DCIT, Ghaziabad V. Shri Manoj Kumar Agarwal, Ghaziabad

ITA 5029/DEL/2013

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 8838 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 14-01-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 30-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARISH SACHDEVA
• Assessee Lawyers: GUNJAN PRASHAD
• Section: 44AD; 142(1); 32

Judgement Text

ITA NO.5029/DEL/2013 ASSTT.YEAR: 2008-09 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES E NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI CHANDRAMOHAN GARG, JUDICIAL MEMBER ITA NO. 5029/DEL/2013 ASSTT. YEAR: 2008-09 DY.COMMISSIONER OF INCOME TAX, VS SHRI MANOJ KUMAR AGARWAL, CIRCLE-1, GHAZIABAD. KM-140, KAVI NAGAR, GHAZIABAD. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI HARISH SACHDEVA, CA RESPONDENT BY: SHRI GUNJAN PRASHAD, CIT O R D E R PER CHANDRAMOHAN GARG, J.M. THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAI NST THE ORDER OF THE CIT(A) GHAZIABAD DATED 11.06.2013 IN APPEAL NO . 1278/2011-12/GZB FOR AY 2008-09. 2. THE MAIN GROUNDS RAISED BY THE REVENUE IN THIS A PPEAL READ AS UNDER:- 1. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETIN G THE ADDITION OF RS.9,46,4511- ON ACCOUNT OF CONSUMABLE STORES. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING TH E ADDITION ITA NO.5029/DEL/2013 ASSTT.YEAR: 2008-09 2 OF RS.3,07,680/- OUT OF LABOUR CHARGES AND RS.60,OO O/- OUT OF VARIOUS EXPENSES. 3. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED IN RESTRICTING THE INCOME O F THE ASSESSEE @ 7.5% OF NET PROFIT, THEREFORE, THE ORDER OF THE CIT(A) MAY KINDLY BE SET-ASIDE AND ORDER OF AO MAY BE RESTORED. 3. BRIEFLY STATED, THE FACTS GIVING RISE TO THIS AP PEAL ARE THAT THE ASSESSEES CASE WAS PICKED UP FOR SCRUTINY AND ACCO RDINGLY NOTICES U/S 143(2) AND 142(1) OF THE INCOME TAX ACT, 1961 WERE ISSUED TO THE ASSESSEE. THE AO COMPLETED ASSESSMENT PROCEEDINGS BY MAKING T HREE DISALLOWANCES VIZ. DISALLOWANCE OUT OF CONSUMABLES STORES, DISALL OWANCE OUT OF LABOUR CHARGES ETC. AND DISALLOWANCE OF OTHER EXPENSES AND FINALISED ASSESSMENT AT TAXABLE INCOME OF RS.23,10,890 AS AGAINST THE RETUR NED INCOME OF RS.9,96,755. BEING AGGRIEVED BY THE ABOVE ASSESSME NT ORDER, THE ASSESSEE PREFERRED AN APPEAL WHICH WAS ALLOWED BY HOLDING TH AT THE ACTION OF THE AO REJECTING BOOKS OF ACCOUNTS U/S 45(3) OF THE ACT WA S JUSTIFIED AND THE FIRST APPELLATE AUTHORITY FOLLOWING THE PROVISIONS OF SEC TION 44AD OF THE ACT ESTIMATED THE NP RATE OF THE ASSESSEE AT 7.5% AND A LL THE DISALLOWANCES MADE OUT OF VARIOUS EXPENSES SEPARATELY WERE ORDERE D TO BE DELETED. NOW, THE AGGRIEVED REVENUE IS BEFORE THIS TRIBUNAL WITH THE GROUNDS AS REPRODUCED HEREINABOVE. 4. WE HAVE HEARD ARGUMENTS OF BOTH THE SIDES AND CA REFULLY PERUSED THE RELEVANT MATERIAL PLACED ON RECORD, INTER ALIA ASSE SSMENT ORDER AND ITA NO.5029/DEL/2013 ASSTT.YEAR: 2008-09 3 IMPUGNED ORDER OF THE CIT(A). FROM CAREFUL READING OF THE OPERATIVE PART OF THE IMPUGNED ORDER, WE OBSERVE THAT THE CIT(A) ALLO WED THE APPEAL OF THE ASSESSEE WITH FOLLOWING OBSERVATIONS AND CONCLUSION :- ALL THE GROUNDS OF APPEAL CAN BE TAKEN TOGETHER IN THIS CASE SINCE IT IS A CASE OF DISALLOWANCE OUT OF CONS UMABLE STORE, LABOR CHARGES AND OTHER EXPENSES; ALL ON THE GROUND OF NON VERIFIABILITY OF THE ENTIRE EXTENT OF THESE EXP ENSES CLAIMED /NON MAINTENANCE OF BILLS AND VOUCHERS, WHI CH HAS LED THE A.O. TO CONCLUDE THAT '......WHAT IT MEANS THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE NOT MUCH RELIA BLE... ..' I FIND THAT IT IS A CASE WHERE BOOK RESULTS CANNOT BE WHOLLY RELIED UPON SINCE SOME OF THE EXPENSES ARE NOT FULL Y VERIFIABLE. TO THAT EXTENT, IN MY VIEW, THIS IS AN APPROPRIATE CASE FOR APPLICATION OF SECTION 145(3) OF THE ACT, REJECTING THE BOOK RESULTS PARTLY TO THE EXTENT THAT N.P. DESERVE S TO BE ENHANCED ON ESTIMATE BASIS. TO THAT ASPECT I DO FIND THAT THE EXTENT OF DISALLO WANCE MADE IS ON EXCESSIVE SIDE SINCE IF THE DISALLOWANCE S ARE TAKEN INTO ACCOUNT, THE RESULTANT N.P. GOES UP TO 13.2% W HICH IS NOT REASONABLE CONSIDERING THE SPECIFIC BUSINESS OF THE ASSESSEE. CERTAINLY THE PRESUMPTIVE RATE OF 8% PRESCRIBED U/S 44AD CAN BE A VERY GOOD INDICATOR OR YARDSTICK FOR ESTIMATING THE N.P., EVEN IF, THE GROSS RECEIPT OF THE ASSESSEE IS MUCH MORE THAN THE LIMIT OF RS. 40 LACS. ON ASPE CT OF ESTIMATE, I FIND THAT ASSESSEE HAS BEEN CONSISTENTL Y SHOWING BOOK RESULTS AT ABOUT 5% , WHILE THE RECENT MAXIMUM N.P. WAS SHOWN AT 5.50% IN ASSTT. YEAR 2005-06. I HOLD I T WOULD DO JUSTICE IF ASSESSEE IS ASSESSED AT A RATE BETWEE N 7% TO 8%. SINCE THE BOOKS HAVE BEEN REJECTED, IN ANY CASE; TH E PROFIT HAS TO BE ESTIMATED ON BEST JUDGMENT BASIS AND IN M Y VIEW, ASSESSING THE APPELLANT'S INCOME @ 7.5% WOULD BE APPROPRIATE AND REASONABLE. THE A.O. IS DIRECTED TO ASSESS THE INCOME OF THE AS SESSEE AT 7.5% N.P. SUBJECT TO THIS, THE DISALLOWANCES MAD E OUT OF VARIOUS EXPENSES SEPARATELY, ARE DELETED . ITA NO.5029/DEL/2013 ASSTT.YEAR: 2008-09 4 5. LD. DR SUBMITTED THAT THE CIT(A) UPHELD THE ACTI ON OF THE AO REJECTING BOOKS OF ACCOUNTS OF THE ASSESSEE U/S 145(3) OF THE ACT AS THE BOOK RESULTS COULD NOT BE WHOLLY RELIED UPON SINCE SOME OF THE M AJOR EXPENSES WERE NOT WHOLLY VERIFIABLE. LD. DR FURTHER CONTENDED THAT P RESUMPTIVE NP RATE PRESCRIBED U/S 44AD OF THE ACT IS 8% BUT THE CIT(A) ADOPTED NP RATE OF 7.5% TO BE APPROPRIATE AND REASONABLE WHICH IS NOT A PROPER APPROACH. HOWEVER, THE LD. DR FAIRLY ACCEPTED THAT WHEN THE T AXABLE INCOME OF THE ASSESSEE IS ORDERED TO BE ESTIMATED UNDER PRESUMPTI VE NP RATE PRESCRIBED U/S 44AD OF THE ACT, THEN OTHER DISALLOWANCES DO NO T SURVIVE. 6. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS OF BOTH THE SIDES AND OPERATIVE PART OF THE IMPUGNED ORDER AS REPRODUCED HEREINABOVE, AT THE OUTSET, WE APPROVE THE CONCLUSION OF THE CIT(A) THA T THE AO WAS JUSTIFIED IN APPLICATION OF SECTION 145(3) OF THE ACT REJECTING THE BOOK RESULTS OF THE ASSESSEE. FURTHER, WE NOTE THAT THE CIT(A) HAS ADO PTED PRESUMPTIVE NP RATE BY TAKING RECOURSE TO SECTION 44AD OF THE ACT AND ESTIMATED THE INCOME OF THE ASSESSEE AT 7.5% WHICH IS A REASONABLE AND J USTIFIED APPROACH. WE MAY ALSO POINT OUT THAT WHEN REVENUE AUTHORITIES PR OCEED TO ESTIMATE TAXABLE INCOME OF THE ASSESSEE ON PRESUMPTIVE BASIS U/S 44AD OF THE ACT, THEN NO FURTHER DEDUCTION U/S 32 TO 38 OF THE ACT I S ALLOWABLE UNDER SUB- SECTION (2) OF SECTION 44AD OF THE ACT. THEREFORE, WE ARE INCLINED TO HOLD THAT THE CIT(A) WAS RIGHT IN ADOPTING PRESUMPTIVE N P RATE OF 7.5% AND ITA NO.5029/DEL/2013 ASSTT.YEAR: 2008-09 5 CONSEQUENTLY OTHER DISALLOWANCES AND ADDITIONS MADE THEREUNDER DO NOT SURVIVE AND DESERVE TO BE DELETED. THUS, WE ARE UN ABLE TO SEE ANY AMBIGUITY, PERVERSITY OR ANY OTHER VALID REASON TO INTERFERE WITH THE IMPUGNED ORDER AND WE UPHOLD THE SAME. ACCORDINGLY, GROUND NO. 1, 2 AND 3 OF THE REVENUE ARE DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27.1.2015. SD/- SD/- (G.D. AGRAWAL) (CHANDRAMOHAN GARG) VICE PRESIDENT JUDICIAL MEMBER DT. 27TH JANUARY, 2015 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. C.I.T.(A) 4. C.I.T. 5. DR BY ORDER ASSTT. REGISTRAR