JCIT Circle-22(1), New Delhi V. Saidham Overseas Pvt Ltd, Gurgaon

ITA 4063/DEL/2019

AI Insights

The case involves an appeal by the Revenue against the order of the Commissioner of Income Tax (Appeals) which had reversed the additions made by the Assessing Officer under Section 145 of the Income Tax Act, 1961. The Assessing Officer had rejected the books of account of the assessee, Saidham Overseas Pvt. Ltd., and estimated the income at 20% of the total turnover due to non-compliance in providing necessary documents and details during the assessment proceedings. The CIT(A) found the additions arbitrary and not based on concrete evidence, leading to the Revenue's appeal to the Tribunal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 121515 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2023
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 20-04-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 05-05-2019
• Other Referred Cases: Sangrur Vana Spati Mills Ltd. vs. CIT, Kachwala Gems vs. Jt. CIT, Style Syntex Pvt. Ltd. New Delhi vs. Department of Income Tax, Sai International, New Delhi vs. Department of Income Tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 145; 28; 10; 11; 142(1); 201; 73; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “B” DELHI BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER I.T.A No.4063/DEL/2019 Assessment Year 2013-14 JCIT, Circle-22(1), New Delhi. v. Saidham Overseas Pvt. Ltd., Plot No.397, Udyog Vihar Phase- III, Gurgaon TAN/PAN: AAOCS7212H (Appellant) (Respondent) Appellant by: Shri Priyansh Jain, CA Respondent by: Shri N.K. Bansal, Sr.DR Date of hearing: 21 04 2023 Date of pronouncement: 26 04 2023 O R D E R PER PRADIP KUMAR KEDIA, A.M.: The capt ioned appeal has been f il ed b y t he Re ven ue agai nst the or der of the Co mmi ssioner of I nc o me Tax (A ppeal s)- VI II, New Delhi ( ‘CIT( A) ’ i n shor t) dat ed 22. 02. 2019 arisi ng fro m the assessment or der dated 22. 02. 2016 passed by t he Assessi ng Of ficer (AO ) under Secti on 143( 3) of t he I nco me Tax Act , 1961 ( the Act) concerni ng A Y 201 3- 14. 2. The gr ounds of appeal r ai sed b y t he Reve nue re ad as under: “ Wh e t he r on t h e f ac t s a n d c i r c u m s ta n c e s o f t he c a s e a nd i n l aw , t h e L d . C I T ( A ) w a s j us t i f i e d i n d e l e t i n g t he ad d i t io n o f R s . 1 , 8 4 , 3 8 , 9 6 8/ - be i n g 2 0 % o f t ot a l t ur n o v e r of R s . 9 , 21, 9 4 , 8 4 0 / - o n a c c ou n t o f e s t i m at i o n o f i n c om e b e r e j e c t in g t h e book s o f ac c o un t s o f t h e a s s e s s e e c o m p a ny u/ s 1 4 5 of I T A c t as t h e a ss e s s e e h a d I.T.A No.4063/Del/2019 2 n e i t he r f u r n i s he d t he r e q u ir e d d e t ai l s s u p po r t i n g the f i n an c i al r e s ul t s n or b o ok s o f a c c ou n ts p r o d uc e d f o r e x am i n a ti o n d u r i ng t he a s s e s s m e n t p r o c e e d i n gs or d u r i ng t he c o ur s e of a pp el l at e p r o c e e di n gs . ” 3. Br iefl y stat ed, t he assessee filed ret ur n of i nco me f or Assess ment Year 2013- 14 declari ng loss at Rs. 1, 63, 77, 940/ -. The ret ur n fi led b y t he assessee was s ubj ecte d t o scr uti n y assess ment . In t he course of scr uti ny assess ment, the Assessi ng Of fi cer issued not i ces under Sect i on 142 (1) on several occasi ons and c al led f or det ai l s and docu me nt s i n support of retur n and al so the books of acco unt. A show cause not i ce was i ssued under Secti on 144 o f the Act as wel l to the Di rect ors of t he assessee due t o c onti nue d non- co mpli ance. The Assessing Officer eve nt ual l y r ej ected the books of ac count under Secti on 145 of the Act and est i mat ed a n addi t ion of 20% on tot al tur nover of Rs.9,21,9 4,8 40/- b y i n voki ng Sec t ion 145 of the Act. A n addit ion of Rs. 1, 84, 38, 968/ - was accor di ngl y made along wit h cert ai n ot her addi ti ons wi t h whi ch we are not presentl y con cer ned. 4. Aggri eved, the assessee pr ef err ed appeal bef ore the CIT( A) . The CI T(A ) howe ver di splaced t he act i on of t he Assessi ng O ff icer and rev ersed t he addi ti ons so ma de. The relevant oper at ive paragraph of t he or der of t he CIT( A) reads as under: “ 4 . 1 In t h e gr o u nd N o. 2, A ss es si n g O ff i c er h as m ad e a d di t i o ns o f Rs. 1 , 8 4, 38 , 96 8 / -, i . e . , @ 2 0 % of to t a l t u rn o v er o f R s. 9, 2 1, 9 4 , 84 0 / - w hi c h i s un j u st i f i ed a rb i t ra ry a nd on t he b a si s o f s u rm i se s a n d c o nj e ct u r es a n d ba d i n l a w. Re j ec t i on of b o ok s o f a c c o u nt u/ s 1 45 (3 ) a nd m ak i ng a be st ju dg me nt a ss e s sm en t, a sse ss m e nt u/ s 1 44 i s a p o w e rf ul t oo l in t he ha n d s o f t h e A s se ss i n g O f f i c e r. T h e As se s si n g O f f ic e r m u st n ot i c e I.T.A No.4063/Del/2019 3 sp e c i f i c d e fe c t s i n th e b o ok s o f ac c o u n t of as se ssee t o b e a b le t o re j e c t i t & m a ke a n a s se ssm e n t on t he b a si s of best j ud gm e n t . O ne m et ho d of e st im a t i n g i nc om e of a ss e s se e i n c a se o f r e j e c t io n of a cc o u n t s i s t ak i n g gro s s p r o f i t ra te by c om p ari ng t h e a s se s se e wi th i t s c o u n te rp a r t s ' op er at in g re s u l t s. H o we ve r, A s se s si ng O f f i c er s m ust e x er c i se t hi s p o we r p r ude n t l y a n d n ot a ct a rb i t ra ri l y. It i s se e n f r o m t he o r d e r o f t he AO t ha t t he A O ha s t ak e n a n i m a g i na ry i nc o rr ec t f i g u re o f R s. 28 7. 47 l a c s as t u rn ov e r i n au d i te d b a l an c e sh e e t a s m e nt i on ed un de r p a r a X I of pa ge n o . 10 o f a ss e s sm ent or de r, w h e re a s i t is c le a rl y m e n ti on ed i n a u di t e d b a l a n c e s h e et as w el l a s i n I T t h a t t h e re i s t ur no ve r o f R s. 9. 2 1 c ror e s. T h ere f o re , re j ec t i o n of b o o k s o f ac c o u nt s u/ s 14 5( 3) i s no t f ou nd t e b e c or re ct as t h e b as e o f re j ec t i on of b ooks of a cc ou nt s i s n ot a p pr o p ri a t e . T hi s i s ba sed o n w ro ng f i gu re s t ak e n b y th e AO f r o m th e a ud it e d p ro f i t a nd l o ss a cc ou n t f o r t he q ua r t e r e nd i n g 3 1/ 03 / 2 01 3 an d n ot f o r t h e co m ple te y e ar, w h i ch i s cl e a rl y m e nt io ne d a s 9. 2 1 c r in t h e a u d i t ed ba l an ce sh e e t . A c c o r di ng ly a d di t i o n o f R s. 1 , 8 4, 38 , 9 66 / - on i m ag i na r y ba si s a t t h e r at e o f 20 %. T he se a dd i t i o n a pp e ar s t o b e a lso a rb i t ra ry a n d a g a i n st th e s h o w c au se le t t e r d a t e d 0 5/ 02 / 2 01 6 o f t he AO , i n w h i c h i t i s m en ti o ne d t h a t " t o e x p l a i n as t o w h y 1 0 % of t he se e x pe ns e s s ho u l d n ot be d is a l lo w e d" a n d t he s am e i s a l s o m e nt i on ed on p g 1 1 o f h i s as se ssm e n t o r de r u n de r p oi n t X 3. T h ere f o re , t h e a d d i t i on @ 20 % o f t he t u rn ov e r i s n ot on ly a r bi t ra ry a nd b as e d u po n su rm i s e s a n d co n j e ct ure s. T h e le ga l po si t i on i n t hi s r e g a rd is t h at u p o n re jec t in g b ook s o f a c c ou nt a nd i nv o k i ng Se c . 1 45 , t he AO do es n o t g et u nf e t t e re d p ow e r s t o a pp l y a n y G P ra t e o f h is c h oi ce. R e l y in g o n t h e j ud g m en t of t h e H on ' b l e S an g r ur V a n a sp a t i M il l s L t d. v s. CIT ( 2 0 07 ) 2 11 C T R (P &H ) 4 39 a n d " H o n' b l e SC i n K a c h wa la G em s v s. Jt . CI T 2 88 I T R 1 0 (S C ), t he be st ju dg m e nt a ss e s sm en t m u st b e o n a re a s on ab l e b as i s a n d s h o ul d b e h o ne s t a nd f ai r e st im a te an d n ot t o t a l l y a rb it r ar y. I n t h e i ns t a nt c a se , AO h a d n ot br ou gh t an y m at e ri al e v i d enc es t o sh ow t ha t s om e bu s i ne ss ac t iv i t ie s ha s be e n c a rr i e d o ut b y t h e a ss e s se e a n d no f i nd i n g h a s b ee n re co r de d. I n v i ew o f t he a b ov e d i sc u s si o n, i n m y c on si d e red o p i ni on t h e e st im a t e m ade b y t h e A O i s w i t h ou t a ny ba si s an d he nc e di re c t e d to t he d el e t ed . T h e a pp ea l o f t he a p pe l l a n t ha s b e e n al lo we d. I t i s f ur t h er s e e n t ha t d u ri n g th e y e a r, t he gr o s s pr o f i t rat i o b ef o r e i n t e r e s t a n d d ep re c i at i o n i s R s. 84 2 . 22 l a kh s i. e . 91 . 3 3 % I.T.A No.4063/Del/2019 4 ( 84 2 . 22 / 9 22. 1 9* 1 0 0) a s ag a i n s t t h e pre v i ou s y e a r of R s. 6 . 8 8 l ak h s i. e . 38 . 7 0 % ( 6. 8 8/ 17. 7 8* 1 0 0) , w hi c h i s h ig he r i . e . 2. 4 0 t i m e s of t h e p re v i ou s y e a r p ro f i t b e f o re d ep re c i at io n an d i nt e r e s t. A l s o, t he n et p rof i t v ol u m e h as a ls o i n c re a s e d by 8 3. 17 l ac s a s c om p a re d t o t he p r e c e di ng p re v io us y ea r a n d i s n ot c o ns i d e re d b y th e A i n t he a ss e ssm e nt or d e r , whi c h i s a g ai n s t t he d e c i si o n o f j u ri s di c t i o n a l IT A T i n t he ca se o f St y l e S yn t e x P v t . L t d. N ew D el h i V s. D e pa rtm e nt o f I n c om e T ax P r on ou n c e d o n J u n e , 20 1 5, IT A No . 73 / D e l/ 2 01 0 de ci ded b y t he b en ch of D e v a S i n gh , J u d i c i a l Me m b e r a nd N. K . Sai n i , A c c o u nt a n t M em b e r. A nd a l s o t h e c a se of Sa i In te r n at i o n al , N e w D el hi V s. D e p art m e nt o f I nc om e T ax o n 28 t h S e p te m be r, 2 0 12 , I T A T D e l h i B e nc h G , N e w D el h i, IT A No . 1 40 6 / D el / 2 01 2, i n wh i c h i t i s d e c i d ed b y I T A T D e l h i t ha t " t he e s t im a t e of t he A O i n as s e ss i n g t h e i n co m e f o r th e y e ar u nd e r c o n s id er at i o n w a s wi t h ou t a ny b as i s p a rt ic u l a r ly w h en h e hi m s el f as s e ss e d t he i n c o m e of t h e a sse ss e e a t ni l f o r t he p r ec e d i n g as s e s sm e nt y e a rs 2 0 0 3 - 04 t o 200 5- 0 6. T h ere f o re , c o n s i de ri n g t h e f a c t s a n d c i r c um s t a n c e s o f t he c as e , t he ad d i ti on o f Rs . 1 , 84, 3 8, 96 8/ - i s he r e b y del et e d. ” 5. Aggri eved b y t he r el ief gra nted b y t he CI T(A ). The Reve nue i s in appeal befor e t he Tr ibunal . 6. The l d. Sr. DR f or t he Revenue ve he ment l y oppose d the acti on of the CI T( A). The l d. Sr .DR poi nt ed out t hat the Assessi ng Of fi cer ma de al l possi bl e effor ts b y i ss uing mul ti pl e not ices to t he as sessee t o gather ma teri al s and evidences i n support of t he retur n. The Ass essee di d n ot produce th e evi de nces and the books o f account as cal l ed for despit e l ong li st of show cause not ices. Under t he ci rc u mst ances, t he Assessi ng Off icer was l eft wit h no opt i on but was const raint t o est i mat e t he i ncome t o t he best of hi s j udg me nt . The Assessi ng Of fi cer has est i mat ed a r easona ble inco me of 20% on t ur nove r in t he absence of an y dat a made ava il able b y t he assessee i n this regar d. The l d. Sr . DR r el ied upon t he j udg me nt i n the case of I.T.A No.4063/Del/2019 5 Sanj ay K undu vs. CIT in C WP No. 27253 of 2016 j udgment dat ed 15. 05. 2017 f or the prop osit ion t hat wher e t he assessee f ai led t o pr oduce t he books of account despi t e mul ti pl e opport uni ti es, the Assessi ng Of fi cer was ent it l ed t o est i mat e the i ncome i n the absence of books. The l d. Sr .DR sub mi t ted that t he fact s i n Sanj ay Kundu ( supra) are br oa dl y si mi lar and t her efor e, est i mat ion ma de by t he Assessi ng O ffi cer in the a bsence of an y hi st ori cal dat a pr ovi ded b y t he assessee need not be int er fer ed. The l d. S r. DR t hus reli ed upon t he order of t he Assessi ng Of fi cer and ur ged for sett i ng asi de t he or der of t he CI T(A ). 7. The l d. AR f or t he assessee, on the ot her hand, s upp ort ed the orde r of t he CIT( A) a nd conte nded t hat show c ause not ice under Sect i on 144 was i ssued onl y wit h respect t o esti mati on of 10% inc o me on c er tain expenses such as depreciat ion, i nterest cost etc. and no opp ort unit y was gi ven f or est i mat ion of i nco me under Secti on 145 of the Act vi s-à- vis t he turnove r report ed b y the assessee. The l d. AR also poi nt ed out t hat t he t urnover fi gur e has not been t aken cor r ect l y f or t he pur poses of assess ment un der Secti on 144 of t he Act and theref ore , rej ecti on of books of acc ount on incorr ect fact s were not appr opr iate as ri ght l y hel d b y t he CIT( A) . T he l d. counsel t hus submi t ted t hat no inter ference wi th t he or der of t he CI T(A) is called for. 8. We have car eful l y consi dered t he ri val s ub mi ssions and per used t he assess ment or der and t he fir st appel late or der a nd al so t he materi al r eferre d to and r eli ed upon i n t he co urse of heari ng. The i ssue in t he pr ese nt case i s whether the C IT( A) was just i fied i n r ever sing the est i mat ed addit i ons i n the pecul iar I.T.A No.4063/Del/2019 6 fact s of t hi s case. 8. 1 On per usal of t he assess me nt or der, it is ma nifest that the Assessi ng Of fi cer ma de ut most ef f ort s in gat her ing det ai l fr o m the assessee wi t hout an y avail . Th e show cause not ices wer e served on the di re ct ors al so. Despi te al l the eff ort s, the assessee has f ai led t o pr oduce books of acc ount re peate dl y cal l ed for . A per usal of t he or der of th e CIT (A) al so does not confi r m as t o whet her t he books of account were cal led f or b y t he C IT( A) and exa mi ned b y hi m. T hus, t he f ai r conclusi on w oul d be t hat t her e was an abj ect fail ure on t he par t of t he assessee to produce t he books of accou nt as cal led for b y t he Assessi ng Offi cer for t he purposes of assessment . U nder t he c ir cu mst ances, the aver me nts ma de b y t he CI T(A) are cont rar y t o t he facts on r ecor d. The CIT( A) i nt er ali a has obser ved t ha t t he Assessi ng O ffi cer must not e speci fi c d efe ct s in the boo ks of account of t he assessee to be abl e t o reject i t and ma ke an ass ess ment on t he ba si s of best judg ment. However, such obser vat ion of t he CI T( A) is gr ossl y contr ar y t o t he fact t hat bo oks of account we re never pr oduced at t he fi rst pl ace and there for e, the Assessing Offi ce r was in no posi ti on t o poi nt out speci fi c de fect s. However, t he CIT( A) has vag uel y st at ed t hat t he Assessi ng Of ficer must e xerci se his power pr udent l y a nd not act ar bi tr ar i l y b ut has not demo nstrat ed as to ho w t he Assessi ng Of fi cer act ed wi t hout or dinar y pr udence par ti cularl y w her e seri es of noti ces have been i ssue d and ser ved on t he assessee cal li ng f or r equi sit e det ai ls and books of account. The assessee has app are ntl y di sobe yed t he st at ut or y not ices issue d under Sect i on 14 3( 2), Sect i on 142(1) and Secti on 144 of the Act. T he process of reasoni ng adopt ed b y the CI T(A ) I.T.A No.4063/Del/2019 7 is tot al l y cont rar y t o t he materi al avai labl e on r ecor d. The CIT( A) coul d not have reached t o t he concl usi on as draw n on the f ace of s uch non co- operati on and di sregar d. Needl ess t o sa y, t he CI T( A) is vested wi t h the app el late powers as well as co- ter mi nus powe r as vest ed wit h t he Assessing Off icer whi l e ma king the assess me nt. In t he i nst ant case, t he CIT( A) ought t o hav e at l east cal l ed f or t he books of ac count hi ms el f bef or e co ming t o an y c oncl usion o n t he mat ter. The C IT( A) i n our vi ew has act ed i n a perfunct or y ma nner whi le disl odgi ng t he assess ment or der. 9. We ar e t hus incl i ned t o set asi de t he or der of the C I T( A) and r est or e the issue back to t he fil e of t he Assessing Off icer. The Assessi ng Of fi cer shall be ent i tl ed t o exa mi ne the i ssue wi t hout a n y fet ter s aft er call i ng f or all such inf or mati on as ma y be requi re d and t he books of account mai nt ai ned f or t his purpose i f a n y. The assessee i s cauti one d t o att end to t he pr ocee din gs bef or e t he Assessi ng O ff icer di li gent l y a nd wi thout an y de mur and pr ovi de such assi stance as ma y be discerni bl e. The Assessi ng Of f icer shal l r e-exa mi n e t he issue in accor dance wi t h law after gi vi ng reas onabl e op port uni t y t o the assessee. 10. I n the r esult , the appeal of t he R evenue i s al lowed for stati sti cal purpose s. Order pronounced in the open Court on 26/04/2023. Sd/- Sd/- [CHANDRA MOHAN GARG] [PRADIP KUMAR KEDIA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: /04/2023