The Income Tax Officer, Srinagar V. M/s. East India Co., Srinagar

ITA 509/ASR/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0787 (ITAT-AMRITSAR)
• Duration Of Justice: 2 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 05-05-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 05-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S KANWAL
• Section: 69C; 143(3); 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR BEFORE SH. A.D.JAIN, HONBLE JUDICIAL MEMBER AND SH. T.S. KAPOOR, HONBLE ACCOUNTANT MEMBER [ I.T.A NO.509 (ASR)/2013 ASSESSMENT YEARS: 2009-10 ITO, WARD-3(1), SRINAGAR (J&K) . VS. M/S. EAST INDIA COMPANY, SHIVPORA SRINAGAR. PAN:AAAFE8160B (RESPONDENT) APPELLANT BY: SH. S. S. KANWAL (DR.) RESPONDENT BY: SH. SUDHIR SEHGAL (ADV.) DATE OF HEARING: 04.05. 2016 DATE OF PRONO UNCEMENT: 06.05.2016 ORDER PER T. S. KAPOOR (AM): THIS IS AN APPEAL FILED BY REVENUE AGAINST THE ORD ER OF LEARNED CIT(A) DATED 13.05.2013 FOR ASST. YEAR 2009-10. 2. THE GROUNDS OF APPEAL TAKEN BY REVENUE ARE REPRO DUCED BELOW. (I) ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. CIT(A) WAS RIGHT IN DELETING THE ADDITION OF RS.18,43,355/- ON ACCOUNT OF APPLYING A RATE OF 6% ON THE TURNOVER DECLARED BY THE ASSESSEE APPELLANT AT RS.3,07,22,588/-. (II) ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. CIT(A) WAS RIGHT IN DELETING THE ADDITION OF RS.6,88,437/- ON ACCOUNT O F DEPB AMOUNTING TO RS.1,12,982/-, DISCOUNT RS.1,79,902/-, DUTY DRAWBAC K (BANGALORE) RS.31,100/- AND DUTY DRAWBACK (NEW DELHI) RS.3,64,4 53/-. (III) ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD . CIT(A) WAS RIGHT IN DELETING THE ADDITION ON ACCOUNT OF DISALLOWANCE OF LICENSE FEES AMOUNTING TO RS.17,13,388/-. 3. THE APPEAL WAS EARLIER DISMISSED AS BEING DEFECT IVE VIDE TRIBUNAL ORDER DATED 20.12.2013. HOWEVER, ON AN APPLICATION FILED BY REVENUE THE ITA NO.509 (ASR)/2013 ASST. YEAR: 2009-1 0 2 SAID ORDER WAS RECALLED VIDE TRIBUNAL ORDER DATED 1 2.09.2014 AS REVENUE HAD REMOVED THE DEFECTS/DEFICIENCY AND THE APPEAL W AS LISTED FOR HEARING ON MERITS. 4. AT THE OUTSET, THE LEARNED DR INVITED OUR A TTENTION TO ASSESSMENT ORDER AND SUBMITTED THAT THE BOOKS OF ACCOUNTS OF A SSESSEE WERE NOT RELIABLE AS THE ASSESSEE HAD NOT RECORDED TOTAL EXP ENDITURES AND THEREFORE, ASSESSING OFFICER HAD RIGHTLY ESTIMATED THE PROFITS OF ASSESSEE @ 6%. HE FURTHER SUBMITTED THAT AFTER REJECTION OF BOOKS OF ACCOUNT AND AFTER ESTIMATING THE NET PROFIT BASED @ 6% OF SALES , THE ASSESSING OFFICER HAD RIGHTLY ASSESSED SEPARATELY INCOME ON ACCOUNT O F DEPB, DISCOUNT, DUTY DRAWBACK AMOUNTING TO RS.6,88,437/-. AS REGARD S THE THIRD DELETION MADE BY LEARNED CIT(A), THE LEARNED DR SUB MITTED THAT ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT P ROCEEDINGS HAD OBSERVED THAT AN EXPENDITURE OF RS.17,13,388/- WAS NOT BOOKED BY ASSESSEE IN ITS P&L ACCOUNT AND FOR WHICH ASSESSING OFFICER HAD INFORMATION AS PER AIR INFORMATION. IT WAS SUBMITTE D THAT LEARNED CIT(A) HAD DELETED THESE ADDITIONS WITHOUT LOOKING INTO EN TIRE FACTS AND WITHOUT LOOKING INTO FACTS THAT THE BOOKS OF ACCOUNT OF ASS ESSEE WERE NOT RELIABLE IN VIEW OF NOT RECORDING OF EXPENDITURE. 5. THE LEARNED AR SUBMITTED THAT ASSESSEE WAS ENGA GED IN EXPORT OF CARPETS AND HAD DECLARED PROFITS AS PER AUDITED BOO K OF ACCOUNTS AND ITS PROFITS INCLUDED THE INCOME OF RS.,6,88,437/- ON AC COUNT OF DUTY DRAWBACK, DISCOUNT AND DEPB. HE SUBMITTED THAT THE ASSESSEE HAD DULY ITA NO.509 (ASR)/2013 ASST. YEAR: 2009-1 0 3 RECORDED THE EXPENDITURE OF RENT PAID TO WINDSOR HO TEL GOLF COURSE ROAD, BANGLORE AND WHICH WAS PAID THROUGH ICICI BANK AND DETAILS OF WHICH WAS PRODUCED BEFORE LEARNED CIT(A) BESIDES ASSESSIN G OFFICER. HE SUBMITTED THAT LEARNED CIT(A) AFTER GOING THOROUGH THE COMPLETE RECORDS HAD RIGHTLY DELETED THE ADDITION AS THE ADDITION MA DE BY ASSESSING OFFICER WAS NOT BASED UPON THE FACTS AS ASSESSEE HA D DULY RECORDED THE PAYMENTS. 6. AS REGARDS THE REJECTION OF BOOKS THE LEARNED AR SUBMITTED THAT ASSESSING OFFICER HAD REJECTED THE BOOKS OF ACCOUNT MERELY HOLDING THAT ASSESSEE HAD NOT RECORDED THE EXPENDITURE OF RENT P AID TO WINDSOR HOTEL GOLF COURSE ROAD, BANGLORE WHEREAS THE FACT REMAINS THAT ASSESSEE HAD MADE PAYMENTS THROUGH ITS BANK ACCOUNT AND HAD DULY RECORDED THE SAME IN ITS BOOKS OF ACCOUNT AND THEREFORE, THE BAS IS OF REJECTION OF BOOKS WAS NOT IN EXISTENCE AND ASSESSING OFFICER AR BITRARILY APPLIED 6% OF NET PROFIT TO SALES WITHOUT COMPARISON WITH THE EARLIER YEARS PROFITS THE ASSESSMENT OF WHICH WAS ALSO MADE U/S 143(3) OF THE ACT. THEREFORE, IT WAS SUBMITTED THAT THE LEARNED CIT(A) HAD RIGHTLY D ELETED THE ADDITION. SIMILARLY, IT WAS ARGUED THAT SINCE THE INCOME ON A CCOUNT OF DEPB DUTY DRAWBACK ETC. WAS ALREADY INCLUDED IN THE P&L ACCOU NT NO SEPARATE ADDITION WAS WARRANTED AND THEREFORE, THE LEARNED C IT(A) HAS RIGHTLY DELETED THE SAME. 7. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH ROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT ASSESSING O FFICER DURING THE ITA NO.509 (ASR)/2013 ASST. YEAR: 2009-1 0 4 COURSE OF ASSESSMENT PROCEEDINGS REJECTED THE BOOKS OF ASSESSEE AND ESTIMATED THE NET PROFITS @ 6% BY HOLDING AS UNDER: 2.1 LEDGER EXTRACTS OF SOME OF THE ACCOUNTS FROM T HE BOOKS OF ACCOUNT WERE PRODUCED WHICH WERE TEST CHECKED. HOWE VER COMPLETE BOOKS OF ACCOUNT WERE NOT PRODUCED FOR VERIFICATION . IT IS SEEN THAT THE ASSESSEE HAS MADE CERTAIN EXPENSES WHICH ARE NOT BO OKED AT ALL. MOREOVER CASH BOOK WAS NOT PRODUCED FOR VERIFICATIO N WHICH COULD HAVE HELPED IN CORRECT DETERMINATION OF BUSINESS [RECEIP TS AND EXPENDITURES. THE EXPENDITURES MADE BY THE ASSESSEE AT THE WINDSO R HOTEL, GOLF COURSE ROAD, BANGALORE HAVE NOT BEEN BOOKED AT ALL. THEREFORE THE BOOKS OF ACCOUNT ARE DEFECTIVE IS NOT CONTAINING TH E FULL PARTICULARS OF EXPENDITURES AND THE SOURCE THEREOF DURING THE RELE VANT FINANCIAL YEAR. THIS IS A SERIOUS FLAW WITH THE BOOKS OF ACCOUNT SI NCE THE TOTAL EXPENDITURES ARE NOT RECORDED WHICH MAKES THE ENTIR E VERSION OF BOOKS OF ACCOUNT SUSPECT. HENCE THE BOOKS OF-ACCOUNT/ FINANCIAL STATEMENTS FU RNISHED BY THE ASSESSEE AS WELL AS THE AUDIT REPORT IS DEFICIE NT GIVEN THE FACT THAT THESE DO NOT REFLECT COMPLETE PICTURE OF CONTEMPORA RY RECORD OF FINANCIAL EVENTS. MOREOVER THE CASH BOOK WAS NOT FURNISHED FR OM WHICH THE PURCHASES AND OTHER EXPENDITURES PASSED THROUGH THE CASH BOOK COULD HAVE BEEN VERIFIED. RESULTANTLY CORRECT EXAMINATION OF CONTRA ENTRIES COULD NOT BE MADE. IN LIGHT OF THE ABOVE DEFECTS IN THE BOOKS OF ACCOUNTS, THE COUNSEL WAS EXPLAINED THAT PROVISIONS OF SECTION 145(3) WERE ATTRACTED. IN LIGHT OF THE AFOREMENTIONED DEFECTS OBSERVED IN THE COMPLETE BOOKS OF ACCOUNT PRODUCED, THERE IS NO OTHER MECHAN ISM FOR THE UNDERSIGNED TO DETERMINE AND ASSESSEE THE TRUE INCO ME OF THE ASSESSEE FOR THE RELEVANT ASSESSMENT YEAR THAN TO I GNORE THE BOOKS OF ACCOUNT AND THE FINANCIAL STATEMENTS FURNISHED BY T HE ASSESSEE. AFTER CONFRONTING THE COUNSEL WITH THE NATURE OF DEFECTS OBSERVED IN THE BOOKS OF ACCOUNT, PROVISIONS OF SECTION 145(3) ARE INVOKE D AND THE BOOKS OF ACCOUNT/FINANCIAL STATEMENTS ARE REJECTED AND FURTH ER DETERMINATION OF INCOME IS RESTORED TO ON THE BASIS OF THE MATERIAL ON RECORDS IN A MANNER PROVIDED UNDER SECTION 144 OF THE INCOME TAX ACT, 1961. FOR NON-MAINTENANCE OF PROPER AND COMPLETE BOOKS OF ACC OUNT PENALTY PROCEEDINGS UNDER SECTION 271A OF THE INCOME TAX AC T,1961 ARE INITIATED SEPARATELY. AFTER ESTIMATING THE PROFITS THE ASSESSING OFFICER SEPARATELY MADE ADDITION OF RS.6,88,437/- WHICH THE ASSESSEE HAD DE CLARED IN ITS P&L ITA NO.509 (ASR)/2013 ASST. YEAR: 2009-1 0 5 ACCOUNT. SIMILARLY, THE ASSESSING OFFICER MADE AN A DDITION OF RS.17,13,388/- U/S 69C OF THE ACT HOLDING THE SAME TO BE UNEXPLAINED THE EXPENDITURE. 8. FROM THE FINDINGS RECORDED BY ASSESSING OF FICER FOR REJECTION OF BOOKS OF ACCOUNT WE FIND THAT ASSESSING OFFICER WIT HOUT POINTING OUT ANY DEFECT IN SALES AND PURCHASES, OPENING AND CLOSING STOCK REJECTED THE BOOKS OF ACCOUNT BY JUST HOLDING THAT ASSESSEE HAD NOT BOOKED THE EXPENDITURE WHEREAS THE LEARNED CIT(A) HAS MADE A F INDING OF FACT THAT THE EXPENDITURE WAS DULY BOOKED IN THE BOOKS OF ACC OUNT AND WAS REFLECTED IN THE P&L ACCOUNTS AND PAYMENTS THEREOF WERE MADE THROUGH BANK ACCOUNT AND IN VIEW OF THE ABOVE FACTS THE REJ ECTION OF BOOKS OF ACCOUNT WAS NOT JUSTIFIED SPECIALLY KEEPING IN VIEW THE FACT THAT ASSESSING OFFICER DID NOT FIND ANY DEFICIENCY IN TH E SALES, PURCHASES, OPENING STOCKS AND CLOSING STOCK OF THE ASSESSEE. T HE CONTENTION OF THE ASSESSING OFFICER THAT RENT EXPENDITURE OF 17,13,38 8/- WAS INCURRED OUT OF UNEXPLAINED SOURCES IS ALSO NOT CORRECT AS LEARN ED CIT(A) IN THIS RESPECT HAS MADE A CLEAR FINDING OF FACT AND THEREF ORE, THE BASIS WHICH WAS TAKEN BY ASSESSING OFFICER FOR REJECTION OF BOO KS OF ACCOUNT IS ALSO NOT VALID. THE ASSESSING OFFICER WITHOUT COMPARING EARLIER YEAR RESULTS OF THE ASSESSEE APPLIED 6% NET PROFIT RATE WITHOUT ANY BASIS AND THEREFORE, ACTION OF LEARNED CIT(A) IN DELETING SUCH ADDITION IS JUSTIFIED. SIMILARLY, THE ASSESSEE HAD DECLARED THE INCOME ON ACCOUNT OF DUTY DRAWBACK ETC. ITA NO.509 (ASR)/2013 ASST. YEAR: 2009-1 0 6 SEPARATELY IN P&L ACCOUNT AND THEREFORE, THE ADDITI ON WAS NOT JUSTIFIED AND LEARNED CIT(A) HAS RIGHTLY DELETED THE SAME. 9. AS REGARDS RENT PAYMENTS OF RS.17,13,388/- , WE FIND THAT ASSESSEE HAD BEEN CONTINUOUSLY INCURRING SUCH EXPENDITURE AN D EXPENDITURE INCURRED UNDER THIS HEAD FOR YEAR 31.3.2008 & 31.3. 2007 IS RS.16.67 LACS AND 12.98 LACS RESPECTIVELY. THE ASSESSEE HAD CLARIFIED THIS VIDE ITS SUBMISSIONS WHICH ARE NOTED BY LEARNED CIT(A) IN PA RA 4.2. FOR THE SAKE OF CONVENIENCE, THE FINDINGS RECORDED BY LEARNED CI T(A) AS CONTENTED IN PARA 4.2 ARE REPRODUCED. THE AO HAS MADE AN ADDITION OF RS.17,13,388/- ON A CCOUNT OF PAYMENTS MADE TO THE WINDSOR HOTEL, GOLF COURSE ROAD, BANGAL ORE. THE APPELLANT HAS A BRANCH OFFICE AT THE SAID LOCATION. INFORMATI ON ABOUT EXPENDITURE IS REPORTED IN THE AIR WHICH IS REFLECTED AT PAGE-4 OF THE ASSESSMENT ORDER. THE AO HAS OBSERVED THAT THESE PAYMENT HAVE BEEN MA DE FROM UNDISCLOSED SOURCES AND NOT BOOKED IN THE BOOKS OF ACCOUNT. THE APPELLANT ON THE OTHER CONTESTED THIS FINDINGS OF THE AO AND STATED THAT THE AO WITHOUT INQUIRY JUMP TO THE CONCLUSION. THE APPELLA NTS BOOKS OF ACCOUNT ARE AUDITED. IT WAS STATED THAT THE BOOKS OF ACCOUN TS ALONG WITH BANK ACCOUNT, VOUCHERS WERE PRODUCED WITH SUPPORTING EVI DENCE DURING THE COURSE OF HEARING TO PROVE THAT THESE EXPENDITURE A RE DULY RECORDED IN THE BOOKS. THE PAYMENTS WERE VOUCHED FOR AND INFACT THE TOTAL PAYMENT IS RS.19,82,620/- WHICH IS ON ACCOUNT OF LICENSE FEE I NSTEAD OF RS.17,13,386/- AS HELD BY THE AO. THE APPELLANT HAS PAID LICENSE FEE IN PRECEDING YEARS FOR RS.16.67 LACS AND 12.98 LACS FO R THE YEAR ENDING 31.03.08 AND 31.03.07 RESPECTIVELY. THE APPELLANT H AS PLACED BEFORE ME THE COMPLETE DETAIL OF PAYMENTS TO ITC THE WINDSOR HOTEL THROUGH ITS ACCOUNT IN ICICI BANK. IN VIEW OF ABOVE FACTS I HOLD THAT THE AO HAS ERRED IN MAKING ADDITION OF RS.17,13,388/- ON ACCOUNT OF UNEXPLAINED EXPENDITUR E U/S 69C OF THE I.T. ACT, THEREFORE, DELETE THE SAID ADDITION. FROM THE ABOVE FINDINGS WE FIND THAT ASSESSING OFF ICER MADE THE ADDITION WITHOUT ANY BASIS AND WHICH LEARNED CIT(A) HAD RIGHTLY DELETED. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES WE DO NOT FIND ANY INFIRMITY ITA NO.509 (ASR)/2013 ASST. YEAR: 2009-1 0 7 IN THE ORDER OF LEARNED CIT(A) AND THEREFORE, THE A PPEAL FILED BY REVENUE IS DISMISSED. [ 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH MAY, 2016. SD/- SD/- (A.D. JAIN) (T. S. KAP OOR) JUDICIAL MEMBER ACCOUNTA NT MEMBER DATED:06.05.2016. /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER