The ITO, Ward-1(1), JUNAGADH V. Shree Girnar Cement Co. P. Ltd.,

ITA 4/RJT/2012

• Counselvise Citation: [2012] 120 COUNSELVISE.COM (IT) 0214 (ITAT-RAJKOT)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 06-09-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 03-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MK SINGH
• Assessee Lawyers: SAMIR S JANI
• Keywords: Business income; Deemed to accrue or arise in india
• Section: 142(1); 68; 145

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBULAL; RAJKOT BENCH, RAJKOT. . .. . . .. . , , , , . .. . . .. . , , , , $ $ $ $ BEFORE SHRI T. K. SHARMA, JM AND SHRI D. K. SRIVASTAV A, AM ITA NO.4/RJT/2012. / ASSESSMENT YEAR 2006-07 INCOME TAX OFFICER WARD 1(1), BHUTNATH CHAMBER, COLLEGE ROAD, JUNAGADH. ( * / APPELLANT) VS. SHRI GIRNAR CEMENT CO.PVT.LTD., BILKHA ROAD, AT: VIJAPUR TAL: JUNAGADH PAN: AADCS5555P. +,* / RESPONDENT - / REVENUE BY SHRI M.K.SINGH /- / ASSESSEE BY SHRI. SAMIR S JANI - / DATE OF HEARING 6.9.2012 - / DATE OF PRONOUNCEMENT 7.9.2012 / / / / ORDER . .. . . . . . , , , , / T. K. SHARMA, J. M. THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER DATED 31.10.2011 OF CIT (A), RAJKOT FOR THE ASSESSMENT YEAR 2006-07. 2. BRIEF FACTS RELATING TO CONTROVERSY INVOLVED IN TH IS CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF CEM ENT AND FILED RETURN OF INCOME DECLARING LOSS OF RS.3,22,680/- ON 26. 9.2006 ALOGNWITH AUDITED ACCOUNTS. AGAIN, HE HAS FILED RETURN OF INCO ME ON 11.12.2006 DECLARING THE TOTAL LOSS OF RS.3,22,683/- ELECTRONICALL Y. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S 143(2) WAS ISSUED TO TH E ASSESSEE. AGAIN, NOTICE U/S 142(1) ALONG WITH QUESTIONNAIRE WAS ISSUED TO THE ASSESSEE. IN RESPONSE TO THE NOTICE U/S 143(2), THE AUTHO RIZED ITA NO.4/RJT/2012. 2 REPRESENTATIVE APPEARED BEFORE THE AO AND FURNISHED D ETAILS AS CALLED FOR BY THE AO. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED FROM THE BALANCE SHEET, THE ASSESSEE HAS SHOWN AN AMOUNT OF RS.5,44,000/- UNDER THE HEAD ADVANCE FOR WORK RECEIVE D FROM DIFFERENT PARTIES. THE DETAILS OF THE ADVANCE FOR WORK HAVE BEEN INCORPORATED AT PAGE 2 OF ASSESSMENT ORDER. SIMILARLY, AN AMOUNT OF R S.2,50,000/- HAS BEEN SHOWN AGAINST THE NAME OF M/S GANESH CONSTRUCTION CO. UNDER THE HEAD ADVANCE FOR GOODS. THE AO CALLED FOR THE EXPLAN ATION FROM THE ASSESSEE TO PRODUCE THE DOCUMENTARY EVIDENCE TO PROVE CRED ITWORTHINESS OF THE CREDITOR, IDENTITY OF PARTIES AND GENUINENESS OF THE TRANSACTION. 3. IN REPLY TO THE ABOVE, THE ASSESSEE SUBMITTED THAT T HE AMOUNTS RECEIVED FROM THE PARTIES MENTIONED IN THE ASSESSMENT ORD ER ARE FOR THE PURPOSE OF CARRYING OUT DEVELOPMENT AND LEVELING O F THE LAND. THESE AMOUNTS WERE TREATED AS ADVANCE FROM THE PERSONS T O WHOM THE WORK OF LAND DEVELOPMENT AND LEVELING WORK WAS TO BE DON E. IT IS SUBMITTED THAT THE SAME AMOUNTS WERE CARRIED FORWARD TO 1.4.2009 UNDER THE HEAD AS ADVANCE. THEREFORE, NO EXPENDITURE HAS BEEN INCURRED IN THE PRECEDING YEAR OR IN THE YEAR UNDER CONSIDERATION. AS AGAINST THI S, THE AO OBSERVED THAT THESE CONTRACTORS WOULD THEMSELVES BE IN NEED OF SO ME WORKING CAPITAL FOR THE LAND DEVELOPMENT AND LEVELING TO BE CARRIED OUT BY THEM. HE ALSO OBSERVED THAT IN FACT NO WORK HAS BEEN PERFORMED B Y THESE PERSONS.. . THE AO FURTHER OBSERVED THAT ALL THESE DEPOSITS WERE GIVEN IN CASH AND IDENTICALLY WORKED CONFIRMATION LETTERS WERE FILED TO SU BSTANTIATE THE CLAIM OF THE ASSESSEE. HE, THEREFORE, DID NOT ACCEPT THE EXP LANATION OF THE ASSESSEE AND ADDED THE SAME AS UNEXPLAINED DEPOSIT WITHIN THE MEANING OF THE PROVISIONS OF SECTION 68 OF THE INCOME T AX ACT, 1961. WITH ITA NO.4/RJT/2012. 3 REGARD TO THE ADDITION OF RS.2,50,000/- IN RESPECT O F M/S GANESH CONSTRUCTION CO., THE AO WAS OF THE OPINION THAT THE ASSESSEE FAILED TO PROVE THE TRANSACTION AND ACCORDINGLY, HE TREATED THE S AME AS UNEXPLAINED CASH U/S 68 OF THE ACT AND ADDED BOTH T HE AMOUNTS TO THE TOTAL INCOME OF THE ASSESSEE. 4. WITH REGARD TO THE ADDITION OF RS.3,00,000/- ON ACCOUNT OF TRADING RESULT, THE AO FOUND THAT THE OPENING BALANCE OF C EMENT, GYPSUM AND PACKING MATERIAL WAS AT RS.3,47,161/-. THE ASSESSEE SHOWN P URCHASES OF RS.2,20,102/-, TOTAL MANUFACTURING EXPENSES HAVE BEEN SHOWN AT RS.1,43,290/-. AS AGAINST IT, THE ASSESSEE SHOWN SALES OF RS.2,95,564/- AND CLOSING STOCK AT RS.2,24,327/- AND THEREBY SHOWN A LOSS OF RS.2,02,237/-. BY LOOKING TO THE NATURE OF TRANSACTI ONS SHOWN BY THE ASSESSEE IN THE TRADING ACCOUNT, THE AO WAS OF THE VIEW T HAT THE ASSESSEE HAS PREPARED ITS ACCOUNT AS PER HIS CONVENIENCE TO D EFRAUD THE REVENUE. IN ADDITION, THE ASSESSEE ALSO DEBITED AN A MOUNT OF RS.53,393/- BEING LOSS OF ASSETS TO THE PROFIT AND LOSS ACC OUNT. THE AO DID NOT SATISFY WITH THE EXPLANATION OFFERED BY THE ASSESSE E AND ACCORDINGLY HE MADE LUMPSUM ADDITION OF RS.3,00,000/- TO THE TOTA L INCOME OF THE ASSESSEE. 5. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE CARR IED THE MATTER BEFORE THE LD. CIT(A) WITH FOLLOWING GROUNDS OF APPE AL : 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN D ELETING THE ADDITION OF RS.5,44,000/- MADE BY THE AO U/S 68 ON A CCOUNT OF ADVANCE FOR WORK, WITHOUT APPRECIATING THE FACTS BROUGHT ON RECORD BY THE AO. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.2,50,000/- MADE BY THE AO U/S 68 ON ACCOUNT OF ITA NO.4/RJT/2012. 4 ADVANCE FOR GOODS, WITHOUT APPRECIATING THE FACTS BROUGH T ON RECORD BY THE AO. 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.3,00,000/- MADE BY THE AO U/S 68 ON ACCOUNT OF LUMPSUM ADDITION TO TRADING RESULT, WITHOUT APPRECIATI NG THE FACTS BROUGHT ON RECORD BY THE AO. 4. ON THE FACTS OF THE CASE AND IN LAW THE LD.CI T(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AO. 5. ANY OTHER GROUND THAT THE REVENUE MAY RAISE BEFOR E OR DURING HEARING PROCEEDINGS BEFORE THE HONBLE ITAT 6. APROPOS THE GROUND NO.1, BEFORE THE LD.CIT(A) THE COUNSEL OF THE ASSESSEE CONTENDED THAT THE ASSESSEE IS A DULY INCORPORATED CLOSELY HELD DOMESTIC COMPANY ENGAGED IN THE BUSINESS OF MANUFACT URE AND RESALE OF CEMENT. IT HAS SUBMITTED AUDITED BOOKS OF ACCO UNT AND OTHER RELEVANT DOCUMENTS BEFORE THE AO FOR VERIFICATION. D UE TO TECHNICAL PROBLEMS, THE ASSESSEE HAD TO SUFFER FINANCIAL LOSS AND H ENCE THE ASSESSEE CHOOSE TO HANDOVER THE MANUFACTURING UNIT ITSELF TO OTHER BUYERS. THESE 24 PERSONS WHO ARE THE BUYERS AND WHO HAVE TO CARRY OUT THE WORK OF LEVELING AND DEVELOPING THE LAND EN TERED INTO AN AGREEMENT AND TAKEN ADVANCE FROM THEM. 7. APROPOS THE ADVANCE OF RS.2,50,000/- TAKEN FROM M/S GANESH CONSTRUCTION CO. , BEFORE THE LD. CIT(A), THE LD.COUNSE L OF THE ASSESSEE CONTENDED THAT THE APPELLANT IS AN APPROVED GOVERNM ENT CONTRACTOR AT SURAT AND HE HAD ADVANCED THE AMOUNT OF RS.2,50,000 /- BY ACCOUNT PAYEE CHEQUE AND HE IS REGULARLY ASSESSED TO TAX. THE ASS ESSEE WAS AGREED TO SUPPLY GOODS TO M/S GANESH CONSTRUCTION CO. B UT DUE TO LACK OF QUALITY, M/S GANESH CONSTRUICTION CO. REFUSED TO TAKE G OODS FROM THE ITA NO.4/RJT/2012. 5 ASSESSEE. THEREAFTER THIS PAYMENT WAS RETURNED TO M/S GAN ESH CONSTRUCTION CO. 8. THE LD. CIT(A) AFTER HEARING THE LD. COUNSEL AND O N PERUSAL OF THE RECORDS, VIDE PARAGRAPHS 4.1 AND 4.2 AT PAGES 6 AND 7 OF HIS ORDER DIRECTED THE AO TO DELETE BOTH THE ADDITIONS VIZ RS.5 ,44,000/- AND RS.2,50,000/- BY OBSERVING AS UNDER : 4.1 I HAVE GONE THROUGH THE ASSESSMENT ORDER AND SUBMISSIONS OF APPELLANT. I FIND THAT APPELLANT HAD GIVEN THE COPY OF CONTRACT WITH THE 24 PERSONS TO ASSESSING OFFICER WHERE IT WAS CLEA RLY SPELT OUT THAT THESE 24 PERSONS WERE INTERESTED IN DIGGING AN D LEVELLING THE LAND OF APPELLANT FOR EXCAVATION OF LIMESTONE. TH E VALUE OF LIME STONE WAS PERCEIVED TO BE HIGHER THAN THE COST OF DIGGIN G AND LEVELLING THE LAND AND THEREFORE THESE 24 PERSONS HA D AGREED TO PAY TO APPELLANT AS PER THE TERMS OF CONTRACT. AS THE CONTRACT S INVOLVED PARTS OF THE SAME LAND THEREFORE THEY ARE SIMILARLY WO RDED. ASSESSING OFFICER HAS NOT FOUND ANY EVIDENCE AGAINST THE CONTRACT TO SAY THAT IT IS NOT GENUINE. THE 24 PERSONS WERE ADMI TTEDLY PERSONS OF SMALL MEANS. HOWEVER, THE AMOUNT ADVANCED BY THEM TO APPELLANT WAS FOR A SHORT PERIOD AS THEY WOULD RECOV ER SUCH AMOUNT AFTER THE LIME STONE IS EXCAVATED FROM THE LAND OF APPELLANT. THEREFORE ARRANGEMENT OF SMALL AMOUNT OF RS 25,000/- OR LESS, REQUIRED FOR A SHORT PERIOD, IS POSSIBLE BY A PERSON OF SMALL MEANS ALSO. ASSESSING OFFICER HAS REJECTED THE CLAIM OF APPELLANT ON MERE SUSPICION WITHOUT VERIFYING ANY OF THE CONTRACTORS THOU GH THEIR IDENTITY WAS CLEARLY DISCLOSED BY APPELLANT BEFORE THE A SSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS. FINALLY, THE ADVANCE OF RS 5,44,000/- WAS SUBSEQUENTLY CONVERTED INTO INCOME OF RS 7,20,000 /- WITH ADDITIONAL RECEIPTS IN ASSESSMENT YEAR 2009-10 WHEN THE WORK WAS ACTUALLY CARRIED OUT BY THESE CONTRACTOR S. THE RETURN OF THIS ASSESSMENT YEAR WAS FILED BEFORE ASSESSING OF FICER FINALIZED THE ASSESSMENT OF ASSESSMENT YEAR UNDER APPEAL. THE ADVANCE HAS ALREADY BEEN OFFERED FOR TAXATION BY APP ELLANT AND THEREFORE CONSIDERING THIS AMOUNT AS DEEMED INCOME U/S 6 8 WOULD AMOUNT TO DOUBLE TAXATION I THEREFORE DIRECT T HE ASSESSING OFFICER TO DELETE THE ADDITION OF RS. 5,44,000/- MAD E BY HIM U/S 68 ON ACCOUNT OF 'ADVANCE FOR WORK'. 4.2 APPELLANT RECEIVED CHEQUE OF RS 2,50,000/- FROM A GOVERNMENT APPROVED CONTRACTOR AT SURAT, M/S GANESH CONSTRUCTION COMPANY, IN RESPECT OF ADVANCE FOR SALE OF CEMENT. APPELLANT FILE D CONFIRMATION OF M/S. GANESH CONSTRUCTION COMPANY IN THE FORM OF CONTRA ACCOUNT WITH HIS PAN BEFORE ASSESSING OFFICER. APPE LLANT HAD AGREED TO SUPPLY CEMENT TO M/S GANESH CONSTRUCTION COMPANY. HOWEVER, AS THE QUALITY OF THE GOODS PRODUCE D BY THE ITA NO.4/RJT/2012. 6 APPELLANT WAS NOT TO THE SATISFACTION OF THE PURCHASER H E HAD REFUSED THE GOODS AND INSISTED FOR REPAYMENT OF ADVANCE GIVEN THE CHEQUE WAS RETURNED BY APPELLANT TO M/S GANESH CONSTRUCTION COMPANY. ASSESSING OFFICER HAS REJECTED THE CLAIM OF APPE LLANT ON MERE SUSPICION WITHOUT VERIFYING M/S GANESH CONSTRUCTION COMPANY THOUGH HIS IDENTITY WAS CLEARLY DISCLOSED BY APPE LLANT BEFORE THE ASSESSING OFFICER AND HIS CAPACITY AS A GOVERNME NT APPROVED CONTRACTOR AT SURAT WAS ALSO EVIDENT. FINALLY , THE CHEQUE WAS RETURNED BY THE APPELLANT TO M/S . GANESH CONSTRUCTION COMPANY BECAUSE HE REFUSED TO ACCEPT THE CEMENT PRODUC ED BY APPELLANT TO HIM BECAUSE ITS QUALITY WAS NOT UP TO THE MARK IT IS QUITE EVIDENT THAT APPELLANT WAS A LOSS MAKING COMPANY AND HAD REALIZED THAT MINI CEMENT PLANT OF APPELLANT WAS NOT VIABLE UNIT IN COMPETITION TO LARGE CEMENT PLANTS. THEREFORE THE RED UCTION OF SALE OR MEAGRE SALE BY APPELLANT IS QUITE . NATURAL. HOWEVER, SUPPLY OF CEMENT TO MIS. GANESH CONSTRUCTION COMPANY, WHICH DID NOT MATERIALIZE ON ACCOUNT OF QUALITY OF CEMENT SUPPLIED BY APPELLANT, COULD BE VERY WELL PART OF SUCH REDUCED SALE IF IT HAD MATERIALIZED AND BEFORE APPELLANT WINDS UP ALL ITS SALES. I FIND THA T ASSESSING OFFICER HAS GIVEN UNACCEPTABLE REASON TO CALL THE TRANS ACTION AS NON GENUINE TRANSACTION AND THE REASON IS NOT BASED ON A NY EVIDENCE AND IS ONLY A SUSPICION. I THEREFORE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS. 2,50,000/- MAD E BY HIM U/S 68 ON ACCOUNT OF 'ADVANCE FOR GOODS'. 9. AT THE TIME OF HEARING, SHRI M.K.SINGH, THE LD. DR APPEARED BEFORE US HE COULD NOT BRING ANY MATERIAL CONTRARY TO THE FI NDING OF THE LD. CIT(A), EXCEPT MERELY TO SUPPORT THE ORDER OF THE AO. 10. ON THE OTHER HAND, THE LD.COUNSEL FOR THE ASSESSEE R ELIED ON THE ORDER OF THE LD. CIT(A) AND CONTENDED THAT THE LD. C IT(A) HAS PASSED A REASONED ORDER AND HENCE THE APPEAL FILED BY THE REVE NUE BE DISMISSED. 11. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY GON E THROUGH THE ORDERS OF AUTHORITIES BELOW. WE FIND FROM THE RECORD THAT THE ASSESSEE HAS SUBMITTED ALL THE RELEVANT DETAILS BEFORE THE AO, THE CONTRACT WITH THE 24 PERSONS WHO WERE SUPPOSED TO CARRY OUT THE WORK OF LA ND LEVELING AND DEVELOPING, THE ASSESSEE HAS ALSO FILED CONFIRMATION LETT ER FROM M/S GANESH CONSTRUCTION CO. FOR RECEIPT OF PAYMENT OF RS. 2,50,000/- AND ITA NO.4/RJT/2012. 7 REFUND THEREOF FOR THE REASONS THAT THE GOODS WERE NO T UP TO SATISFACTION OF M/S GANESH CONSTRUCTION CO.. THEREFORE, WE DO NOT F IND ANY INFIRMITY IN THE ORDER PASSED BY THE LD.CIT(A) AND ACCORDINGLY WE CON FIRM HIS ORDER. 12. GROUNDS OF APPEAL NO.1 AND 2 ARE THEREFORE DISMI SSED. 13. WITH REGARD TO THE ADDITION OF RS.3,00,000/-, BE FORE THE LD. CIT(A), THE ASSESSEE CONTENDED THAT THE TOTAL SALES OF THE APPE LLANT ARE ONLY RS.2,95,564/-. THE ADDITION MADE BY THE AO IS MORE T HAN THE TOTAL SALES. THE AO DID NOT FIND ANY FAULT IN THE BOOKS OF ACCOUNT, NEITHER HE REJECTED THE BOOKS OF ACCOUNT NOR INVOKED THE PROVISIONS OF SECTIO N 145 OF THE ACT. HE SUBMITTED THAT THE ASSESSEE HAS DEBITED LAND REVENUE A ND ROYALTY OF RS.12,91,892/- PERTAINING TO EARLIER YEARS AND HAS FU RTHER DEBITED LOSS ON SALE OF ASSET AT RS.53,393/- IN THE P AND L ACCOUNT FOR THE YEAR. THE ASSESSEE FOLLOWS THE MERCANTILE SYSTEM OF ACCOUNTING. THE AS SESSEE HIMSELF HAS DISALLOWED THE SAME WHILE COMPUTING THE IN COME FOR THE YEAR UNDER CONSIDERATION. THE ASSESSEE IS MAINTAINING REGULAR BOOKS OF ACCOUNT. 14. THE LD. CIT(A) AFTER HEARING THE LD. COUNSEL AND ON PERUSAL OF THE RECORDS, VIDE PARAGRAPH 4 AT PAGES 9 AND 10 OF HIS OR DER DIRECTED THE AO TO DELETE THE ESTIMATED ADDITION OF RS.3,00,000/- TO TOTAL INCOME. HE FURTHER DIRECTED THAT THE LOSS ON SALE OF ASSET IS REQU IRED TO BE DEDUCTED FROM THE WDV OF THE ASSET AND THEREFORE IN COMPUTATIO N OF INCOME, THE AMOUNT OF RS.53,393/- TO BE ADDED BACK. THE PARAGRAPH 4 OF HIS ORDER IS REPRODUCED BELOW: 4. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND SUBMISSI ONS OF APPELLANT. I FIND THAT APPELLANT HAS SHOWN A LOSS OF R S.16,14,575/- IN P&L A/C. APPELLANT HAS ADDED BACK THE EXPENDITURE O N ACCOUNT ITA NO.4/RJT/2012. 8 OF LAND REVENUE AND ROYALTY OF RS.12,91,892/- PERTAI NING TO EARLIER YEARS TO ARRIVE AT THE LOSS OF ASSESSMENT YEAR UNDER APPE AL AT RS.3,22,680/-. ASSESSING OFFICER HAS CALLED THIS CLAIM OF EXPENDITURE BY APPELLANT A DEFECT IN BOOKS OF ACCOUNT. HOWEVER, IT IS NOT A DEFECT AFTER THE BOOKS ARE AUDITED AND APPELLANT HAS NOT CLAIMED THIS EXPENDITURE IN COMPUTATION OF IN COME FOR INCOME TAX PURPOSE. APPELLANT HAS DEBITED LOSS OF ASSETS OF RS. 53,393/- TO THE P & L A/ C WHICH IS A NORMAL ENTRY IN BOOKS OF ACCOUNT MAINTAINED BY A COMPANY. ON THE BASIS OF THIS ENT RY IT CANNOT BE SAID THAT THE BOOKS OF APPELLANT ARE DEFECTI VE. FOR INCOME TAX PURPOSES, THE LOSS OF ASSET IS REQUIRED TO BE DEDUCTED FROM THE WDV OF THE ASSET AND THEREFORE IN CO MPUTATION OF INCOME, THE AMOUNT OF RS 53,393/- IS REQUIRED TO BE ADDED BACK. THE GROSS LOSS INCURRED BY APPELLANT IS MAINLY ON ACCOUN T OF THE FACT THAT APPELLANT REALIZED THAT IN VIEW OF COMPETI TION FROM BIGGER MANUFACTURING UNITS THE MINI MANUFACTURING UNIT OF CEM ENT OF APPELLANT IS NOT VIABLE. THE FINANCIAL ACCOUNTS OF APPE LLANT SHOW THAT APPELLANT WAS SELLING THE OLD STOCK AS APPEARING IN OPENING STOCK AT PRICE BELOW THE COST PRICE AT WHICH SUCH STOCKS WERE BROUGHT FORWARD. THE QUALITY OF CEMENT OF APPELLANT WAS ALSO NOT ACCEPTABLE IN MARKET AS APPARENT FROM ABOVE DISCUSSION. THE REFORE THE LOSS INCURRED BY APPELLANT UNDER THE CIRCUMSTANCES W AS NATURAL AND THE BOOKS DO NOT SHOW ANY DIFFERENT RESULT ON THE B ASIS OF WHICH THEY COULD BE REJECTED. MOREOVER, THE ASSESSING OFFI CER HAS NOT FOUND DEFECT IN ANY VOUCHER OR EXPENDITURE ON TH E BASIS OF WHICH HE COULD SAY THAT BOOKS ARE DEFECTIVE I THEREFORE FIND THAT THE ASSESSING OFFICER HAS INCORRECTLY REJECTED THE BOOKS OF ACCOUNT AND HAS INCORRECTLY MADE AN AD HOC ESTIMATION OF PROFIT OF RS.3,00,000/-. I DIRECT THE ASSESSING OFFICER TO DELETE THIS ESTIMATED ADDITION OF RS 3,00,000/- TO TOTAL INCOME. HOWEVER, THE LOSS ON SALE OF ASSET IS REQUIRED TO BE DEDUCTED FROM THE WDV OF THE ASSET AND THEREFORE IN COMPUTATION OF INCOME, THE AMOUNT OF RS.53,393/- IS REQ UIRED TO BE ADDED BACK. 15. WE, FIND THAT THE ASSESSEE HAS SHOWN A LOSS OF RS.16,14 ,575/- IN P&L A/C AND THE ASSESSEE HAS ADDED BACK THE EXPENDITURE ON ACCOUNT OF LAND REVENUE AND ROYALTY OF RS.12,91,892/- PERTAININ G TO EARLIER YEARS TO ARRIVE AT THE LOSS OF ASSESSMENT YEAR UNDER APPEAL AT RS.3 ,22,680/-. ASSESSING OFFICER HAS CALLED THIS CLAIM OF EXPENDITURE BY A SSESSEE A DEFECT IN BOOKS OF ACCOUNT AND SINCE THE ASSESSEE HAS MADE ENTRIES IN THE BOOKS OF ACCOUNT, IT CANNOT BE CONSIDERED AS DEFECT IN THE BOOKS OF ACCOUNT. THE ASSESSEE HAS NOT CLAIMED THIS EXPENDITURE IN COMPUTATION OF INCOME FOR INCOME TAX PURPOSE. THE ASSESSEE HAS DEBITED LOSS OF ASSETS OF RS. 53,393/- TO THE P & L A/ C WHICH IS A NORMAL ENTRY IN BOOKS OF ACCOUNT MAINTAINED BY A COMPANY. WE FIND FROM THE RECOR D THAT FOR ITA NO.4/RJT/2012. 9 INCOME TAX PURPOSES, THE LOSS OF ASSET IS REQUIRED TO BE D EDUCTED FROM THE WDV OF THE ASSET AND THEREFORE IN COMPUTATION OF INCO ME, THE AMOUNT OF RS 53,393/- IS REQUIRED TO BE ADDED BACK. WE FIND THAT THE LD. CIT(A) HAS CONSIDERED ALL THE ASPECTS ON THIS ISSUE AND CAME TO THE C ONCLUSION THAT THE ADDITION MADE BY THE AO OF RS.3,00,000/- BE DEL ETED. THEREFORE, WE ARE OF THE VIEW THAT THE LD. CIT(A) HAS CORRECTLY DELE TED THE ADDITION OF RS.3,00,000/-, ACCORDINGLY WE CONFIRM HIS FINDINGS. 16. GROUND NO.3 OF REVENUES APPEAL IS, THEREFORE, DI SMISSED. 17. REST OF THE GROUNDS ARE GENERAL IN NATURE AND HEN CE DO NOT REQUIRE OUR COMMENTS, THEREFORE, DISMISSED AS ACADEMIC IN NATURE. 18. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. THIS ORDER IS PRONOUNCED IN THE OPEN COURT ON THE DAT E MENTIONED HEREINABOVE. SD SD ( .. / D. K. SRIVASTAVA) ( .. / T. K. SHARMA) / ACCOUNTANT MEMBER /JUDICIAL MEMBER 3/ ORDER DATE : 07.09.2012 /RAJKOT SRL - -- - +4 +4 +4 [phone] / COPY OF ORDER FORWARDED TO:- 1. * / APPELLANT-. 2. +,* / RESPONDENT- 3. : / CONCERNED CIT. 4. :- / CIT (A). 5. 4 +, , / DR, ITAT, RAJKOT 6. / GUARD FILE. / BY ORDER , TRUE COPY SENIOR PRIVATE SECRETARY , INCOME TAX APPELLATE TRIBUNAL, RAJKOT.