ASSTT. C.I.T Amravati CIR-, AMRAVATI V. BHUWANESHWAR REFINERIES (PVT.)LTD, Amaravati

ITA 471/NAG/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9671 (ITAT-NAGPUR)
• Duration Of Justice: 2 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 28-04-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 14-11-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A R NINAWE
• Keywords: Gross profit estimation; Rejection of books of accounts
• Section: 142(1); 133A; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SHRI P.K. BANSAL, VICE PRESIDENT AND SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA NO. 471/NAG./2014 ( ASSESSMENT YEAR : 201112 ) ASSTT. COMMISSIONER OF INCOME TAX AMRAVATI CIRCLE, AMRAVATI APPELLANT V/S BHUWANESHWAR REFINERIES PVT. LTD. C30, MIDC, AMRAVATI 444 606 PAN AABCB3650M .... RESPONDENT REVENUE BY : SHRI A.R. NINAWE ASSESSEE BY : NONE DATE OF HEARING 20.06.2017 DATE OF ORDER 21.0 6.2017 O R D E R PER AMARJIT SINGH, J.M. THE PRESENT APPEAL PREFERRED BY THE REVENUE IS DIRE CTED AGAINST THE IMPUGNED ORDER DATED 13 TH AUGUST 2014, PASSED BY THE LEARNED COMMISSIONER (APPEALS)II, NAGPUR, FOR THE ASSESSME NT YEAR 201112 ON THE FOLLOWING GROUNDS OF APPEAL: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) WAS RIGHT IN HOLDING THA T THE ASSESSING OFFICER WITHOUT ANY MATERIAL REASONS, REJECTED THE BOOKS OF ACCOUNT UNDER SECTION 145 OF THE ACT. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) WAS RIGHT IN DELETING THE ADDITION O F ` 37,67,620 MADE ON ACCOUNT OF GROSS PROFIT ESTIMATION ON THE B ASIS OF AVERAGE GROSS PROFIT FOR THE LAST YEAR IN THE ASSES SEES OWN CASE, PARTICULARLY IN VIEW OF THE FACT THAT ASSESSEE HAS REDUCED GROSS PROFIT TO SUPPRESS THE TAX LIABILITY DUE TO DECLARA TION MADE DURING THE SURVEY. 2 BHUWANESHWAR REFINERIES PVT. LTD. 2. WHEN THE CASE WAS CALLED FOR HEARING, NONE APPEARED ON BEHALF OF THE RESPONDENT ASSESSEE BEFORE US. THEREFORE, WE PROCEED TO DISPOSE OFF THE APPEAL AFTER HEARING THE LEARNED DE PARTMENTAL REPRESENTATIVE AND ON THE BASIS OF MATERIAL ON RECO RD. 3. BRIEF FACTS OF THE CASE ARE, A SURVEY UNDER SECTION 133A OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ) WAS CONDUCTED ON 14 TH SEPTEMBER 2010. THE ASSESSEE COMPANY DECLARED ITS I NCOME TO THE TUNE OF ` 70 LAKH OVER AND ABOVE REGULAR INCOME. THE ASSESSE E, VIDE STATEMENT DATED 8 TH OCTOBER 2010, CONFIRMED THE SAID DECLARATION. THE ASSESSEE FILED ITS RETURN OF INCOME ON 1 ST OCTOBER 2011, DECLARING INCOME TO THE TUNE OF ` 41,50,000. THE CASE WAS SELECTED FOR SCRUTINY. NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED O N 20 TH JULY 2012, AND SERVED UPON THE ASSESSEE. NOTICE UNDER SECTION 142(1) ALONG WITH QUESTIONNAIRE WERE ISSUED AND SERVICED UPON THE ASS ESSEE. THE ASSESSEE COMPANY WAS ENGAGED IN PROCESSING OF REFIN ING EDIBLE OIL, COCKING AND TRADING. THE ASSESSING OFFICER REJECTED ASSESSEES BOOKS OF ACCOUNT U/S 145 OF THE ACT AND ESTIMATED THE GRO SS PROFIT @ 2.10% AND ASSESSED THE INCOME TO THE TUNE OF ` 79,17,620. BEING AGGRIEVED, THE ASSESSEE WAS IN APPEAL BEFORE THE FIRST APPELLA TE AUTHORITY. 3 BHUWANESHWAR REFINERIES PVT. LTD. 4. THE LEARNED COMMISSIONER (APPEALS) ALLOWED THE APPE AL OF THE ASSESSEE. BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. ISSUE NO.1 & 2 5. THE GROUNDS NO.1 AND 2 BEING INTERCONNECTED, THERE FORE, THEY ARE BEING TAKEN UP TOGETHER. IN FACT, THE ISSUE INVOLVED IN THE AFORESAID GROUNDS RELATE TO DELETION OF ADDITION TO THE TUNE OF ` 37,67,620. 6. LEARNED DEPARTMENTAL REPRESENTATIVE HAS ARGUED THAT THE ASSESSING OFFICER HAS RIGHTLY REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED THE GROSS PROFIT @ 2.10% AT TURNOVER TO T HE TUNE OF ` 1,91,18,723 I.E., TO THE TUNE OF ` 37,67,620, BUT THE LEARNED COMMISSIONER (APPEALS), BY ACCEPTING THE CONTENTION S OF THE ASSESSEE HAS WRONGLY DELETED THE ADDITION OF ` 37,67,620, THEREFORE, IN THE SAID CIRCUMSTANCES, THE FINDING OF THE LEARNED COMMISSIO NER (APPEALS) IS AGAINST LAW AND FACTS AND IS LIABLE TO BE SET ASIDE . 7. THE LEARNED COUNSEL FOR ASSESSEE ON THE OTHER HAND PLACED RELIANCE UPON THE FINDINGS OF THE LEARNED COMMISSIO NER (APPEALS) IN QUESTION. 4 BHUWANESHWAR REFINERIES PVT. LTD. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. BEFORE PROCEEDING FURTHER, WE D EEM IT FIT TO ADVERT THE FINDINGS OF THE LEARNED COMMISSIONER (APPEALS) ON THIS ISSUE. THE RELEVANT PORTION OF THE ORDER OF THE LEARNED COMMIS SIONER (APPEALS) IS REPRODUCED BELOW FOR THE SAKE OF BREVITY: 5. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE AND THE WRITTEN SUBMISSIONS OF THE APPELLANT. I FIND SUBSTANTIAL FO RCE IN THE SUBMISSION MADE BY THE APPELLANT. THE BOOKS OF ACCO UNT OF THE APPELLANT ARE SUBJECT TO AUDIT. THE AUDIT REPORT WA S SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND CON TAINS COMPLETE QUANTITATIVE DETAILS IN RESPECT OF ITEMS O F ITS MANUFACTURING ACTIVITY AS WELL, AS ITS TRADING ACTI VITY. IT IS ALSO A FACT THAT THE SHORTAGE/LOSSES SHOWN BY THE APPELLAN T ARE NORMAL IN NATURE AND NO ADVERSE COMMENTS IN RESPECT OF SUCH Q UANTITATIVE DETAILS FURNISHED AND THE QUANTITY RECORD PRODUCED HAS BEEN MADE BY THE AUDITOR OR BY THE ID. AO DURING THE COURSE O F ASSESSMENT PROCEEDINGS. 5.1 THE APPELLANT HAS ALSO VERY VALIDLY EXPLAINED T HAT IF THE NON DELIVERY INCOME IS REMOVED FROM THE TRADING A/C THE RE IS A SIGNIFICANT INCREASE IN GP PERCENTAGE DURING THE YE AR VIS--VIS THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. ALSO, AS POI NTED OUT BY THE APPELLANT, THERE ARE NO DEFECTS POINTED OUT BY THE LD. AO WHAT SO EVER THOUGH THE BOOKS OF ACCOUNT WERE PRODUCED A ND EXAMINED BY THE LD. AO. IT IS TO BE NOTED THAT THE ID. AO HA S USED STRONG WORDS AND COME TO THE WRONG CONCLUSION WITHOUT ANY BASIS. HE HAS STATED THAT THE NP CLAIMED TO HAVE BEEN WORKED OUT AT RS. 72.77 LACS INCLUDING THE SURVEY DECLARATION 'SOUNDS ABSUR D' AND HAS COMMENTED THAT THE FALL IN GP 'IS BEYOND IMAGINATIO N'. HOWEVER OTHER THAN THESE COMMENTS, NOT A SINGLE DEFECT HAS BEEN POINTED OUT IN THE BOOKS AND THERE IS NO COMMENT OR FINDING ON THE LACK OF COMPLETENESS OR THE CORRECTNESS OF THE BOOKS. WITH REGARD TO REJECTION OF BOOKS OF ACCOUNTS BY THE AO U/S 145 OF THE ACT, THE PRINCIPLE TO BE FOLLOWED IS ACCEPTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE IS A RULE AND REJECTING THE SAME IS AN EXC EPTION'. THIS IS THE PRINCIPLE IN EXISTENCE AND AN AO CANNOT REJECT THE BOOKS UNLESS THE ACCOUNTS OF THE ASSESSEE SUFFER FROM EITHER OF THE TWIN REASONS SPECIFIED IN THE ACT VIZ. THE CORRECTNESS OR THE CO MPLETENESS OF THE BOOKS OF ACCOUNT. IT IS THE SETTLED LAW THAT THE BO OKS CANNOT BE REJECTED U/S 145 OF THE ACT AND ESTIMATION OF INCOM E RESORTED TO, UNLESS THE AO RECORDS ANY FINDING THAT THE BOOKS OF ACCOUNT 5 BHUWANESHWAR REFINERIES PVT. LTD. MAINTAINED BY THE ASSESSEE ARE INCORRECT RENDERING IT IMPOSSIBLE TO DEDUCE THE PROFITS. AO NEEDS TO INDICATE THAT HE NO TICED ANY INCONSISTENCY OR INFIRMITY IN THE AUDIT REPORT. A F INDING OF LOWER GP IS NO GROUND FOR REJECTION OF BOOKS U/S 145 OF THE ACT. THUS, WHEN NO DISCREPANCY IS NOTICED IN THE ACCOUNTS MAINTAINE D BY THE ASSESSEE, AO CANNOT ASSUME JURISDICTION U/S 145 OF THE ACT. 5.2 IT HAS BEEN HELD IN VARIOUS CASES THAT WHERE NO SPECIFIC DISCREPANCIES OR DEFECTS IN THE BOOKS OF ACCOUNT OF THE ASSESSEE HAS BEEN POINTED OUT NOR WAS ANY MATERIAL BROUGHT T O ESTABLISH THAT PURCHASES WERE INFLATED OR RECEIPTS SUPPRESSED , THERE IS NO JUSTIFICATION IN INVOLVING THE PROVISIONS OF SECTIO N 145 OF THE ACT. IF THERE WAS NO CHALLENGE TO THE TRANSACTIONS REPRESEN TED IN THE BOOKS, THEN IT IS NOT OPEN TO THE LD. AO TO CONTEND THAT WHAT WAS SHOWN BY THE ENTRIES IS NOT THE REAL STATE OF AFFAI RS. THUS, SUSPICION, HOWEVER, STRONG IT MAY BE, IS NO GROUND FOR THE AO FOR INVOKING THE PROVISIONS OF SECTION 145(3) OF THE AC T. 5.3 IN THIS CASE, THE APPELLANT WAS UNDER STATUTORY OBLIGATION TO MAINTAIN THE BOOKS SPECIFIED IN SEC. 2(12A) OF THE INCOME TAX ACT. IT IS A CASE WHERE BOOKS OF ACCOUNTS WERE DULY AUDI TED BY THE STATUTORY AUDITORS AS REQUIRED UNDER THE STATUTE. T HEY WERE UNDER OBLIGATION TO PROVIDE CATEGORICAL FINDINGS ABOUT TH E VERIFICATION OF THE BOOKS OF ACCOUNT, CONSISTENCY IN THE METHOD OF ACCOUNTING ADOPTED, ACCURACIES OR COMPLETENESS IF ANY OF THE B OOKS OF ACCOUNTS. IN A CASE WHERE BOOKS ARE MAINTAINED AND THE SAME WERE AUDITED, THE AO SHOULD ACCEPT THE SAID BOOKS S O LONG AS HE HAS NOT FOUND OUT ANY DEFECTS OR INCOMPLETENESS OF TRANSACTIONS OR DISCREPANCIES OR ANY INACCURACIES, WHATEVER MAY BE THE NAME GIVEN TO THEM. FURTHER, IT HAS BEEN THE RULE THAT W HEN THE BOOKS ARE REJECTED BY THE AO BY INVOKING THE PROVISIONS O F SUB- SECTION 3 OF SEC. 145 OF THE ACT, THE ONUS IS ON THE AO TO PI NPOINT OR ENLIST THE DEFICIENCIES OR INACCURACIES IN THE SAID BOOKS OF ACCOUNT OF THE ASSESSEE. WITHOUT POINTING OUT THE SAME EITHER DIRE CTLY EXPRESSING IN THE ORDER OR INDIRECTLY BY IMPLICATION, THE AO C ANNOT RESORT TO REJECTION OF THE ACCOUNTS OF THE ASSESSEE AND FURTH ER, HE CANNOT RESORT TO THE BEST JUDGMENT ASSESSMENT IN THE MANNE R PRESCRIBED IN SEC. 145(3) OF THE ACT. THE ONUS IS ON THE ID. A O TO ENLIST THE DEFECTS OR DISCREPANCIES OR ENTRIES OR FAILURE OF T HE ASSESSEE IN MAINTAINING SOME REQUISITE BOOKS IN THE ORDER BEFOR E THE BOOKS ARE REJECTED U/S 145(3) OF THE ACT. THE ID. AO MIGHT NO T HAVE MENTIONED EXPRESSIVELY THE PROVISIONS OF SEC. 145(3 ) OF THE ACT IN THE ORDER BUT THE REQUIREMENT IS, AO MUST ENLIST TH E DEFECTS OR DISCREPANCIES OR INCOMPLETION OR INACCURACIES OF TH E ACCOUNTS OF THE ASSESSEE. IN THE INSTANT CASE ID. AO DID NOT BOTHER TO HONOUR THE LAW IN ITS TRUE SPIRIT. THE ID. AO CANNOT RESORT TO ESTIMATION OF INCOME WITHOUT REJECTION OF ACCOUNTS SYSTEMATICALLY MAINTAINED BY THE ASSESSEE FOR ALL THE YEARS UNDER CONSIDERATION AND ALSO BY 6 BHUWANESHWAR REFINERIES PVT. LTD. INVOKING THE PROVISIONS OF SECTION 145 OF THE ACT E VEN THOUGH HE HAS NOT BROUGHT ON RECORD ANY MATERIAL REASON FOR T HE REJECTION OF THE BOOKS. IN VIEW OF THE ABOVE FACTS THE ACTION OF THE ID. AO OF REJECTING THE BOOKS OF ACCOUNTS AND ESTIMATION OF T HE PROFITS CANNOT BE UPHELD AND CONSEQUENTLY THE ADDITION OF RS. 3767 620/- IS HEREBY DELETED. 9. ON APPRAISAL OF THE AFORESAID FINDINGS, WE OBSERVE THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE DULY AUDITED AND AU DIT REPORT WAS ALSO SUBMITTED BEFORE THE ASSESSING OFFICER. NO SUBSTANT IVE DEFECT OF ANY KIND WAS FOUND IN THE AUDIT REPORT AS WELL AS IN TH E BOOKS OF ACCOUNT. THE ASSESSING OFFICER HAS ONLY POINTED OUT THE DEFE CT THAT THE NET PROFIT CLAIMED TO HAVE BEEN WORKED OUT AT ` 72.77 LAKH INCLUDING THE SURVEY DECLARATION SOUND ABSURD AND HAS COMMENTED THAT THE FALL OF GROSS PROFIT IS BEYOND IMAGINATION. NO PARTICULAR D EFECT OF ANY KIND WAS POINTED OUT IN THE BOOKS OF ACCOUNT. THE REASON S MENTIONED ABOVE ARE NOT THE PLAUSIBLE EXPLANATION FOR REJECTI ON OF THE BOOKS OF ACCOUNT UNDER SECTION 145 OF THE ACT. WITHOUT POINT ING OUT ANY DEFECTS IN THE BOOKS OF ACCOUNT, THE SAME CANNOT BE REJECTE D. FINDING THE LOWER GROSS PROFIT CANNOT BE A GROUND AT ALL TO REJ ECT THE BOOKS OF ACCOUNT UNDER SECTION 145 OF THE ACT. HAVING DOUBT IN BOOKS IS ALSO NOT SUFFICIENT TO ARRIVE AT THIS CONCLUSION THAT TH E BOOKS OF ACCOUNT ARE NOT LIABLE TO BE SUSTAINED IN VIEW OF THE PROVISION S OF SECTION 145(3) OF THE ACT. THE FACTS ARE SIMILAR IN THE PRESENT APPEA L ALSO. NO DISTINGUISHABLE MATERIAL HAS BEEN PLACED ON RECORD ON THE BASIS OF WHICH IT CAN BE ASSUMED THAT THE FINDINGS OF THE LE ARNED COMMISSIONER 7 BHUWANESHWAR REFINERIES PVT. LTD. (APPEALS) ARE INCORRECT AND AGAINST LAW & FACTS AND IS NOT LIABLE TO BE SUSTAINABLE IN THE EYES OF LAW. IN VIEW OF THE SAID CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE LEARNED COMMISSIONER (APPE ALS) HAS PASSED THE ORDER IN QUESTION JUDICIOUSLY WARRANTING NO INT ERFERENCE AT THE INSTANCE OF THE REVENUE. CONSEQUENTLY, UPHOLDING TH E ORDER OF THE LEARNED COMMISSIONER (APPEALS) ON THIS ISSUE, WE DI SMISS THE GROUNDS RAISED BY THE REVENUE ON THE ABOVE SAID ISSUES. 10. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21.06.2017 SD/ - P.K. BANSAL VICE PRESIDENT SD/ - AMARJIT SINGH JUDICIAL MEMBER NAGPUR, DATED: 21.06.2017 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, NAGPUR CITY CONCERNED; (5) THE DR, ITAT, NAGPUR; (6) GUARD FILE. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (DY./ASSTT. REGISTRAR) ITAT, NAGPUR