M/s. Aero Sales, New Delhi V. ITO, New Delhi

ITA 4855/DEL/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97997 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 30-05-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 05-09-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: ALOK BAJAJ
• Keywords: Rejection of books of accounts; Business income; Commercial expediency
• Section: 44AD; 143(3)

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F : NEW DELHI BEFORE SHRI AMIT SHUKLA , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 4855/DEL/2014 (ASSESSMENT YEAR: 2008 - 09 ) AERO SALES, 5/34, WEA KAROL BAGH, NEW DELHI PAN:AAAFA3991L VS. ITO, WARD - 33(2), NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ALOK BAJAJ, CA REVENUE BY: SHRI ATIQ AHMAD, SR. DR DATE OF HEARING 06/11/2017 DATE OF PRONOUNCEMENT 05 / 0 2 / 201 8 O R D E R PER PRASHANT MAHARISHI , A. M. 1. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD CIT(A) 19, NEW DELHI DATED 26.06.2014 FOR THE AY 2008 - 09. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THAT THE LD CIT(A)(19) HAS COMPLETELY FAILED IN UNDERSTANDING AND APPRECIATING THE SUB MISSIONS OF THE APPELLANT WHEREBY MATHEMATICAL CALCULATION BASED ON THE BOOKS OF ACCOUNTS ALONGWITH DUE AND RELEVANT EVIDENCES BESIDES NECESSARY EXPLANATIONS, WRITTEN AS WELL AS ORAL, ON MANY A TIME TO EXPLAIN THE BOOKS OF ACCOUNTS, METHODS OF MAKING ENTRI ES ETC. THEREFORE, THE LD CIT(A)(19)S REJECTION OF BOOKS OF ACCOUNTS WHICH ARE DULY AUDITED AS WELL AS UPHOLDING THE LD ASSESSING AUTHORITYS ORDER IS NOT BASED ON FACTUAL APPRECIATION OF THE REAL SITUATION BUT ARE A TOTAL FAILURE ON THEIR PART TO PUT EVEN TWO AND TWO TOGETHER AS FOUR. THE APPELLANT CONTESTS VEHEMENTLY THE WORKING OF THE NET PROFIT @8% WORKED OUT TO RS. 327190/ - IGNORING ALL THE ADDITIONS MADE ON ACCOUNT OF INCORRECT MATHEMATICAL CALCULATION AS WELL AS DISALLOWANCE OF SPECIFIC EXPENSES BEING MADE PART OF GROUNDS IN APPEAL NO. 2. 2. THAT THE LD C(T(A)(19), NEW DELHI HAS FAILED TO UNDERSTAND AND APPRECIATE THE COMMERCIAL EXPEDIENCY IN INCURRING THESE EXPENDITURE SUCH AS RS. 514081/ - RESPECTIVELY IN THE CAPACITY OF TENANTS BASED ON THE COM MERCIAL DECISION AND AGREEMENT BETWEEN THEM AND THEIR LANDLORD WHO HAPPENS TO BE ONE OF THE PARTNERS. AERO SALES VS. ITO, ITA NO. 4855/DEL/2014 (ASSESSMENT YEAR: 2008 - 09) PAGE | 2 3. THAT THE LD CIT(A)(19), NEW DELHI HAS ERRED IN UPHOLDING THE DISALLOWANCE OF RS. 59596/ - OUT OF SALARY EXPENSES OF RS. 755072/ - AS INCURRED BY THE AP PELLANT AS ALL THE RELEVANT DETAILS AND EVIDENCES WERE DULY FILED. ASSESSEE IS DOING THE RETAIL BUSINESS OF FOOT WEAR AND EMPLOYED SOME WORKERS WHICH ARE CASUAL AND MIGRATORY LABOUR THEMSELVES AND HAVE NO ADDRESS PER SE TO BE PROVIDED TO THEIR EMPLOYERS AN D YET THEY ARE KEPT OWING TO MUTUAL NEEDS AND BENEFIT. THE LD CITY(A)(19) UPHOLDING ON THE BASIS THAT SALARY OF THESE EMPLOYEES CAN NOT BE ALLOWED BECAUSE OF NOT HAVING ADDRESS IS NOT FAIR APPRECIATION OF GROUND REALITIES. 3. BRIEF FACTS OF THE CASE IS THAT ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF TRADING OF FOOTWEAR AND ACCESSORIES. IT FILED ITS RETURN ON 08.09.2008 AT A LOSS OF RS. 428826/ - . THE ASSESSEE WAS ASSESSED U/S 143(3) OF THE ACT VIDE ORDER DATED 29.10.2010 AT A TOTAL INCOME O F RS. 11002833/ - . IN THE ASSESSMENT THE LD ASSESSING OFFICER HAS MADE SEVERAL ADDITIONS AMOUNTING TO RS. 1531659/ - . 4. ON APPEAL BEFORE THE LD CIT(A) SUBSTANTIAL RELIEF WAS GRANTED TO THE ASSESSEE HOWEVER, CERTAIN ADDITIONS WERE CONFIRMED. DURING THE APPELLAN T PROCEEDINGS , THE LD CIT(A) INSTEAD OF CONFIRMING OR REDUCING THE OTHER ADDITION ON ACCOUNT OF TRADING RESTRICTED THE ADDITION TO 8% OF THE TOTAL SALES OF RS. 7839887/ - AT RS. 627190/ - . 5. THE ASSESSEE AGGRIEVED WITH THE ORDER OF THE LD CIT(A) PREFERRED APP EAL BEFORE US. 6. THE FIRST GROUND OF APPEAL IS AGAINST THE SUSTENANCE OF NET PROFIT @8% OF RS. 62719/ - ON THE SALES OF RS. 7839887/ - BY THE LD CIT(A). ASSESSEE AS STATED ON RECORD IS ENGAGED IN THE BUSINESS OF FOOTWEAR. DURING THE ASSESSMENT PROCEEDINGS ASS ESSEE WAS ASKED TO FILE THE DETAILS OF SALE S TO WHICH ASSESSEE SUBMITTED THAT HIS SALES ARE IN CASH AND THROUGH CREDIT CARDS AND THEREFORE, PARTY - WISE DETAILS WERE NOT AVAILABLE. THE ASSESSEE SUBMITTED RECONCILIATION OF CASH DEPOSIT AS WELL AS CREDIT CARD SALES. HOWEVER, THE LD AO REJECTED IT AND MADE AN ADDITION OF RS. 5 LACS AS INCOME OF THE ASSESSEE. THE LD CIT(A) HELD THAT THE APPELLANT COULD FILE ONLY RECONCILIATION BUT COULD NOT FILE ANY OTHER DETAILS AS THE MOST OF THE SALES ARE IN CASH HE ESTIMATED THE 8% PROFIT ON THE TOTAL TURNOVER OF RS. AERO SALES VS. ITO, ITA NO. 4855/DEL/2014 (ASSESSMENT YEAR: 2008 - 09) PAGE | 3 78739887/ - AND INSTEAD OF OTHER ADDITIONS DETERMINED THE NET PROFIT OF ASSESSEE AT RS. 627190/ - . THE LD AR SUBMITTED THAT HIS TOTAL SALES IS RECONCILED OF RS. 78389937/ - . HE HAS ALSO FURNISHED CASH FLOW STATEMENT TO RECONCILE THE SAME. HE THEREFORE SUBMITTED THAT THE ADDITIONS MADE BY THE LD AO IS INCORRECT. HE FURTHER STATED THAT HIS GP IS AT 25.66% DURING THE YEAR. 7. THE LD DR SUBMITTED THAT THE ASSESSEE HAS INCURRED NET LOSS OF RS. 42826/ - ON THE SALES OF RS. 783 9887/ - , WHICH ITSELF SHOWS THAT IN THE RETAIL BUSINESS THE ASSESSEE HAS INCURRED LOSS. HE FURTHER STATED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS DISCREPANCIES HAVE BEEN FOUND AND SAME COULD NOT BE REPLIED BY THE ASSESSEE. THEREFORE, THE ORDER OF T HE LD CIT(A) WHO HAS ESTIMATED THE PROFIT SHOULD BE UPHELD. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND ALSO PERUSED THE ORDERS OF THE LOWER AUTHORITIES. THE LD CIT(A) HAS DETERMINED THE NET PROFIT OF ASSESSEE AT RS. 627190/ - . THE BOOKS OF THE ASSESSEE WERE DEFINITELY NOT RELIABLE. EVEN ASSESSEE STRUGGLED TO RECONCILE THE SALES AT VARIOUS PLACES. BEFORE THE LD ASSESSING OFFICER THE ASSESSEE SUBMITTED A CASH FLOW WHERE OTHER DEPOSITS IN THE BANKS WAS RS. 2515696/ - WHEREAS CREDIT CARD SALES WAS SH OWN AT RS. 1684895/ - . FURTHER, BEFORE THE LD CIT(A) THE DETAILS OF THE SALES WERE GIVEN BY THE LD ASSESSEE BUT IT WAS NOT SUBSTANTIATED WITH EVIDENCE CALLED FOR. BEFORE US ALSO THE ASSESSEE HAS SUBMITTED A CASH FLOW STATEMENT TO RECONCILE THE SALES. FURTHE R THE NET PROFIT ADOPTED BY THE LD CIT(A) ALSO CONFIRMS TO THE PROVISION OF SECTION 44AD OF THE INCOME TAX ACT. IN VIEW OF ABOVE FACTS IT IS APPARENT THAT BOOKS OF ACCOUNTS OF THE ASSESSEE ARE NOT RELIABLE, THEREFORE, NO FAULT CAN BE FOUND IN THE ORDERS OF THE LOWER AUTHORITIES ON THIS ISSUE. IN VIEW OF THIS GROUND NO. 1 OF THE APPEAL IS DISMISSED. 9. GROUND NO. 2 OF THE APPEAL IS WITH RESPECT TO THE DISALLOWANCE OF COMMERCIAL TAX, ELECTRICITY BILLS AND RENTAL EXPENSES AND GROUND NO. 3 OF THE APPEAL IS WITH R ESPECT TO DISALLOWANCE OF SALARY EXPENSES. 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS ON THESE ISSUES. AS WE HAVE UPHELD THE ORDER OF THE LD CIT(A) IS ESTIMATING THE NET PROFIT OF THE AERO SALES VS. ITO, ITA NO. 4855/DEL/2014 (ASSESSMENT YEAR: 2008 - 09) PAGE | 4 ASSESSEE @8% NO OTHER ADDITIONS ON ACCOUNT OF DISALLOWANCE OUT OF TRADING RESULTS CAN BE SUSTAINED, BECAUSE WHEN THE BOOKS ARE REJECTED AND THE NET PROFIT IS DETERMINED IT TAKES CARE OF INFIRMITY IN THE TRADING RESULTS OF THE ASSESSEES BUSINESS. IN THE RESULT GROUND NO. 2 AND 3 OF THE APPEAL IS ALLOWED. 11. IN THE RESUL T APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 0 5 / 0 2 / 2018 . - S D / - - S D / - ( AMIT SHUKLA ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 0 5 / 0 2 / 2018 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI