Chander Prakash Sharma, Gurgaon V. ACIT, Gurgaon

ITA 4847/DEL/2010

• Counselvise Citation: 484720114 RSA 2010
• Duration Of Justice: 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 04-08-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 04-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROHIT GARG
• Assessee Lawyers: ASHISH VIRMANI; SATISH V IRMANI
• Keywords: Opportunity of being heard; Revised return
• Section: 145; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER & SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO. 4847/DEL/2010 ASSESSMENT YEAR: 2007-08 CHANDER PRAKASH SHARMA, VS. ACIT, L-6/1, DLF CITY, PHASE-II, CIRCLE, GURGAON. GURGAON. AQLPS6743D (APPELLANT) (RESPONDENT) APPELLANT BY : ASHISH VIRMANI, ADV. & SATISH V IRMANI, ADV. RESPONDENT BY : ROHIT GARG, DR ORDER PER C.L. SETHI, J.M. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER DATED 09.09.2010 PASSED BY LD. CIT(A) IN THE MATTER OF AN ASSESSMENT MADE BY THE AO U/S 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) FOR THE A.Y. 2007-08. 2. THE ISSUE RAISED BY THE ASSESSEE IS DIRECTED AGA INST AOS ORDER IN REJECTING THE ASSESSEES BOOKS OF ACC OUNT AND THEN ESTIMATING THE INCOME ON ADHOC BASIS. ITA NO. 4847/D/2010 2 3. IN THIS CASE, THE ASSESSEE FILED HIS RETURN OF I NCOME ON 31.10.2007 DECLARING TOTAL INCOME AT RS. 25,0,220/- . SUBSEQUENTLY, THE ASSESSEE FILED A REVISED RETURN O N 19.02.2008 DECLARING TOTAL INCOME AT RS. 23,08,670/ -. THE CASE WAS PICKED UP FOR SCRUTINY AND NOTICE U/S 143( 2) WAS ISSUED ON 28.08.2008, WHICH WAS DULY SERVED UPON TH E ASSESSEE. DURING THE ASSESSMENT PROCEEDINGS, ONE S HRI GOPAL RAWAT, CHARTERED ACCOUNTANT, APPEARED FOR THE ASSESSEE FROM TIME TO TIME AND FURNISHED NECESSARY INFORMATION AS CALLED FOR. 4. IN THE ASSESSMENT ORDER, IT HAS BEEN STATED BY T HE AO THAT HE HAD OBSERVED CERTAIN DISCREPANCIES IN THE B OOKS OF ACCOUNT OF THE ASSESSEE, WHICH ARE AS UNDER: I) IN THE CAPITAL ACCOUNT OF THE ASSESSEE AS PER ORIGINAL AUDIT REPORT THE AMOUNT WAS SHOWN AT RS. 1,45,99,049/-, WHEREAS IN THE REVISED TAX AUDIT REPORT THE FIGURE WAS SHOWN AT RS. 1,44,61,093/-. II) NET PROFIT IN THE ORIGINAL RETURN WAS SHOWN AT RS. 28,43,252/-, WHEREAS AS PER REVISED ACCOUNT SAME WAS SHOWN AT RS. 26,61,597/-. III) TOTAL OF LIABILITY SIDE AND ITS CORRESPONDING ASSET SIDE WERE SHOWN AT RS. 1,78,55,510/- IN THE ITA NO. 4847/D/2010 3 ORIGINAL STATEMENT, WHEREAS IT WAS SHOWN AT RS. 1,76,99,404/- IN THE REVISED STATEMENT. IV) CURRENT LIABILITIES WERE SHOWN AT RS. 1,44,044/ - IN THE ORIGINAL STATEMENT, WHEREAS IT WAS SHOWN AT RS. 2,06,856/- IN THE REVISED STATEMENT. V) IN THE ORIGINAL PROFIT AND LOSS ACCOUNT THE BROKERAGE RECEIVED WAS SHOWN AT RS. 42,15,937/-, WHEREAS IT WAS SHOWN AT RS. 36,53,819/- IN THE REVISED STATEMENT. 5. THE ASSESSEE HAD EXPLAINED BEFORE THE AO THAT TH E DIFFERENCES HAD ARISEN IN THE LIGHT OF THE REVISED RETURN SUBMITTED BY THE ASSESSEE WHERE REALLOCATION OF CER TAIN AMOUNTS WERE MADE FROM ONE HEAD TO ANOTHER. THE ASSESSEES EXPLANATION HAS BEEN REPRODUCED BY THE A O IN THE ASSESSMENT ORDER. THE ASSESSEES EXPLANATION WITH REGARD TO THE DIFFERENCES IN THE AMOUNT SHOWN IN THE ORIGI NAL STATEMENT OF INCOME VIZ-A-VIZ REVISED STATEMENT OF INCOME ARE AS UNDER: - I) BALANCE SHEETS TOTAL IN ONE BALANCE SHEET (PRI OR TO CHANGE) RS. 1,76,99,404/- AND SUBSEQUENT TO CHANGE RS. 1,78,55,510/- IS ON ACCOUNT OF THE DIFFERENCE IN PROFIT IN THE TWO ITRS THE TOTAL DIFFERENCE IS OF RS. 1,56,105/-. ON ACCOUNT OF CHANGE IN THE REVISED BALANCE SHEET DUE TO CHANGES DISCUSSED BELOW. ITA NO. 4847/D/2010 4 THE AMOUNT OF PROFIT HAS DECREASED FROM RS. 1,78,975/- AND WHICH IS ON ACCOUNT OF ONE INCOME FROM COMMISSION AND BROKERAGE WHICH WAS NOT RECEIVED NOR DUE TO US IN THE ORIGINAL RETURNS AND THE SAME HAS BEEN SHIFTED TO THE INCOME IN THE FOLLOWING YEAR I.E. A.Y. 2008-09. THE BILLING OF RS. 1,78,975/- WAS DONE SUBSEQUENTLY IN THE FOLLOWING YEAR AND PERTAINS TO M/S ARDEE INFRASTRUCTURE P. LTD. VOUCHER COPY OF RELEVANT ENTRY PASSED IN THE BOOKS IS BEING ENCLOSED AS PER ANNEX.-3, THE INCOME HAS THEREFORE, AFFECTED THE BALANCE SHEET AND THE P&L ACCOUNT FIGURE (RS. 1,78,55,510/- - 1,76,99,404/- = RS. 1,56,106/-) AS WELL AS DIFFERENCE ON ACCOUNT OF DRAWINGS MADE BY THE PROPRIETOR AMOUNTING TO RS. 69,942/-. DIFFERENCE ON ACCOUNT OF CHANGE IN CURRENT LIABILITIES (DISCUSSED BELOW) RS. 92,812/- (CHANGE IN DUTIES AND TAXES AND TDS PAYABLE). THE TOTAL OF ALL THESE DIFFERENCES AMOUNTS TO (RS. 1,78,975/- RS. 69,942/- - RS. 92,812/- = RS. 1,56,105/-) THUS, MAKING UP THE DIFFERENCE IN THE ORIGINAL AND REVISED BALANCE SHEET. II) THE CAPITAL BALANCE OF RS. 14,39,151/- (REVISE D BALANCE SHEET) IN ONE BALANCE SHEET (AND RS. 1,44,61,093/- PRIOR TO CHANGE) . DIFFERENCE OF RS. 69,942/- IS ON ACCOUNT OF DRAWINGS MADE BY THE PROPRIETOR WHICH HAS BEEN EFFECTED IN THE REVISED BALANCE SHEET. ITA NO. 4847/D/2010 5 III) CURRENT LIABILITIES AGGREGATE TO RS. 2,06,856/ - AGAINST RS. 1,14,044/- IN THE SECOND BALANCE SHEET (DIFFERENCE RS. 92,811.55) SUBSEQUENT TO CHANGE IS ON ACCOUNT OF TWO FIGURES WHICH HAVE BEEN SHOWN IN NEGATIVE (-) IN THE LIABILITIES SIDE AND WHICH HAVE BEEN CORRECTED IN THE REVISED BALANCE SHEET BY SHOWING IN THE ASSETS SIDE. A) RS. 88,504.55/- DUTIES AND TAXES B) RS. 4,307/- TDS PAYABLE TOTAL RS. 92,811.55 IV) PROFIT IS MENTIONED AS RS. 24,82,622/- IN ONE BALANCE SHEET AND RS. 26,61,597/- IN ANOTHER RS. 1,78,975/- (DIFFERENCE IN THE TWO BALANCE SHEETS) AND WHICH IS ON ACCOUNT OF ONE INCOME FROM COMMISSION AND BROKERAGE WHICH WAS NOT RECEIVED NOR DUE TO US IN THE ORIGINAL RETURN AND THE SAME HAS BEEN SHIFTED TO THE INCOME IN THE FOLLOWING YEAR I.E. A.Y. 2008-09. THE BILLING OF RS. 1,78,975/- WAS DONE SUBSEQUENTLY IN THE FOLLOWING YEAR AND PERTAINS TO M/S ARDEE INFRASTRUCTURE PVT. LTD. VOUCHER COPY OF RELEVANT ENTRY PASSED IN THE BOOKS IS BEING ENCLOSED AS PER ANNEX-3. V) TDS BALANCE IS MENTIONED AS RS. 3,31,805/- I N ONE CASE AND RS. 3,27,498/- IN ANOTHER THE DIFFERENCE OF RS. 4,307/- WHICH HAS BEEN SHOWN IN CURRENT LIABILITIES AS TDS PAYABLE WITH (-) MINUS FIGURE HAS BEEN CORRECTED IN THE ITA NO. 4847/D/2010 6 REVISED BALANCE SHEET BY SHOWING IT IS THE ASSETS SIDE WITH RS. 4,307/-. VI) COMMERCIAL SPACE IN VIPUL TECH (FIXED ASSETS) SHOWN AT RS. 17,55,000/- WHEREAS IN THE SECOND (REVISED) IT IS RS. 8,77,500/- THE ASSESSEE WAS HOLDING THE PROPERTY M/S VIPUL TECH (FIXED ASSETS) IN JOINT NAME WITH HIS WIFE SMT. RAJNI SHARMA. IN THE REVISED RETURN SHARE OF PROPERTY HAS BEEN TRANSFERRED IN THE NAME OF THE WIFE AND THEREFORE, VALUE AT 50% I.E. RS. 8,77,500/- HAS BEEN SHOWN IN THE REVISED RETURN. THE BALANCE OF SMT. RAJNI SHARMA HAS INCREASED TO THE EFFECT. COPY OF ENTRY PASSED IN THE REVISED BOOKS IS ENCLOSED AS PER ANNEX-4. THE AMOUNT SHOWN IN THE NAME OF SMT. RAJNI SHARMA IS BEING AFFECTED BY THE SAME AMOUNT AND CAN BE SEEN IN THE REVISED BALANCE SHEET. VII) IN THE P&L ACCOUNT BROKERAGE IS SHOWN AT RS. 42,15,937/- AND RS. 36,53,819/- IN THE REVISED BALANCE SHEET THE TOTAL DIFFERENCE IS RS. 5,62,118/- WHICH HAS ARISEN ON ACCOUNT OF THE AMOUNT OF PROFIT WHICH HAS DECREASED FROM RS. 1,78,975/- AND WHICH IS ON ACCOUNT OF ONE INCOME FROM COMMISSION AND BROKERAGE WHICH WAS NOT RECEIVED NOT DUE TO US IN THE ORIGINAL RETURN ITA NO. 4847/D/2010 7 AND THE SAME HAS BEEN SHIFTED TO THE INCOME IN THE FOLLOWING YEAR I.E. A.Y. 2008-09. THE BILLING OF RS. 1,78,975/- WAS DONE SUBSEQUENTLY IN THE FOLLOWING YEAR AND PERTAINS TO M/S ARDEE INFRASTRUCTURE PVT. LTD. VOUCHER COPY OF RELEVANT ENTRY PASSED IN THE BOOKS IS BEING ENCLOSED AS PER ANNEX.-3. THE BALANCE OF OTHER DIFFERENCE IS ON ACCOUNT OF SHIFTING OF INCOME FROM BROKERAGE TO SUB BROKERAGE I.E. RS. 3,83,143/- AND IS ONLY BECAUSE OF HEAD CHANGE I.E. FROM BROKERAGE TO SUB BROKERAGE (A CORRECTION DONE IN THE REVISED RETURN). 6. HOWEVER, THE AO DID NOT ACCEPT THE ASSESSEES EXPLANATION AS TENABLE, AND HE REJECTED THE ASSESSE ES BOOKS OF ACCOUNT AND ESTIMATED THE PROFIT BY APPLYING THE RATE OF 60% OF GROSS RECEIPTS. 7. BEING AGGRIEVED, THE ASSESSEE PREFERRED AN APPEA L BEFORE THE LD. CIT(A). ITA NO. 4847/D/2010 8 8. THE CIT(A) HAS MERELY SUPPORTED THE AOS ORDER A ND HAS NOT ACCEPTED THE ASSESSEES EXPLANATION ABOUT T HE DIFFERENCE IN THE AMOUNT SHOWN IN THE ORIGINAL STAT EMENT AS COMPARED TO THE REVISED STATEMENT. 9. HENCE, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 10. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY PE RUSED THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT ASSESSEE HAS EXCLUDED THE SUM OF RS. 1,78,975/- FROM INCOME WHIC H WAS SHOWN IN THE ORIGINAL RETURN OF INCOME FOR THE REAS ON THAT THIS INCOME HAS ACTUALLY ACCRUED TO THE ASSESSEE IN SUBS EQUENT YEAR. BECAUSE OF EXCLUSION OF THIS INCOME OF RS. 1 ,78,975/-, A DIFFERENCE IN THE INCOME SHOWN IN THE ORIGINAL PROF IT AND LOSS ACCOUNT AND CONSEQUENTLY IN THE CAPITAL ACCOUNT IS INEVITABLE. THE ASSESSEE HAS ALSO EXPLAINED VARIOUS OTHER ENTRI ES, WHICH WERE SUBSEQUENTLY INCORPORATED IN THE REVISED STATE MENT. THE AO HAS NOT NOWHERE POINTED OUT THAT THERE WAS ANY SUPPRESSION OF RECEIPT OR ANY INCOME WAS NOT RECORD ED IN THE BOOKS OF ACCOUNT. THE AO HAS ALSO NOT POINTED OUT ANY MATERIAL DISCREPANCIES IN THE ACCOUNTS REGULARLY MA INTAINED BY THE ASSESSEE. THE VARIOUS DIFFERENCES POINTED OUT BY THE AO ITA NO. 4847/D/2010 9 ARE ONLY BECAUSE OF THE REASON THAT CERTAIN LIABILI TIES AND INCOME HAVE BEEN READJUSTED BY THE ASSESSEE UNDER T HE CORRECT HEADS. THEREFORE, THESE DIFFERENCES POINTE D OUT BY THE AO CANNOT BE A BASIS TO REJECT THE BOOKS OF ACCOUNT . HOWEVER, THEY MAY BE RELEVANT FOR THE PURPOSE OF AS SESSMENT OF ASSESSEES INCOME AS TO WHETHER THE ASSESSEES C LAIM MADE IN THE REVISED RETURN IS ALLOWABLE OR NOT. TH E AO SHOULD HAVE DETERMINED THE ASSESSEES INCOME IN THE LIGHT OF THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE AND AFT ER TAKING INTO ACCOUNT THE ORIGINAL ENTRY MADE IN THE BOOKS V IZ-A-VIZ ENTRY SUBSEQUENTLY MADE AS PER REVISED RETURN OF IN COME. IT IS WELL SETTLED THAT SECTION 145 OF THE ACT ENJO INS THE DUTY ON THE ASSESSING AUTHORITIES TO DETERMINE THE METHOD O F ACCOUNTING REGULARLY EMPLOYED BY AN ASSESSEE AND TO ASSESS THE INCOME, PROFIT AND GAINS IN ACCORDANCE WITH SUC H METHOD OF ACCOUNTING. A DEPARTURE IS PERMISSIBLE IN CASES COVERED BY THE FIRST PROVISO TO SUB-SECTION (1) AND SUB-SECTIO N (2) AND A COMPUTATION UPON SUCH BASIS AND IN SUCH MANNER AS T HE AO MAY DETERMINE CAN BE MADE WHEN THE METHOD EMPLOYED BY THE ASSESSEE IS SUCH THAT, IN THE OPINION OF THE AO , INCOME, PROFIT AND GAINS CANNOT BE PROPERLY DEDUCED THERE F ROM. IN THE PRESENT CASE, THE AO HAS NOT BEEN ABLE TO ESTABLISH THAT ON ITA NO. 4847/D/2010 10 THE BASIS OF METHOD OF ACCOUNTING EMPLOYED BY THE A SSESSEE, THE ASSESSEES INCOME, PROFIT AND GAINS CANNOT BE P ROPERLY DEDUCED THERE FROM. IN THIS CASE, THE AO HAS FOUND SOME FAULTS WITH SOME ADJUSTMENTS ENTRY MADE BY THE ASSE SSEE IN THE REVISED STATEMENT OF INCOME BUT THAT BY ITSELF WOULD NOT NECESSARILY BRING THE CASE WITHIN THE SCOPE OF THE FIRST PROVISO TO SECTION 145 OF THE ACT. THE AO HAS REJECTED THE ACCOUNTS MERELY FOR THE REASON THAT THE ASSESSEE HAS MADE CE RTAIN ADJUSTMENTS TO THE ACCOUNTS AND CONSEQUENTLY FILED A REVISED RETURN. IN THE CASES OF SUCH ADJUSTMENT, THE AMOUN TS OF ADJUSTMENT, AT BEST COULD BE CONSIDERED FOR ADDITIO N OR OTHERWISE WHILE DETERMINING THE ASSESSEES TOTAL IN COME. BUT THAT CANNOT BE A SOLE BASIS TO REJECT THE BOOKS OF ACCOUNT REGULARLY MAINTAINED BY THE ASSESSEE AND THEN TO ES TIMATE THE INCOME ON ADHOC BASIS. WE, THEREFORE, HOLD THAT AS SESSEE HAS BEEN ABLE TO EXPLAIN AS TO WHY THE VARIOUS STAT EMENT OF INCOME AND BALANCE SHEET WERE REVISED AND WHY THE ASSESSEE FILED THE REVISED STATEMENT OF INCOME ALON G WITH REVISED RETURN OF INCOME AND, THEREFORE, MERE BECAU SE THE ASSESSEE HAS REVISED THE STATEMENT OF INCOME AND BA LANCE SHEET THAT BY ITSELF CANNOT BE A GROUND TO REJECT T HE BOOKS OF ACCOUNT U/S 145(3) OF THE ACT. WE, THEREFORE, HOLD THAT THE LD. ITA NO. 4847/D/2010 11 CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE AOS ACTI ON IN REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE. WE , THEREFORE, RESTORE THIS ISSUE BACK TO THE AO FOR HI S FRESH ADJUDICATION AFTER EXAMINING AND VERIFYING THE BOOK S OF ACCOUNT MAINTAINED BY THE ASSESSEE AND AFTER DETERM INING WHETHER THE VARIOUS ADJUSTMENTS MADE BY THE ASSESSE E IN THE REVISED STATEMENT OF INCOME COULD LEAD TO ANY ADDIT ION TO THE RETURNED INCOME. THE AO SHALL EXAMINE AND VERIFY T HE BOOKS OF ACCOUNT AND THEN DECIDE THE ISSUE AS PER LAW AFT ER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 11. NOW, WE COME TO THE AOS ACTION IN ESTIMATING T HE PROFIT AT 60% OF THE GROSS RECEIPTS WHICH HAS BEEN REDUCED TO 48% (EXCLUDING THE AMOUNT OF RECEIPTS INCLUDED IN A.Y. 2008-09) BY THE LD. CIT(A). SINCE THE ISSUE WITH REGARD TO THE EXAMINATION AND VERIFICATION OF THE ASSESSEES BOOKS OF ACCOUNT HAS BEEN RESTORED BACK TO THE FILE OF THE AO, THE DETERMINAT ION OF INCOME ON AD-HOC BASIS AT THIS STAGE IS NOT AT ALL WARRANTED. WE, THEREFORE, RESTORE THIS MATTER BACK TO THE AO F OR DETERMINING ASSESSEES TOTAL INCOME AFTER EXAMINING THE ASSESSEES BOOKS OF ACCOUNT AND AFTER TAKING A DECI SION ITA NO. 4847/D/2010 12 WHETHER ASSESSEES BOOKS OF ACCOUNT WERE PROPER AND WHETHER INCOME, PROFIT AND GAINS CAN BE PROPERLY DE DUCED FROM THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSE E. THE AO SHALL PROVIDE REASONABLE OPPORTUNITY OF BEING HE ARD TO THE ASSESSEE BEFORE/MAKING THE ASSESSMENT, AS PER LAW. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR A STATISTICAL PURPOSE IN THE MANNER AS INDICATE D ABOVE. 13. THIS DECISION IS PRONOUNCED IN THE OPEN COURT O N 12 TH AUGUST, 2011. SD/- SD/- (B.C. MEENA) (C .L. SETHI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 12.8.11 *KAVITA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR