ACIT, New Delhi V. M/s. Ramesh Kumar Siwach Contractor, New Delhi

ITA 3269/DEL/2013

• Counselvise Citation: 326920114 RSA 2013
• Duration Of Justice: 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2009-2010
• Appeal Filed On: 23-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts
• Section: 143(3); 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F NEW DELHI BEFORE SMT DIVA SINGH, JUDICIAL MEMBER AND SHRI T.S.KAPOOR, ACCOUNTANT MEMBER I.T.A .NO.-3269/DEL/2013 (ASSESSMENT YEAR-2009-10) ACIT, CIRCLE-38(1), R.NO.-2202, 22 ND FLOOR, E-2 BLOCK, CIVIC CENTRE, MINTO ROAD, NEW DELHI-110002. (APPELLANT) VS M/S RAMESH KUMAR SIWACH CONTRACTOR, 6/602, SUNDER VIHAR, PASCHIM VIHAR, NEW DELHI-110063. PAN-AAEFR7304Q (RESPONDENT) APPELLANT BY SH. NEEHAR RANJAN PANDEY, SR. DR RESPONDENT BY NONE ORDER PER DIVA SINGH, JM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 01.02.2013 OF CIT(A)-XXVIII, NEW DELHI PERTAINING TO 2009-10 A SSESSMENT YEAR ON THE FOLLOWING GROUNDS :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE AO MOUNTING TO RS .22,64,348/- ESTIMATING THE NET PROFIT RATE OF THE ASSESSEE AT 5% OF GROSS TURNOVER AFTER REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE WITHOUT APPRE CIATING THE FACT THAT THE ASSESSEE HAS NOT MAINTAINED ANY STOCK REGISTER AND ALSO DID NOT PRODUCE ORIGINAL BOOKS OF ACCOUNTS ALONG WITH BILLS AND VOU CHERS DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ALSO THAT THE ASSESSE E HAS SHOWN VERY LESS G.P. AND MOST OF ITS EXPENSES REMAINED UNVERIFIABLE . 2. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR MODI FY THE GROUND OF APPEAL BEFORE OR DURING THE COURSE OF THE APPEAL. 2. NO ONE WAS PRESENT ON BEHALF OF THE ASSESSEE AT THE TIME OF HEARING HOWEVER ON CONSIDERATION OF MATERIAL AVAILABLE ON R ECORD. IT WAS CONSIDERED APPROPRIATE TO PROCEED WITH THE PRESENT APPEAL EX-P ARTE QUA THE ASSESSEE RESPONDED ON MERIT AFTER HEARING THE LD. SR. DR. I.T.A .NO.-3269/DEL/2013 2 3. THE RELEVANT FACTS OF THE CASE ARE THAT THE ASSE SSEE WHO IS A FIRM ENGAGED IN THE BUSINESS OF CONTRACTOR FILED A RETURN DECLAR ING AN INCOME OF RS.20,54,380/- WHICH WAS PROCESSED U/S 143(1), ASSE SSMENT ORDER U/S 143(3) R.W.S 144 OF THE ACT WAS PASSED. ON THE SAID RETU RN BEING SELECTED FOR SCRUTINY UNDER CASS BY WAY OF ISSUANCE NOTICE U/S 143(2) ETC . THE RECORD SHOWS THAT THE ASSESSEE WAS REQUIRED TO PROVIDE COMPARATIVE CH ART OF G.P AND N.P RATIO FOR THE LAST THREE YEARS INCLUDING THE FINANCIAL YEAR. IN RESPONSE THERETO THE ASSESSEE PLACED THE FOLLOWING FIGURES BEFORE THE AO:- ASSTT. YEARS G.P. N.P. 2007-2008 12632292.00 =15.83 405896.00 =0.51% 79783904.00 79783904.00 2008-09 14690189.00 =18.47 412614.00 = 0.52% 79551681.00 7951681.00 2009-2010 13927787.99 = 12.26% 2016189.40 =1.92% 105075317.00 105075317.00 THE G.P. RATIO HAD DECLINE BUT N.P. RATIO HAD INCRE ASED 1.40% FROM THE LAST YEAR. 3.1. THE ASSESSEE WAS FURTHER REQUIRED TO EXPLAIN THE E XPENSES FROM THE PARTIES FROM WHOM PURCHASES WERE MADE IN THE YEAR O F MORE THAN RS. 5 LAC AND ALSO FURNISH DETAILS OF SUNDRY CREDITORS HAVING OPE NING OR CLOSING BALANCE OF MORE THAN RS. 3 LAC. THE ASSESSEE PROVIDED CERTAIN DETAILS WHICH WERE FOUND NOT TO BE IN THE FORMAT ASKED FOR. VARIOUS ADJOUR NMENTS WERE GRANTED TO THE ASSESSEE ON ITS REQUEST. ACCORDINGLY, THE AO MADE AN ADDITION OF RS.32,37,576/- IN THE FOLLOWING MANNER:- 5.6. THUS, IN THE LIGHT OF FACTS AND JUDICIAL PRONOUNCE MENTS MENTIONED ABOVE, THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE HER EBY REJECTED BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE AC T AND THE INCOME OF THE ASSESSEE IS ASSESSED BY APPLYING NET PROFIT RAT E OF 5% ON THE GROSS TURNOVER OF RS.10,50,75,317/- WHICH COMES TO RS.52,53,576/-. ASSESSEE HAS ALREADY SHOWN A NET PROFIT OF RS.2016, 189/-. THUS, RS.32,37,576/- IS ADDED BACK TO THE INCOME OF THE A SSESSEE. 4. AGGRIEVED BY THIS THE ASSESSEE CAME IN APPEAL BE FORE THE FIRST APPELLATE AUTHORITY. BEFORE THE CIT(A) VARIOUS ARGUMENTS ON FACTS AND LAW WERE I.T.A .NO.-3269/DEL/2013 3 ADVANCED. APART FROM THAT RELIANCE WAS PLACED UPON THE COMPARATIVE CHART FILED BEFORE THE AO IN SUPPORT OF THE CLAIM THAT NO INTER FERENCE WAS WARRANTED OR THE NET PROFIT OF THE ASSESSEE HAD INCREASED FROM 0.52% IN 2008-09 ASSESSMENT YEAR TO 1.92% IN 2009-10 ASSESSMENT YEAR. 4.1. CONSIDERING THE SAME, THE CIT(A) CAME TO THE F OLLOWING CONCLUSION:- 5. I HAVE CONSIDERED THE GROUNDS RAISED IN APPEAL AND THE SUBMISSION OF THE AR OF THE APPELLANT. I HAVE CAREFULLY CONSIDERED THE REASONS GIVEN BY TH E ASSESSING OFFICER IN THE ASSESSMENT ORDER IN SUPPORT OF REJECTION OF BOOKS O F ACCOUNTS AND ESTIMATION OF TRADING RESULTS AND ALSO WRITTEN SUBMISSION OF THE APPELLANT. THE ASSESSING OFFICER HAS MADE ONLY GENERAL OBSERVA TION REGARDING REJECTION OF ACCOUNTS U/S 145(3) SUCH AS : (I) NON MAINTENANCE OF STOCK REGISTER (II) LOW PROFIT RATE (III) OTHER COMPARABLE CASES. AT THE OUTSET, IT MAY BE OBSERVED THAT THE ASSESSIN G OFFICER MADE ADDITION IN THE ORIGINAL ASSESSMENT ORDER U/S 143(3) TO THE EX TENT OF RS.32,37,576/-, WHICH WAS SUBSEQUENTLY REDUCED TO RS.22,64,348/- VI DE ORDER U/S 154 DTD. 9/5/12 AND AS SUCH DISPUTE IS CONFINED TO ADDITION OF RS.22,64,348/-. IT WAS SUBMITTED BY THE APPELLANT THAT THE APPELLAN T IS A REGULAR ASSESSEE FOR LAST MANY YEARS AND THERE IS NO CHANGE IN THE SYSTEM OF ACCOUNTING AS COMPARED TO PRECEDING YEARS. IT WAS FURTHER, CLARIFIED THAT LO OKING TO NATURE OF THE BUSINESS, IT WAS NOT POSSIBLE TO MAINTAIN DAY TO DAY STOCK RE CORD, BUT, THE STOCK INVENTORY IS PREPARED AT THE END OF THE YEAR ON THE BASIS OF AVAILABLE CLOSING STOCK. IT WAS FURTHER SUBMITTED THAT ON THE BASIS OF SAME SYSTEM OF ACCOUNTING, TRADING RESULTS WERE ACCEPTED BY THE ASSESSING OFFICER IN THE PRECE DING YEARS U/S 143(3) AND IN SUPPORT OF ABOVE POSITION, COPY OF THE ASSESSMENT O RDER AND TAX AUDIT REPORT WERE PLACED ON RECORD. REGARDING ALLEGATION OF LOW PROFIT RATE, IT WAS CLA RIFIED THAT THE ASSESSING OFFICER HAS NOT PROPERLY APPRECIATED THE FACTS. IN FACT, THERE IS SUBSTANTIAL INCREASE IN NET PROFIT RATE AS COMPARED TO PRECEDIN G YEAR AND FACTUAL POSITION TO THIS EFFECT IS SUPPORTED FROM RELEVANT DETAILS GIVE N AT PAGE 2 OF THE ASSESSMENT ORDER ITSELF. IT WAS FURTHER CLARIFIED THAT EVEN T HOUGH THE ASSESSING OFFICER MADE OBSERVATION ABOUT OTHER COMPARABLE CASES, BUT NO DETAILS OR OPPORTUNITY TO THIS EFFECT WAS PROVIDED FOR CLARIFICATION BY TH E APPELLANT. REGARDING VARIOUS JUDGEMENTS REFERRED TO BY THE ASS ESSING OFFICER, IT WAS CLARIFIED THAT ALL THOSE JUDGEMENTS HAVE NO RELEVAN CE OR BEING TO THE CASE OF THE APPELLANT AS FINDING OF JUDICIAL AUTHORITIES WAS BA SED ON DEFECTS AND DEFICIENCY IN THE BOOKS OF ACCOUNTS AND NOT ON THE GROUND NON MAINTENANCE OF STOCK REGISTER AND LOW PROFIT RATE. THE APPELLANT FURTHE R CLARIFIED THE LEGAL POSITION BY MAKING REFERENCE TO VARIOUS CASE LAWS OF JURISDICTI ONAL HIGH COURT REFERRED TO IN THE WRITTEN SUBMISSION AS PER WHICH NON MAINTENA NCE OF STOCK REGISTRAR AND LOW PROFIT RATE COULD BE NOT VALID GROUND FOR REJEC TION OF BOOKS OF ACCOUNTS U/S 145(3). I.T.A .NO.-3269/DEL/2013 4 AFTER GOING THROUGH FACTS OF THE CASE AND RELEVANT CASE LAWS, THERE IS MERIT IN THE CONTENTION OF THE APPELLANT THAT THE ASSESSING OFFICER IS NOT JUSTIFIED TO APPLY SEC. 145(3) MERELY ON THE GROUND OF NON MAINTENANCE OF STOCK REGISTER OR ON THE GROUND OF LOW PROFIT RATE. IN FACT, IT IS NOT THE CASE OF THE ASSESSING OFFICE R THAT THERE IS ANY CHANGE IN THE SYSTEM OF ACCOUNTING DURING THE YEAR AS COMPARED TO PAST HISTORY AND AS SUCH GENERAL OBSERVATION OF THE ASSESSING OFFICER CANNOT BE A BASIS FOR REJECTION OF BOOKS OF ACCOUNTS PARTICULARLY WHEN NO DEFECT OR IR REGULARITY WAS FOUND IN THE BOOKS OF ACCOUNTS. FURTHER, TRADING RESULTS OF THE ASSESSEE WERE ACCEP TED IN THE PRECEDING TWO YEARS U/S 143(3) AND IN THE YEAR UNDER REFERENCE, T HERE IS SUBSTANTIAL INCREASE IN NET PROFIT RATE AS COMPARED TO PRECEDING YEARS. FU RTHER, IN THE ABSENCE OF ANY DETAILS BROUGHT OUT IN THE ASSESSMENT ORDER OR CONF RONTED TO THE ASSESSEE, THE OBSERVATION OF THE ASSESSING OFFICER REGARDING OTHE R COMPARABLE CASE IS OF NO RELEVANCE. REGARDING CASE LAWS REFERRED TO BY THE ASSESSING OF FICER AND APPELLANT, THE CASE OF THE APPELLANT IS SUPPORTED BY THE DECISION OF JURISDICTIONAL HIGH COURT REFERRED TO ABOVE. THE CASE LAWS REFERRED TO BY TH E ASSESSING OFFICER ARE ON THE BASIS OF SPECIFIC DEFECTS AND DEFICIENCIES IN THE A CCOUNT AND THOSE JUDGEMENTS HAVE NO RELEVANCE AND BEARING TO THE FACTS OF THE C ASE. IN THE LIGHT OF ABOVE DISCUSSION, THERE IS NO JUSTI FICATION FOR REJECTION OF TRADING RESULTS U/S 145(3) AND ESTIMATION OF NET PR OFIT RATE AND ACCORDINGLY ADHOC TRADING ADDITION MADE BY ASSESSING OFFICER IS NOT SUSTAINABLE AND SAME IS HEREBY DELETED. APPEAL IS ALLOWED. IN THE RESULT, APPEAL IS ALLOWED. (HIGHLIGHTED FOR EMPHASIS) 5. AGGRIEVED BY THE ORDER THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD. SR. DR PLACED RELIANCE UPON THE ASSESSMENT ORDER, HOWEVER THE FACTS AVAILABLE ON RECORD, NAMELY THAT THE AO HERSELF RED UCED THE ADDITION FROM RS.32,37,576/- TO RS.22,64,348/- VIDE HER ORDER U/S 154 DATED 09.05.2012 WAS NOT DISPUTED. SIMILARLY, THE FACT THE ASSESSEE WAS REGULAR ASSESSEE FOR THE LAST SO MANY YEARS WHO HAD BEEN FOLLOWING THE SAME SYSTEM OF ACCOUNTING WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT IN THE EARLIER YEA RS BY WAY OF SCRUTINY ASSESSMENT U/S 143(3) RELIED UPON BY THE CIT(A) WAS NOT ASSAILED BY THE REVENUE. SIMILARLY THE FACTUM THAT THE NET PROFIT HAD INCREASED QUA THE EARLIER YEARS ALSO WAS NOT ASSAILED. IT IS SEEN THAT NO EF FORT WAS MADE IN THE ABSENCE OF ANY DISCUSSION IN THE ASSESSMENT ORDER TO ASSAIL TH E FINDING ARRIVED AT THAT NO COMPARATIVE CASE IN SUPPORT OF THE CONCLUSION OF TH E AO THAT A HIGHER I.T.A .NO.-3269/DEL/2013 5 PERCENTAGE OF PROFIT SHOULD HAVE BEEN EARNED WAS RE FERRED TO BY THE AO OR CONFRONTED TO THE ASSESSEE. NOR HAS THE DEPARTMENT CONSIDERED IT NECESSARY TO PLACE ANY SUCH MATERIAL BEFORE THE BENCH TO UPSET T HE FINDING UNDER CHALLENGE. ACCORDINGLY IN THE LIGHT OF THE ABOVE-MENTIONED FAC TS AND CIRCUMSTANCES WHERE PAST HISTORY HAS BEEN TAKEN INTO CONSIDERATION, WE FIND OURSELVES UNABLE TO COME TO A CONTRARY FINDING IN THE ABSENCE OF ANY ARGUMEN T BY THE DEPARTMENT. THE DEPARTMENTAL GROUND IN THE AFORE-MENTIONED PECULIAR FACTS AND CIRCUMSTANCES DOES NOT HAVE ANY MERIT AND THE SAME ACCORDINGLY IS DISMISSED. 6. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMIS SED AS PER THE PRONOUNCEMENT MADE IN THE OPEN COURT AT THE TIME OF HEARING. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 03 RD OF JANUARY 2014. SD/- SD/- (T.S.KAPOOR) (DIVA SINGH) ACCOUNTANT MEMBER JUDI CIAL MEMBER DATED:-03/01/2014 *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI