M/s G B Trading & Investments Pvt. Ltd, Hyderabad V. DCIT, Circle-2(2), Hyderabad

ITA 405/HYD/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87433 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 10-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAMAKRISHNA BANDI
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Corroborative evidences
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 405/HYD/2014 ASSESSMENT YEAR: 2009-10 M/S GB TRADING & INVESTMENTS PVT. LTD., HYDERABAD. PAN AABCG 7496A VS. DY. COMMISSIONER OF INCOME- TAX, CIRCLE 2(2), HYDERABAD. (APPELLANT) (RESPONDENT) ITA NO. 544/HYD/2014 ASSESSMENT YEAR: 2009-10 DY. COMMISSIONER OF INCOME- TAX, CIRCLE 2(3), HYDERABAD. VS. M/S GB TRADING & INVESTMENTS PVT. LTD., HYDERABAD. PAN AABCG 7496A (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI P. MURALI MOHAN RAO REVENUE BY : SHRI RAMAKRISHNA BANDI DATE OF HEARING 09-03-2015 DATE OF PRONOUNCEMENT 13-03-2015 O R D E R PER BENCH.: THESE CROSS APPEALS ARE AGAINST THE ORDER DATED 15 /01/2014 PASSED BY LD. CIT(A)-III, HYDERABAD FOR THE AY 2009 -10. 2. ASSESSEE HAS RAISED SIX GROUNDS. GROUND NO. 1 & 6 BEING GENERAL IN NATURE DO NOT REQUIRE ANY SPECIFIC ADJUD ICATION. GROUND NOS. 2 TO 5 ARE ON THE COMMON ISSUE OF REJECTION OF BOOKS OF ACCOUNT AND ESTIMATION OF PROFIT BY LD. CIT(A) AT 0.7%. WHE REAS, THE ONLY 2 ITA NOS. 405 & 544 /HYD/2014 M/S GB TRADING & INVESTMENTS PVT. LTD. GROUND IN DEPARTMENTS APPEAL IS CHALLENGING THE DE CISION OF LD. CIT(A) REDUCING ESTIMATION OF PROFIT FROM 1% TO 0. 7%. 3. BRIEFLY THE FACTS RELATING TO THE AFORESAID ISSU E ARE, ASSESSEE A COMPANY IS ENGAGED IN THE BUSINESS OF TRADING IN ST EEL PRODUCTS. FOR THE AY UNDER DISPUTE, ASSESSEE FILED ITS RETURN OF INCOME ON 30/09/2011 ADMITTING NIL INCOME AFTER SETTING OFF LOSS OF RS. 5,68,63,943. DURING THE ASSESSMENT PROCEEDING, AO C ALLED FOR THE BOOKS OF ACCOUNT, BILLS AND VOUCHERS, ETC. TO SUBST ANTIATE NOT ONLY THE EXPENDITURE CLAIMED BUT THE RATE OF PROFIT. AFTER V ERIFYING THE BOOKS OF ACCOUNT AND OTHER INFORMATIONS SUBMITTED BY ASSESSE E, AO OBSERVED, ASSESSEE FAILED TO PRODUCE BILLS AND VOUCHERS IN RE SPECT OF VARIOUS EXPENDITURES DEBITED TO THE P&L A/C. HE NOTED THAT IN P&L A/C ASSESSEE HAS NOT BOOKED ANY EXPENDITURE TOWARDS CAR RIAGE INWARD AND OUTWARD, WHICH IS QUITE SURPRISING. BY OBSERVIN G THAT NON PRODUCTION OF BILLS AND VOUCHERS TOWARDS EXPENSES C LAIMED CASTS A DOUBT OVER THE CORRECTNESS OF BOOK RESULTS, AO PROC EEDED TO REJECT THE BOOKS OF ACCOUNT U/S 145 OF THE ACT AND ESTIMAT ED THE PROFIT FROM THE STEEL TRADING BUSINESS @ 1% ON THE GROSS SALES. AS A RESULT, ADDITION ON THIS COUNT WAS MADE OF RS. 33,76,217. B EING AGGRIEVED OF THE REJECTION OF BOOKS OF ACCOUNT AND ESTIMATION OF PROFIT AT 1%, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A). 4. LD. CIT(A), THOUGH, UPHELD THE DECISION OF AO IN REJECTING THE BOOKS OF ACCOUNT AND ESTIMATING THE PROFIT, HOWEVER , HE WAS OF THE OPINION THAT ESTIMATION OF PROFIT AT 1% ON GROSS SA LES IS ON THE HIGHER SIDE AND ACCORDINGLY, THOUGHT IT REASONABLE TO ESTI MATE THE PROFIT AT 0.7% ON GROSS SALES. BEING AGGRIEVED OF SUCH DECISI ON, BOTH ASSESSEE AS WELL AS REVENUE ARE IN APPEALS BEFORE U S. 5. LD. AR SUBMITTED BEFORE US THAT THERE IS NO VALI D GROUND FOR REJECTION OF BOOKS OF ACCOUNT AS AO HAS NOT FOUND S PECIFIC DEFECT/DEFICIENCY IN THE BOOKS OF ACCOUNT MAINTAINE D BY ASSESSEE. LD. AR SUBMITTED, ASSESSEE CAN EXPLAIN EACH ENTRY OF TH E BOOKS OF 3 ITA NOS. 405 & 544 /HYD/2014 M/S GB TRADING & INVESTMENTS PVT. LTD. ACCOUNT WITH SUPPORTING EVIDENCE IF OPPORTUNITY IS GIVEN TO ASSESSEE. IN THIS CONTEXT, LD. AR REFERRED TO AN ORDER OF THE COORDINATE BENCH OF ITAT, HYDERABAD IN CASE OF DCIT VS. GLOBAL FORGING LTD., A COMPANY WITHIN THE SAME GROUP, IN ITA NO. 543/HYD/14 AND OT HERS DATED 26/11/14. HE SUBMITTED THAT IN THE REFERRED CASE, I TAT AFTER CONSIDERING THE SUBMISSIONS OF THE PARTIES HAS REMI TTED THE MATTER TO AO FOR DETERMINING THE PROFIT AFTER VERIFYING THE B OOKS OF ACCOUNT AND OTHER SUPPORTING EVIDENCE. LD. AR SUBMITTED, SAME P RINCIPLE WILL ALSO APPLY TO THE CASE OF ASSESSEE. 6. LD. DR, ON THE OTHER HAND, SUBMITTED BEFORE US, DURING THE ASSESSMENT PROCEEDING, ASSESSEE HAS NOT BEEN ABLE T O PROVE THE ENTRIES MADE IN THE BOOKS OF ACCOUNT BY FURNISHING ADEQUATE EVIDENCE, HENCE, AO WAS JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT AND ESTIMATING THE PROFIT AT 1%. LD. DR SUBMITTED, RATE OF PROFIT ADOPTED BY AO BEING REASONABLE, LD. CIT(A) WAS NOT JUSTIFIED IN REDUCING THE SAME TO 0.7%. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE MATERIALS ON RECORD AS WELL AS THE ORDERS OF TH E REVENUE AUTHORITIES. THE SOLE GRIEVANCE OF ASSESSEE, AS EVI DENT FROM THE SUBMISSIONS MADE BY LD. AR, IS REJECTION OF BOOKS OF ACCOUNT WITHOUT POINTING OUT ANY SPECIFIC DEFECT OR DEFICIENCY IS N OT PROPER. IN OUR VIEW, BOOKS OF ACCOUNT MAINTAINED BY ASSESSEE IN RE GULAR COURSE OF BUSINESS HAVE TO BE TREATED AS AUTHENTIC UNLESS THE RE ARE STRONG EVIDENCE BROUGHT ON RECORD TO SHOW THAT ENTRIES MAD E IN THE BOOKS OF ACCOUNT ARE NOT RELIABLE, HENCE, BOOKS OF ACCOUNT H AVE TO BE REJECTED. WE ARE OF THE VIEW, BEFORE REJECTING THE BOOKS OF A CCOUNT AO SHOULD NOT ONLY GIVE ADEQUATE OPPORTUNITY TO ASSESSEE TO E XPLAIN THE ENTRIES MADE THEREIN, BUT ALSO POINT OUT ANY SPECIFIC DEFEC T OR DEFICIENCY IN THE BOOKS OF ACCOUNT. IN CASE OF DCIT VS. GLOGAL FO RGING LTD. (SUPRA) REFERRED TO BY LD. AR, THE COORDINATE BENCH HELD AS UNDER: 8. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IN VIEW OF THE PLEA OF 4 ITA NOS. 405 & 544 /HYD/2014 M/S GB TRADING & INVESTMENTS PVT. LTD. THE LD. COUNSEL FOR THE ASSESSEE FOR ONE MORE OPPOR TUNITY OF PRODUCING THE BOOKS OF ACCOUNT AND OTHER MATERIAL B EFORE THE AO IN SUPPORT OF THE INCOME DECLARED, TO WHICH THE LD. DR ALSO DID NOT RAISE ANY OBJECTION, AND ALSO KEEPING IN VI EW THE DECISION OF THE TRIBUNAL NOTED ABOVE, WE SET ASIDE THE IMPUGNED ORDER OF LD. CIT(A)AND RESTORE THE MATTER TO THE FILE OF THE AO FOR DECIDING THE MATTER AFRESH. THE AO IS DI RECTED TO REDETERMINE THE PROFIT OF THE ASSESSEE AFTER GIVING SUFFICIENT OPPORTUNITY TO THE ASSESSEE TO PRODUCE THE BOOKS OF ACCOUNT AND OTHER EVIDENCE TO SUBSTANTIATE THE PROFIT DISCL OSED. THE AO SHALL ACCORDINGLY REDECIDE THE MATTER IN ACCORDANCE WITH LAW AND AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF TH E COORDINATE BENCH RENDERED IN CASE OF ANOTHER GROUP CONCERN UNDER IDE NTICAL FACTS AND CIRCUMSTANCES, WE REMIT THE MATTER BACK TO THE FILE OF AO TO DECIDE THE ISSUE AFRESH AFTER AFFORDING REASONABLE OPPORTU NITY TO ASSESSEE TO PRODUCE BOOKS OF ACCOUNT ALONG WITH SUPPORTING EVID ENCE AS MAY BE NECESSARY, TO SUBSTANTIATE THE COMPUTATION OF INCOM E MADE BY ASSESSEE. WE MAKE IT CLEAR THAT WE HAVE NOT EXPRESS ED ANY OPINION WITH REGARD TO CORRECTNESS OF BOOKS OF ACCOUNT OR T HE RATE OF PROFIT TO BE APPLIED, IN CASE BOOKS OF ACCOUNT ARE REJECTED, WHICH IS LEFT OPEN TO AO TO DECIDE INDEPENDENTLY AFTER PROPER VERIFICA TION OF BOOKS OF ACCOUNT AND EVIDENCES TO BE PRODUCED BY ASSESSEE. 8. IN THE RESULT, APPEAL OF THE ASSESSEE AND APPEA L OF REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 13 TH MARCH, 2015. SD/- SD/- (B. RAMAKOTAIAH) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 13 TH MARCH, 2015 KV 5 ITA NOS. 405 & 544 /HYD/2014 M/S GB TRADING & INVESTMENTS PVT. LTD. COPY TO:- 1) M/S G.B. TRADING & INVESTMENTS PVT. LTD.,C/O P. MURALI & CO., CAS., 6-3-655/23, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD 500 033 2) ACIT, CIRCLE 2(3), HYDERABAD 3) CIT(A)-III, HYDERABAD 4) CIT-II, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.