INCOME TAX OFFICER, WARD-3(3), SRINAGAR V. M/S BHAT & CO., SRINAGAR

ITA 429/ASR/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5742 (ITAT-AMRITSAR)
• Duration Of Justice: 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 20-02-2018
• Assessment Year: 2012-2013
• Appeal Filed On: 27-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PASS SRINAGAR PANAAEETM

Judgement Text

IN THE INCOME TAX APPELLATE TRI BUNAL AMRITSAR BENCH, AMRITSAR BEFORE SH. R.S.SYAL, VICE PRESIDENT AND SH. N.K.CHOUDHRY, JUDICIAL MEMBER ITA NO.429(ASR)/2017 ASSESSMENT YEAR:2012-13 INCOME TAX OFFICER WARD-3(3), SRINAGAR VS. M/S THE BHAT & CO., NOWGAM NEAR AHMAD HOSPITAL, BYPASS, SRINAGAR PAN:AAEET2907M (APPELLANT) (RESPONDENT) APPELLANT BY: SH. S.S. NEGI (DR) RESPONDENT BY: NONE DATE OF HEARING: 20.02.2018 DATE OF PRONOUNCEMENT: 22.02.2018 ORDER PER N.K.CHOUDHRY, JM: THE INSTANT APPEAL HAS BEEN PREFERRED BY THE REVENUE DEPARTMENT, ON FEELING AGGRIEVED AGAINST THE ORDER DATED 22.03.2017 PASSED BY THE LD. CIT(A), J&K, JAMMU, IN A PPEAL NO.177/15-16, BY RAISING THE FOLLOWING GROUNDS OF APP EAL. 1. WHETHER THE LD. CIT(A) WAS RIGHT IN LAW AND FACT IN ACCEPTING THE EXPLANATION OF THE ASSESSEE THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE DESTROYED IN FLOODS W HICH MAY BE AN EXCUSE AND WITHOUT ALLOWING AN OPPORTUNIT Y TO EXAMINE THE SAME BY THE ASSESSING OFFICER AS PER RU LE 46 OF THE I. T. ACT. 2. WHETHER THE LD. CIT(A) WAS RIGHT IN LAW AND FACT IN NOT APPRECIATING THAT THE NET PROFIT RATE APPLIED BY TH E AO HAS ITA NO.429 /ASR/2017 (A.Y.2012-13) ITO VS. M/S. THE BH AT & CO., SRINAGAR 2 COVERED THE STEEP DECLINE IN THE GROSS PROFIT RATE AS WELL AS INCONSISTENCIES REGARDING BOOKING OF EXPENSES DIREC TLY RELATIVELY TO THE TRADING ACTIVITY AND THOSE INCURR ED ON BEHALF OF THE SUPPLIERS WHICH ARE CLAIMED BY THE CO UNSEL TO BE ACCOUNTED FOR IN THE LOANS AND ADVANCES ACCOUNT OF THE BALANCE SHEET. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAD FAILED TO PRODUCE THE BOOKS OF ACCOUNT AND OTHER SUPPORTING DOCUMENTS, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON THE PREMISES THAT THE SAME WERE DESTROYED IN THE FLOODS OF SEPTEMBER, 2014 IN SRINAGAR, THEREFORE, FINDING THE OTHER RELEVANT FACTS SUCH AS GROSS TURN OVER, G.P RATE, N.P. RAT E AS REFLECTED BY THE ASSESSEE AS NOT CORRECT, SINCE THE ASSESSEE HAS NOT SHOWN THE LAPU SALES IN THE TOTAL TURN OVER, RENTA L INCOME AND THE COMMISSION INCOME EARNED AND HAS ALSO NOT FOLLOW ED THE CORRECT ACCOUNTING PRINCIPLE AS GIVE IN THE ACCOUNTING STDA NDARD- 1 AND THEREFORE, THE CORRECT AND TRUE PICTURE OF THE BUSINESS HAVE NOT BEEN REFLECTED IN THE RETURN FILED BY THE A SSESSEE. ON THE AFORESAID GROUND, THE ASSESSING OFFICER REJECTED T HE BOOKS OF ACCOUNT OF THE ASSESSEE BY INVOKING PROVISIONS OF SEC.145(3) OF THE I.T. ACT AND COMPUTED THE ESTIMATION ON THE BASIS OF MATERIAL AVAILABLE ON RECORD AND INFORMATION/ DOCUMENTS SUBMITTED BEFORE HIM AND, FINALLY, THE ASSESSING OFFICER APPLIED NET PROFIT RATE @ 1% OF THE TOTAL TURN OVER AS AGAIN ST 0.30% AS DECLARED BY THE ASSESSEE WHICH RESULTED INTO ADDITION OF RS.53,25,197. THE AO ALSO ADDED RENTAL INCOME EARNED B Y THE ASSESSEE FROM M/S PANASONIC APPLIANCES LTD. TO THE TUNE OF ITA NO.429 /ASR/2017 (A.Y.2012-13) ITO VS. M/S. THE BH AT & CO., SRINAGAR 3 RS.1,28,000/- ON THE GROUND THAT THE RENTAL INCOME WA S REFLECTED IN 26AS, BUT HAS NOT BEEN SHOWN AS INCOME IN T HE P&L ACCOUNT. FURTHER ADDED OF RS.2,39,870/- AS THE COMMISSION INCOME EARNED FROM M/S PANASONIC APPLIANCES LTD. WHICH WA S NOT DISCLOSED BY THE ASSESSEE. FURTHER THE AO ALSO ADDED AN AMOUNT OF RS.47,075/- ON ACCOUNT OF INTEREST INCOME EAR NED ON THE FDR. 3. ON FEELING AGGRIEVED AGAINST THE ORDER PASSED BY THE ASSESSING OFFICER, THE ASSESSEE PREFERRED THE FIRST APPEAL BE FORE THE LD. CIT(A) WHO HOLD THE REJECTION OF BOOKS OF ACCOU NT WITHOUT BASIS, AND UNJUSTIFIED AND WHILE CONSIDERING T HE CBDT GUIDELINES IN RESPECT OF QUA TAKING LENIENT VIEW IN TH OSE CASES WHERE BOOKS OF ACCOUNT HAVE BEEN DESTROYED IN THE DEVAST ING FLOOD OF SRINAGAR, DELETED THE ADDITIONS MADE BY TH E ASSESSEE. 4. ON FEELING AGGRIEVED AGAINST THE ASSESSMENT ORDER PASSED BY THE LD. CIT(A) THE REVENUE AUTHORITY PREFERRED T HE INSTANT APPEAL AND IN SUPPORT OF ITS CASE, THE LD. DR SUBMITTED THAT THE LD. CIT(A) HAS ERRED IN LAW AND FACT IN ACCEPTING THE E XPLANATION OF THE ASSESSEE THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE DESTROYED IN FLOODS WHICH MAY BE AN EXCUSE AND WITHOUT ALLOWING AN OPPORTUNITY TO EXAMINE THE SAME BY THE A SSESSING OFFICER AS PER RULE 46 OF THE I. T. ACT. FURTHER, THE LD. CIT(A) ERRED IN LAW AND FACT IN NO T APPRECIATING THAT THE NET PROFIT RATE APPLIED BY THE AO HAS COVERED THE STEEP DECLINE IN THE GROSS PROFIT RATE AS WE LL AS ITA NO.429 /ASR/2017 (A.Y.2012-13) ITO VS. M/S. THE BH AT & CO., SRINAGAR 4 INCONSISTENCIES REGARDING BOOKING OF EXPENSES DIRECTLY REL ATIVELY TO THE TRADING ACTIVITY AND THOSE INCURRED ON BEHALF O F THE SUPPLIERS WHICH ARE CLAIMED BY THE COUNSEL TO BE ACCOUNTED FOR IN THE LOANS AND ADVANCES ACCOUNT OF THE BALANCE SHEET. 5. WE HAVE GONE THROUGH WITH THE FACTS AND CIRCUMSTANCES OF THE CASE, AS IN THE INSTANT CASE, IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS FAILED TO BROUGHT ON RECORD, THE BOOKS OF ACCO UNT OR OTHER SUPPORTIVE DOCUMENTS DURING THE COURSE OF ASSESSM ENT PROCEEDING AS WELL AS APPELLATE PROCEEDING ON THE REASO N THAT THE SAME WERE DESTROYED IN DEVASTING FLOOD OF SEPTEMBE R, 2014 IN SRINAGAR, HOWEVER, THE SAME WAS NOT CONSIDERED BY TH E AO IN ITS RIGHT PERSPECTIVE AND ALSO FAILED TO ADHERE WITH TH E GUIDELINES ISSUED BY THE CBDTS INSTRUCTION, WHICH SPEAKS FOR TAKING A LENIENT VIEW IN THOSE CASES WHERE BOOKS OF ACCOUNT DESTROY ED IN THE DEVASTING FLOOD IN SRINAGAR. IN THE INSTANT CASE, THE ASSESSEE REGULARLY ASSESSED TO TAX AND HIS ACCOUNTS ARE DULY AUDITED AND HAS SHOWN A CONSISTENT INCREASE IN PROFIT RATE, IN THAT EVENTUALITY, THE PRO FIT RATE DECLARED BY THE ASSESSEE DOES NOT FOUND SMELL FOR DOUBT. IT IS ALSO A FACT THAT THE ASSESSING OFFICER HAS ACCEPTED THE BOOKS RESULT AS DECLARED BY THE ASSESSEE IN THE VERY NEXT ASSESSMENT YEAR 2013-14, HOWEVER, REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE FOR THE ASST. YEAR UNDER CONSIDERATION I.E., 2012- 13 WHICH SEEMS TO BE WITHOUT ANY BASIS FOR REJECTION OF RES ULT U/S 145(3) OF THE I.T. ACT. ITA NO.429 /ASR/2017 (A.Y.2012-13) ITO VS. M/S. THE BH AT & CO., SRINAGAR 5 IN OUR CONSIDERED VIEW, THE REJECTION OF BOOKS OF ACCOUNT BY THE A.O UNDER THE AFORESAID CIRCUMSTANCES WAS NOT JUSTIF IED AND THEREFORE, INCOME ESTIMATED BY THE A.O RIGHTLY BE EN DECLINED AND UN-SUSTAINED BY THE LD. CIT(A). FURTHER, THE INCOME ESTIMATED BY THE A.O @1% OF THE TOTAL TURN OVE R ALSO RIGHTLY BEEN FOUND UNBASED BY THE CIT(A) BECAUSE THE A SSESSEE HAS CONSISTENTLY SHOWING INCREASING NET PROFIT RATE. ON THE AFORESAID CONSIDERATION, WE DO NOT FIND ANY ILLEGALITY, INFIRMITY AND IMPROPRIETY, HENCE, THE G ROUND NOS.1 & 2 OF THE APPEAL STANDS REJECTED. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE DEPA RTMENT STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22.02.2018 SD/- SD/- (R.S.SYAL) (N.K.CHOUDHRY) VICE PRESIDENT JUDICIAL MEMBER DATED:22.02.2018 /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) M/S BHAT & CO., SRINAGAR (2) THE ITO, WARD,3(3), SRINAGAR (3) THE CIT(A) J&K, JAMMU (4) THE CIT CONCERNED (5) THE SR DR, I.T.A.T., AMRITSAR TRUE COPY BY ORDER