO METHOD OF ACCOUNTING I S REGULARLY EMPLOYED BY THE ASSESSEE, ANY INCOME BY WAY OF INTEREST ON SECURITIES SHALL BE CHARGEABLE TO TAX AS THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH INTEREST IS DUE TO THE ASSESSEE:] 6 PROVIDED ALSO THAT NOTHING CONTAINED IN THIS SUB - SECTION SHAL L PRECLUDE AN ASSESSEE FROM BEING CHARGED TO INCOME - TAX IN RESPECT OF ANY INTEREST ON SECURITIES RECEIVED BY HIM IN A PREVIOUS YEAR IF SUCH INTEREST HAD NOT BEEN CHARGED TO INCOME - TAX FOR ANY EARLIER PREVIOUS YEAR.] (2) WHERE THE 7 ASSESSING] OFFICER IS NOT SATISFIED ABOUT THE CORRECTNESS OR THE COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE, OR WHERE NO METHOD OF ACCOUNTING, HAS BEEN REGULARLY EMPLOYED BY THE ASSESSEE, THE 8 ASSESSING] OFFICER MAY MAKE AN ASSESSMENT IN THE MANNER PROVIDED IN SECTION 144. 5.7 AS EVIDENT FROM THE ABOVE SECTION, REJECTION OF BOOKS OF ACCOUNTS IS NECESSARY BY THE AO, IF HE DECIDES TO ADOPT OTHER PROFIT PERCENTAGE AND FURTHER AS PER SECTION 145(3), ASSESSMENT UNDER THAT SITU ATION HAS TO BE MADE U/S.144 ONLY. FURTHER FOR THE REJECTION OF BOOKS OF ACCOUNTS, BOOKS ITA NO S . 3163 - 3168 /1 5 9 OF ACCOUNT HAVE TO BE EXAMINED AND A SPECIFIC DEFECT U/S.145(3) HAS TO BE POINTED OUT. 5.8 IT IS SURPRISING THAT THE AO DID NOT REJECT BOOKS OF ACCOUNT AND THE LD. CIT (A) REJECTED IT WITHOUT VERIFYING THE BOOKS OF ACCOUNTS. BY SIMPLY MENTIONING THAT I REJECT THE BOOKS OF ACCOUNT, IT CANNOT BE REJECTED. 5.9 WE HAVE CONSIDERED THESE GROUNDS CAREFULLY. WE ARE OF THE CONSIDERED OPINION THAT NEITHER THE AO NOR THE CIT(A) E XAMINED THE BOOKS OF ACCOUNTS. BOTH OF THEM DID NOT PIN POINT ANY DEFECTS IN THE BOOKS OF ACCOUNT. FURTHER SELLING ITS PRODUCTS IN CASH IS NOT AGAINST THE LAW. A DIFFERENT PERCENTAGE OF PROFIT CANNOT BE ADOPTED ONLY BECAUSE THE ASSESSEE MAKES CASH SALE. WE , THEREFORE, DELETE THE ADDITION MADE BY THE AO. TH ESE GROUND S OF THE ASSESSEE ARE ALLOWED. 6.1 IN REGARD TO GROUND NO.3 , THE ASSESSEE CONTENDED THAT THE ADDITION MADE BY THE AO IS BAD IN LAW AS NO INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF THE SEARCH. THE ASSESSEE FILED THE WRITTEN SUBMISSIONS IN SUPPORT OF THIS GROUND WHICH IS REPRODUCED AS UNDER: N O INCRIMINATING MATERIAL WAS FOUND DURING THE SAID SEARCH ACTION ON THE SAID SHRI SUB HASH DESHMUKH FOR THE RELEVANT ASSESSMENT YEARS. IT IS WELL SETTLED THAT IN ABSENCE OF ANY INCRIMINATING MATERIAL, NO SUCH ADDITION CAN BE MADE IN THE HANDS OF THE OTHER PERSON U/S.153A / 153C, WHICH COULD HAVE BEEN MADE IN A REGULAR ASSESSMENT. RELIANCE, IN THIS REGARD, IS PLACED UPON THE RECENT DECISION OF THE HON' BLE BOMBAY HIGH COURT IN CIT V/ S. MURLI AGRO, INCOME TAX APPEAL 36 OF 2009, CIT VIS. BHARATI VIDYAPEETH ITXAL854 OF 2012 DT. 12TH SEPT.'14 AND THAT OF THE ITAT SPECIAL BENCH IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD., VS. DCIT (2012) 137 ITD 287 (MUM.) (SB). THE VIEW WAS REITERATED RECENTLY BY THE HON'BLE MUMBAI BENCH OF THE TRIBUNAL IN ACIT V/ S. JAYENDRA JHAVERI ITAT 2141 - 2144/MUM / 2012 DATED 2ND FEBRUARY 2014 {SINCE REPORTED IN 65 SOT 118 (URO) (MUM.)., RAKSHA CHAWDA IT A T 8576/MUM. /201 0, DT. OCTOBER 2014 AND THE HON'BLE HYDERABAD BENCH IN MIDWEST GOLD LTD. ITA 1062 / HYD. / 2014 DATED 12 TH DECEMBER 2014. IT IS SUBMITTED THAT IF THE ISSUES THAT COULD BE ITA NO S . 3163 - 3168 /1 5 10 RAISED IN REGULAR ASSESSMENTS CAN BE RAISED EVEN IN ASSESSMENTS U/S.153A1153C THEN IT WOULD AMOUNT TO TWO KI NDS OF ASSESSMENTS HAVING PARALLEL JURISDICTION AND THE PROVISION(S) OF THE PENDING ASSESSMENTS GETTING ABATED, WOULD BE RENDERED OTIOSE. THIS IS NOT THE SCHEME OF THE ACT AS OBSERVED IN SSP AVIATION (2012) 252 CTR (DEL) 291: (2012) 207 T AXMAN 260 (DELHI) (PARA 13). IN VIEW OF THE ABOVE THE ADDITION MADE ON ACCOUNT OF PROFIT, WHILE FRAMING THE ASSESSMENT UNDER SECTION153C IS BAD IN LAW AS NO INCRIMINATING MATERI AL FOUND DURING THE COURSE OF SEARCH. 6.2 THE CIT(A) OBSERVED THAT : - 12.4 BY LOOKING INT O THE ABOVE OBSERVATIONS OF THE SPECIAL BENCH DECISION OF THE HONBLE ITAT, I AM OF THE VIEW THAT IN A CASE WHERE THE RETURN OF INCOME WAS MERELY PROCESSED U/S.143(1) OF THE ACT, THERE IS A SCOPE FOR MAKING ASSESSMENT UNDER ORIGINAL JURISDICTION AS WELL AS U/S.153A OF THE ACT SINCE NO VIEW AS SUCH WAS TAKEN IN RESPECT OF THE INCOME DECLARED IN THE RETURN OF INCOME FILED. ANY RE - APPRECIATION OF THE FACTS ABOUT AN ISSUE ALREADY DECIDED WILL AMOUNT TO CHANGE OF OPINION. BUT IN A CASE WHERE NO ASSESSMENT WAS MA DE EARLIER AND IT WAS ONLY PROCESSING OF RETURN U/S.143 (1) OF THE ACT, THE ASSESSMENT MADE U/S.153A OF THE ACT FOR THE FIRST TIME, THE ISSUE OF CHANGE OF OPINION DOES NOT ARISE. IT APPEARS THAT IN THE CASE OF APPELLANT NO ASSESSMENT WAS COMPLETED EITHER U /S.143 (3) OR U/S.147 OR UNDER ANY OTHER PROVISIONS OF THE ACT EXCEPT PROCESSING OF THE RETURN OF INCOME U/S.139 (1) OF THE ACT. SINCE NO ASSESSMENT WAS MADE IN THIS CASE FOR THE ASSESSMENT YEARS 2005 - 06 TO 2010 - 11 PRIOR TO THE ASSESSMENT U/S.153C OF THE A CT WHICH IS THE FIRST ASSESSMENT FOR THE YEARS UNDER CONSIDERATION, THE SCOPE OF ASSESSMENT EXPANDS TO THE ORIGINAL JURISDICTION AS WELL AS JURISDICTION CONFERRED U/S.153A AND IN OTHER WORDS, THE A.O MAY CONCLUDE THE ASSESSMENT BASED ON THE FINDINGS OF THE SEARCH AND ALSO ON THE BASIS OF ANY MATERIAL EXISTING OR BROUGHT ON RECORD OF THE A.O. IN VIEW OF THE ABOVE, THE GROUND RAISED IN THIS REGARD IS NOT ENTERTAINED. 6.3 . WE DO NOT WANT TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A) AND ACCORDINGLY, THIS GROUND OF ASSESSEE IS DISMISSED. 7.1 . IN REGARD TO GROUND NO.4, ASSESSEE CONTENDED THAT THE APPROVAL OF THE JOINT CO MMISSIONER , AS MANDATED U/S. 153 D IS ABSENT AND HENCE THE ASSESSMENT IS BAD IN LAW. IT WAS FURTHER SUBMITTED THAT, AS HELD BY THE HON'BLE BO MBAY HIGH COURT IN 'AKIL GULAMALI SOMJI INCOME TAX APPEALS ITA NO S . 3163 - 3168 /1 5 11 (LODG.) 1416 - 1419 OF 2012 DATED 15TH JAN'2013, THE APPROVAL IS MANDATORY AND ITS ABSENCE WOULD RENDER THE ASSESSMENT NULL & VOID. 7.2 . THE CIT(A) OBSERVED AS UNDER : - 14.0 I HAVE CAREFULLY EXAMIN ED THE FACTS OF THE CASE, THE STAND TAKEN BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER, THE GROUNDS OF APPEAL AND THE WRITTEN SUBMISSIONS FILED BY THE APPELLANT DURING THE APPEAL PROCEEDINGS. THE SUBMISSION OF THE APPELLANT IS FACTUALLY FOUND TO BE INC ORRECT. IT IS MENTIONED IN THE ASSESSMENT ORDER THAT THE PRIOR APPROVAL OF THE ADDL, COMMISSIONER OF INCOME - TAX, CENTRAL RANGE - 6, MUMBAI WAS OBTAINED VIDE LETTER NO. ADDL.CIT/CR.6/1530/SUBHASH D ESHMUKH GROUP/2012 - 13 DATED 07.03.2013. THEREFORE IT IS NOT CL EAR HOW THE APPELLANT RAISES A GROUND HOLDING THAT NO APPROVAL WAS OBTAINED U/S 1530 OF THE ACT FROM THE JT. COMMISSIONER OF INCOME - TAX. IT IS NOT CLEAR WHETHER THE APPELLANT LITERALLY MEANS THAT UNDER THE PROVISIONS OF SECTION 153D PRIOR APPROVAL OF THE J T. COMMISSIONER IS REQUIRED, WHEREAS IN THIS CASE PRIOR APPROVAL OF THE ADDL. COMMISSIONER OF INCOME TAX IS OBTAINED. IT IS RELEVANT TO MENTION THAT SECTION 2(28C) OF THE ACT DEFINES THE JT. COMMISSIONER AS A PERSON APPOINTED TO BE JOINT COMMISSIONER OF IN COME - TAX OR AN ADDL. COMMISSIONER OF INCOME - TAX UNDER SUB SECTION 1 OF SECTION 117 OF THE ACT. IN VIEW OF THE ABOVE, THE GROUND OF APPELLANT IS HEREBY DISMISSED. 7.3 . WE FULLY AGREE WITH THE OBSERVATION OF CIT(A) AND ACCORDINGLY THIS GROUND OF ASSE SSEE IS DISMISSED. 8 . AS THE FACTS AND CIRCUMSTANCES IN ALL THE YEARS ARE SIMILAR, THEREFORE, OUR DECISION IN ITA NO.3163/MUM/2015 SHALL APPLY MUTATIS MUTANDIS TO THE FACTS AND CIRCUMSTANCES MENTIONED IN ITA NOS.3164 TO 3168/MUM/2015. 9 . IN THE RESULT, AL L THE APPEAL S OF THE ASSESSEE ARE PARTLY ALLOWED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 25/08 / 201 5 . ( . . ) ( R.C.SHARMA ) / ACCOUNTANT MEMBER MUMBAI ; DATED 25/08 /201 5 . . /PKM , . / PS ITA NO S . 3163 - 3168 /1 5 12 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELL ANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY/