Income Tax Officer-1, Bahraich V. Shri Bal Mukund Yadav, Bahraich

ITA 344/LKW/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70524 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 06-06-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 22-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reasonable cause

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI. PRAMOD KUMAR, ACCOUNTANT MEMBER ITA NO.344/LKW/2012 ASSESSMENT YEAR:2009-10 ITO-I BAHRAICH V. SRI BAL MUKUND YADAV K.D. C. ROAD BAHRAICH PAN:ABOPY6150A ( A PP ELLANT ) ( RES P ONDENT ) APPELLANT BY: SMT. RANU BISWAS, D.R. RES P ONDENT B Y :SHRI. RAKESH GAR G , ADVOCATE DATE OF HEARING: 06.06.2013 DATE OF PRONOU NCEMENT: 07.08.2013 O R D E R PER SUNIL KUMAR YADAV: THIS APPEAL IS PREFERRED BY TH E REVENUE AGAINST THE ORDER OF THE LD. CIT(A) ON A SOLITARY GROUND THAT THE LD. CIT(A) HAS ERRED IN ACCEPTING THE INCORRECT AND INCOMPLETE BOOKS OF ACCOUNT OF THE ASSESSEE AND APPLYING THE PROFIT RATE AT 1.25% OF THE TURNOVER WHICH IS CONTRARY TO SECTION 145(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFT ER CALLED IN SH ORT THE ACT'). 2. THE FACTS IN BRIEF BORNE OUT FROM THE RECORD ARE THAT THE ASSESSEE FILED HIS RETURN OF INCO ME SHOWING INCOME AT ` 5,47,417 AND ASSESSMENT WAS COMPLETED AT A TOTAL INCOME OF ` 25,21,020 AFTER HAVING APPLIED THE PROFIT RATE AT 5% ON THE TOTAL TURNOVER OF ` 4,48,59,825. :-2-: 3. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WITH THE SUBMISSION THAT BEFORE THE ASSESSING OFFICER ASSESSEE HAS PRODUCED THE BOOKS OF ACCOUNT, BUT IT WAS REJECTED BY TH E ASSESSING OFFICER AND ESTIMATED THE BOOK PROFIT. THOUGH THE ASSESSING OFFICER HAS MENTIONED IN HIS ORDER THAT VOUCHERS WERE NOT PRODUCED, BUT COPIES OF ALL THE VOUCHERS HAVE BEEN PRODUCED AND FILED BEFORE THE LD. CIT(A) TO SHOW THAT THESE WERE PROPERLY MAINTAINED. THE LD. CIT(A) RE-EXAMINED THE ISSUE IN THE LIGHT OF THE BOOKS OF ACCOUNT PRODUCED BEFORE HIM AND ESTIMATED THE PROFIT RATE AT 1.25% AGAINST THE PR OFIT RATE SHOWN BY THE ASSESSEE AT 0.67%. 4. AGGRIEVED THE REVENUE HAS PREF ERRED AN APPEAL BEFORE THE TRIBUNAL AND HAS PLACED HEAVY RELIAN CE UPON THE ASSESSMENT ORDER WHEREAS THE LD. COUNSEL FOR THE ASSESSEE HAS CO NTENDED THAT WHILE ESTIMATING THE PROFIT RATE AT 1.25%, THE LD. CIT(A) HA S TAKEN INTO ACCOUN T THE PROFIT RATE DECLARED IN THE IMMEDIATELY PRECEDING YEARS. THE LD . CIT(A) HAS ALSO TAKEN INTO ACCOUNT SUBSTANTIAL INCREASE IN TURNOVER OF THE ASSESSEE WHILE ESTIMATING THE PROFIT. 5. HAVING GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FI ND THAT THE ASSESSEE HAS PRODUCED THE BOOKS OF ACCOUNT BEFORE THE ASSESSING OFFICER AND NO SPECIFIC DEFECT WAS POINTED OUT THEREIN. THE ASSESSING O FFICER AFTER REJECT ING THE BOOKS OF ACCOUNT HAS APPLIED THE NET PROFIT RATE AT 5% OF THE TOTAL TURNOVER WHICH WAS REDUCED BY THE LD. CIT(A) TO 1.25 % AGAINST THE PROFIT RATE OF 0.67% DECLARED BY THE ASSESSEE KEEPING IN VI EW THE NET PROFIT RATE DECLARED AT 1.05% IN THE IMMEDIATELY PRECEDING YEAR . THE RELEVANT OBSERVATIONS OF THE LD. CIT(A) ARE EXTRACTED HEREUNDER:- 4(3) I HAVE EXAMINED THE FACTS AND CIRCUMSTANCES OF THE CASE. I FIND THAT THE ASSESSING OFFICER HAS CLEARLY MENTIONED THAT THE COMPUTERIZED CASH BOOKS AND LEDGERS WERE PRODUCED FOR :-3-: EXAMINATION. THE AO ALSO MENTIONS THAT THE RECEIPTS OF CONTRACTUAL BUSINESS ARE IN ACCORDANCE WITH THE RECEIPTS AS PER TDS CERTIFICATES. THE VOUCHERS OF THE ACCOMPANYING ENTRIES IN THE B OOKS OF ACCOUNTS WERE HOWEVER NOT PRODUCED. THE BOOKS OF ACCOUNTS HAVE BEEN AUDITED AND THE AUDITORS HAVE NOT QUALIFIED ANY DISC REPANCIES. THE AO HAS ALSO NOT FOUND ANY DISCREPA NCIES IN THE BOOKS OF ACCOUNTS. NOW EVEN IF THE ACTION OF THE AO IN REJECTING THE BOOKS OF ACCOUNTS AS INCORRECT AND INCOMPLETE WITH IN THE MEANING OF PROVISIONS OF SECTION 145(3) OF THE ACT WERE TO BE SUSTAINED FOR NON-PRODUCTION OF THE ACCOMPANYING VOUCHERS OF THE BOOKS OF ACCOUNTS, I FIND THAT THE ADOPTION OF RATE OF 5% FOR ESTIMATION OF PROFITS OF THE APPELLANT IS EXCESSIVE AND ARBITR ARY. NO REASONS HAVE BEEN ADVANCED BY THE AO TO ADOPT THIS FIGURE OF 5% FOR ESTIMATING THE PROFITS. NO PARALLELS HAVE BEEN DRAWN WITH THE CASE OF M/S UNIVERSAL CONSTRUCTION VS ITO CITED BY THE AO. ON THE CONTRARY THE DISTINGUISHI NG FEATURES OF THAT CASE CITED BY THE AO WITH THE CASE OF THE ASSESSEE ARE OBVIOUS IN SO FAR AS THE BOOKS OF ACCO UNTS HAVE BEEN MAINTAINED AND PRODUCED BEFORE THE AO. IT IS ONLY THAT THE VO UCHERS HAVE NOT BEEN PRODUCED FOR THE REAS ON THAT THE SPOUSE OF THE APPELLANT WAS UNDERGOING TREATMENT FOR CANCER AT A HOSPITAL IN MUMBAI AND APPELLANT WAS ATTENDING TO HIS AILING SPOUSE. 4(4) I AM OF THE CONSIDERED OPIN ION THAT WHILE REJECTING THE BOOKS OF ACCOUNTS UNDER SECTION 145(3) OF THE ACT AND CONSEQUENT ESTIMATION OF PROFIT, THE RATE ADOP TED SHOULD NOT BE SUCH THAT IT PUTS AN ASSESSEE WHO IS NOT MAINTA INING THE BOOKS OF ACCOUNTS OR AN ASSESSEE WHO IS NOT PRODUCING TH E BOOKS OF ACCOUNTS IN A BETTER POSITION THAN AN ASSESSEE WHO IS MAINTAINING AND PRODUCING THE BOOKS OF ACCOUNTS BUT COULD NOT PR ODUCE VOUCHERS FOR A REASONABLE CAUSE. THE RATE OF 5% ADOPTED BY THE AO IS THEREFORE EXCESSIVE AND ARBITRARY AND DOES NOT HAVE AN Y LINKAGE WITH THE PROFIT BEING SHOWN IN EARLIER YEARS WHEN TH E BOOKS OF ACCOUNTS WERE NOT REJECTED. IN THE CURRENT YEAR THE ASSESSEE HAS SHOWN GROSS PROFIT OF RS.2,28,858/- EXCLUDING THE INTE REST INCOME OF RS.2,16,224/- AND OTHER INCOME OF RS.12,634/- ON TURNOVER OF RS.4,48,59,825/- AS COMPARED TO PROFIT OF RS.3,63,737/ - ON TURNOVER OF RS.3,01,24,811/. THE PROFIT RATE IN CURRENT YEAR IS 0.67% AS COMPARED TO 1.05% IN THE IMMEDIATELY PRECEDING YEAR. THE FALL IN PROFIT COULD BE ATTRIBUTED TO THE TURNOVER OF RS.1,00,00,000/- OF NEW BUSINESS STARTED BY THE APPELLANT. THE PROF IT RATE IS THEREFORE ALMOST CONSISTENT. IN VIEW TH EREOF I AM OF THE OPIN ION THAT IT WOULD BE REASONABLE TO ESTIMATE THE PROFIT @1.25% WHICH W ILL BE CONSISTENT TO RATE SHOWN BY THE APPELLANT IN EARLIER YEARS. :-4-: 6. DURING THE COURSE OF HEARING OF TH E APPEAL, NO SPECIFIC DEFECT IN THE ORDER OF THE LD. CIT(A) WAS POINTED OUT BY THE LD. D.R. THE LD. CIT(A) HAS ESTIMATED THE PROFIT RATE AT 1.25% KEEPING IN VIEW THE PAST RECORD OF THE ASSESSEE. IN THE IM MEDIATELY PRECEDING YEAR THE PROFIT RATE WAS DECLARED AT 1.05%. IN TH E LIGHT OF THESE FACTS, WE FIND NO ERROR IN THE ESTIMATION OF PROFIT MADE BY THE LD . CIT(A). WE ACCORDINGLY CONFIRM HIS ORDER ON THIS ISSUE. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN TH E OPEN COURT ON 7.8.2013. SD/- SD/- [PRAMOD KUMAR] [S UNIL KUMAR YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:7.8.2013 JJ:2806 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR