ACIT 9(3), MUMBAI V. VITAL HEALTHCARE P.LTD, MUMBAI

ITA 3890/MUM/2010

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3504 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 03-05-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 13-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A DYANI
• Section: 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F, BENCH MUM BAI BEFORE SHRI JASON P. BOAZ, AM AND SHRI SANDEEP GOSA IN, JM ITA NO.3890/MUM/2010 (ASSESSMENT YEAR: 2006-07) DY.COMMISSIONER OF INCOME- TAX-9(3) 2 ND FLOOR, ROOM NO.229, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. VS. M/S. VITAL HEALTHCARE P. LTD. 5/6, SHREYAS BUILDING, 2 ND HASNABAD LANE, SANTACRUZ (W), MUMBAI-400 054. PAN: AAACV 4682N APPELLANT .. RESPONDENT APPELLANT BY SHRI R.A. DYANI RESPONDENT BY NONE DATE OF HEARING: 03-05-2016 DATE OF PRONOUNCEMENT: 25-05-2016 O R D E R PER SANDEEP GOSAIN,JUDICIAL MEMBER : THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE AG AINST THE ORDER OF THE LEARNED CIT (A)-20, MUMBAI DATED 10-03 -2010 PASSED IN APPEAL NO.CIT (A) -20/9(3)/I.T.553/2008-09 FOR ASSE SSMENT YEAR 2006-07 WHEREBY THE LEARNED CIT (A) HAS PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE AGAINST LEVY OF PENALTY U/S 271 (1) (C) OF THE IT ACT, ON THE GROUND MENTIONED HEREIN BELOW:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, AND IN LAW THE LD. CIT (A) ERRED IN HOLDING THAT THE ASSESSING OFF ICER HAS ARBITRARILY ESTIMATED THE GROSS PROFIT DESPITE THE FACT THAT NO TICE U/S 133(6) OF THE INCOME-TAX ACT,1961 SENT BY THE ASSESSING OFFIC ER WERE RETURNED UNSERVED AND ONE OF THE CREDITORS REFUSED TO ACKNOWLEDGE ANY AMOUNTS DUE TO THE ASSESSEE. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE REST ORED. ITA NO.3890/MUM/2010(A.Y.2006-07) DY. CIT VS. M/S. VITAL HEALTHCARE P. LTD. 2 3. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER AN Y GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. ADDITIONAL GROUNDS OF APPEAL: 1. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN HOLDING THAT THERE WAS NO VALID REASON FOR THE REJECTION OF BOOKS OF ACCOUNT OF THE ASSESS EE BY THE ASSESSING OFFICER BE UNDER THE PROVISIONS OF SECTIO N 145(3) OF THE I.T. ACT,1961. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE REST ORED. 3. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER AN Y GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2. THIS APPEAL WAS FIXED FOR HEARING TODAY AND WAS CALLED FOR SEVERAL TIMES BUT, NOBODY APPEARED ON BEHALF OF THE ASSESSE E AND EVEN; NO APPLICATION FOR ADJOURNMENT OF THE CASE WAS FILED. AS PER THE RECORDS IT IS REVEALED THAT NONE APPEARED ON BEHALF OF THE ASSESS EE ON THE PREVIOUS DATE OF HEARING ALSO THOUGH NOTICE WAS ALREADY ISSU ED BY RPAD. THEREFORE, IT SEEMS THAT THE ASSESSEE IS NOT INTERE STED TO CONTEST THE PRESENT APPEAL. THE LEARNED DR REPRESENTING THE REV ENUE IS PRESENT BEFORE THE BENCH AND SUBMITTED THAT HE WISH TO CONT EST THE SAME. THEREFORE, WE PROCEED TO DISPOSE OF THE APPEAL AFTE R HEARING THE LEARNED DR AND PERUSAL OF THE MATERIALS AVAILABLE ON RECORD . 3. THE BRIEF FACTS OF THE CASE ARE THAT THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 12,28,130/- WAS ELECTRONICALLY FURNISHED BY THE ASSESSEE ON 24.11.2006. THE SAME WAS PROCESSED U/S1 43(1) ADOPTING THE TOTAL INCOME AS RETURNED. HOWEVER, THE REVISED COMPUTATION OF TOTAL INCOME WAS RECEIVED DURING THE SCRUTINY ON THE GROU ND THAT THERE WAS ITA NO.3890/MUM/2010(A.Y.2006-07) DY. CIT VS. M/S. VITAL HEALTHCARE P. LTD. 3 SOME ERROR IN FEEDING THE DATA AT THE TIME OF FILIN G THE E-FILED RETURN, STATING THAT THE CORRECT TOTAL INCOME OF THE ASSESSEE IS RS .15,29,554/-. LATER ON THE CASE WAS SELECTED FOR SCRUTINY AND AFTER SERVIN G REQUIRED NOTICES AND AFTER RECEIVING THE REPLY THE ASSESSMENT ORDER U/S 143(3) R.W.S.145(3) OF THE INCOME TAX ACT,1961 WAS PASSED HOLDING THAT THE ASSESSEE HAS INDULGED IN INFLATING PURCHASES BY USING SOME NAMES WHO ARE EITHER NON EXISTENT, ETC. THEREFORE, THE AO REJECTED THE BOOK S OF ACCOUNT OF THE ASSESSEE AND DETERMINED TOTAL INCOME AS PER PROVISI ON OF SECTION 143(3)R.W.S. 145(3) VIDE ORDER DATED 16.12.2008. AG GRIEVED BY THE ORDER OF THE ASSESSMENT, THE ASSESSEE PREFERRED APPEAL BE FORE THE LEANED CIT (A) AND THE LEARNED CIT (A) AFTER CONSIDERING THE C ASE HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE VIDE ITS ORDER DATED 10- 03-2010. AGGRIEVED BY THE ORDER OF THE LEARNED CIT (A), THE REVENUE IS NOW IN APPEAL BEFORE US ON THE AFOREMENTIONED GROUNDS. GROUND NO.1 4. THIS GROUND RAISED BY REVENUE THEREBY CHALLENGIN G THAT LD. CIT(A) HAS ERRED IN HOLDING THAT THERE WAS NO VALID REASON FOR THE REJECTION OF BOOKS OF ACCOUNT OF THE ASSESEE BY THE ASSESSING OF FICER UNDER THE PROVISIONS OF SECTION 145(3) OF THE I.T. ACT,1961. THE LEARNED DR APPEARING ON BEHALF OF REVENUE SUBMI TTED THAT HE WANTS TO ONLY CONTEST ADDITIONAL GROUND NO.1 AS THE SAID GROUND NO.1 WAS RAISED EARLIER AT THE TIME OF FILING APPEAL. THEREF ORE, WE HAVE DECIDED TO DISPOSE OF THE ADDITIONAL GROUND RAISED BY THE REVE NUE. ITA NO.3890/MUM/2010(A.Y.2006-07) DY. CIT VS. M/S. VITAL HEALTHCARE P. LTD. 4 5. WE HAVE HEARD THE LEARNED DR AND ALSO PERUSED TH E MATERIALS PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY TH E REVENUE AUTHORITIES. WE HAVE NOTICED THAT THE LD. CIT(A) WH ILE DEALING WITH THE SAID GROUND HAS GIVEN HIS FINDINGS IN PARA NUMBER 5.4,5. 5&5.6 WHICH READS AS UNDER: 5.4 I HAVE CONSIDERED THE DISPUTE. I AM OF THE OPIN ION THAT THE AO HAS NOT GIVEN COGENT REASONS TO REJECT THE B OOKS OF ACCOUNTS. HE HAS NOT CITED ANY SERIOUS DEFECTS IN T HE BOOKS OF ACCOUNTS OR THE METHOD OF ACCOUNTING IN VOGUE. THE WHOLE PLANK OF REJECTION OF THE BOOKS OF ACCOUNTS IS NOT THE BOOKS OF ACCOUNTS AS SUCH BUT THE DISCREPANCIES IN THE LISTS OF SUNDRY CREDITORS FURNISHED IN COURSE OF THE ASSESSMENT PRO CEEDINGS. HE HAS NOT LINKED THE MISSING CREDITORS WITH THE BO OKS OF ACCOUNTS. IN FACT HE HAS NOT QUESTIONED THE CORRECT NESS OF THE SUNDRY CREDITORS SHOWN AT RS.3,00,98,947 IN THE AUD ITED BALANCE SHEET. HE HAS NOT SHOWN THAT ANY OF THE SUN DRY CREDITORS APPEARING IN THE BALANCE DID NOT APPEAR I N THE BOOKS OF ACCOUNTS. THE TWO STATUTORY AUDITS, ONE UNDER TH E COMPANIES ACT AND THE OTHER U/S 44AB OF, THE INCOME TAX ACT HAVE BEEN MADE WITH REFERENCE TO REJECTED BOOKS OF ACCOUNTS AND THE AO HAS NOT RAISED ANY DOUBTS ON THE CORRECT NESS OF THE TWO AUDIT REPORTS. FURTHER, THE AO HAS RELIED U PON THE TAX AUDIT REPORT IN RECTIFYING THE ERROR CREPT IN THE A SSESSMENT ORDER WHILE MAKING DISALLOWANCE U/S 40(A)(IA) WHICH I HAVE REFERRED EARLIER. HE HAS NOT BROUGHT ANY MATERIAL O N RECORD TO SHOW THAT SUNDRY CREDITORS VERIFIED BY HIM WERE ON ACCOUNT OF PURCHASES MADE DURING THE CURRENT YEAR. WITHOUT VER IFYING A SINGLE PURCHASE, HE HAS HELD THAT THE PURCHASES WER E INFLATED. THE BURDEN WAS ON THE AO TO ESTABLISH THAT THE BOOK S RESULTS ARE NOT RELIABLE. HE HAS FAILED TO DISCHARGE THIS O NUS. I, THEREFORE, HOLD THAT THERE WERE NO VALID REASONS FO R THE AD TO INVOKE THE PROVISIONS OF SECTION 145(3) AND REJECT THE BOOKS. 5.5 WITHOUT PREJUDICE THERE IS NO MERIT EVEN IN THE ESTIMATION MADE BY THE AO. HE HAS ADOPTED GROSS PROFIT RATE OF 40% AS COMPARED TO THAT DECLARED AT 26.84%. IN SUPPORT, HE OBSERVED THAT IN THE KIND OF BUSINESS CARRIED ON BY THE APPE LLANT THE GROSS PROFIT WAS SHOWN IN THE RANGE BETWEEN 40% AND 50% IN COMPARABLE CASES. THE AO, HOWEVER, DID NOT CITE ANY COMPARE CASE. IF HE PROPOSED TO MAKE AN ESTIMATE IN DISREGARD OF THE BOOK RESULTS, HE SHOULD IN ALL FAI RNESS DISCLOSE THE MATERIALS BASED ON WHICH HE FOUNDED THAT ESTIMA TE. IT IS ITA NO.3890/MUM/2010(A.Y.2006-07) DY. CIT VS. M/S. VITAL HEALTHCARE P. LTD. 5 WELL-SETTLED THAT IN A BEST JUDGEMENT ASSESSMENT TH ERE IS ALWAYS A CERTAIN DEGREE OF GUESS WORK. EVEN THEN TH E AO HAS TO MAKE AN HONEST AND FAIR ESTIMATE OF THE INCOME [ SEE DHAKESHWARI COTTON MILLS LTD. V. COMMISSIONER OF IN COME-TAX, 26 ITR 775 (SC)]. HOWEVER, THE ESTIMATION MADE HERE LACKS SUBSTANCE AND REFLECTS ONLY IMAGINATION AND CONJECT URES ON THE PART OF THE AO. THE AO HAS ACTED TOTALLY ARBITR ARILY IN ESTIMATING THE GROSS PROFIT. THERE IS NO FORCE IN T HE ADDITION MADE OF RS.54,45,485 TO THE GROSS PROFIT DECLARED B Y THE APPELLANT. I, THEREFORE, DELETE THE SAME. THE ISSUE IS DECIDED IN FAVOUR OF THE APPELLANT. WE HAVE ANALYSED THE ORDERS PASSED BY CIT(A) AND WE HAVE NOTICED THAT THE LD. CIT(A) HAS RIGHTLY HELD THAT T HE WHOLE PLANK OF REJECTION OF THE BOOKS OF ACCOUNTS IS NOT THE BOOKS OF ACCOUN TS AS SUCH BUT THE DISCREPANCIES IN THE LISTS OF SUNDRY CREDITORS FURN ISHED IN THE COURSE OF ASSESSMENT PROCEEDINGS. THE LD. CIT(A) HAS ALSO TAK EN INTO CONSIDERATION THAT AO WHILE PASSING THE ORDER OF ASSESSMENT HAS N OT LINKED THE MISSING CREDITORS WITH THE BOOKS OF ACCOUNTS AND IT WAS ALS O CONSIDERED BY CIT(A) THAT THE AO HAS NOT SHOWN ANY OF THE SUNDRY CREDITO RS APPEARING IN THE BALANCE SHEET DID NOT APPEAR IN THE BOOKS OF ACCOUN TS AND HAS NOT RAISED ANY DOUBT ON THE CORRECTNESS OF THE TWO AUDIT REPOR TS, ONE UNDER THE COMPANIES ACT AND THE OTHER U/S 44AB OF THE INCOME TAX ACT. THE LD. CIT(A) HAS ALSO CONSIDERED THAT THE AO HAS NOT BROU GHT ANY MATERIAL ON RECORD TO SHOW THAT THE SUNDRY CREDITORS VERIFIED B Y HIM WERE ON ACCOUNT OF PURCHASES MADE DURING THE CURRENT YEAR AND HENCE WITHOUT VERIFYING A SINGLE PURCHASE, THE AO HAS HELD THAT THE PURCHASES WERE INFLATED. WHILE CONSIDERING THESE CIRCUMSTANCES THE CIT(A) HAS RIGH TLY HELD THAT THERE WAS NO VALID REASON FOR THE AO TO INVOKE THE PROVIS IONS OF SECTION 145(3) AND REJECT THE BOOKS. ITA NO.3890/MUM/2010(A.Y.2006-07) DY. CIT VS. M/S. VITAL HEALTHCARE P. LTD. 6 6. WE HAVE FURTHER NOTICED THAT CIT(A) HAS RIGHTLY TAKEN INTO CONSIDERATION THAT THERE IS NO MERIT EVEN IN THE ES TIMATION MADE BY AO AS THE AO DID NOT CITED ANY COMPARED CASE. THEREFORE, THE ESTIMATION MADE BY AO LACKS SUBSTANCE AND REFLECTS ONLY IMAGINATION AND CONJECTURES ON HIS PART AND THEREFORE, THE LD. CIT(A) HAS RIGHTLY DELETED THE ADDITIONS OF RS.54,45,485/-. AFTER ANALYZING THE AFORE MENTIONED ORDERS OF CIT(A ) WE FOUND THAT THE CIT(A) HAS DEALT WITH THE ISSUES AND HAS PASSED JUDICIOUS AND WELL REASONED ORDER AND NO CIRCUMSTANCES HAVE BEEN BROUG HT BEFORE US IN ORDER TO CONTROVERT OR REBUT THE FINDINGS RECORDED BY THE CIT(A). THEREFORE, WE SEE NO REASON TO DEVIATE OR INTERFERE INTO THE FINDINGS RECORDED BY THE CIT(A) AND HENCE, WE REJECT THESE G ROUNDS OF APPEAL RAISED BY THE REVENUE AND UPHOLD THE ORDER OF THE C IT(A). 7. GROUND NO.2&3 OF THE REVENUES APPEAL ARE GENERA L IN NATURE AND, THEREFORE, NEEDS NO SEPARATE ADJUDICATION. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25-05-2016 . SD/- SD/- (JASON P. BOAZ) (SANDEEP GOSAI) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI , DATED 25/5/2016 ASHWINI/ ASHWINI/ ASHWINI/ ASHWINI/PS PSPS PS ITA NO.3890/MUM/2010(A.Y.2006-07) DY. CIT VS. M/S. VITAL HEALTHCARE P. LTD. 7 COPY OF THE ORDER FORWARDED TO : BY ORDER, ASSISTANT REGISTRAR ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT (A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//