M/s Infra Developers, Shivpuri V. I.T.O., Shivpuri

ITA 52/AGR/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9594 (ITAT-AGRA)
• Duration Of Justice: 4 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-08-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 15-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: WASHIM ARSHAD
• Keywords: Depreciation; Peak credit; Deemed to accrue or arise in india
• Section: 68; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND DR. MITHA LAL MEENA, ACCOUNTANT MEMBER ITA NO. 52 /AGR/2013 ASSESSMENT YEAR: 2009 - 10 M/S INFRA DEVELOPERS, SHIVPURI. VS. INCOME TAX OFFICER, SHIVPURI (M.P.) PAN: AAB FI5834R APPELLANT RESPONDENT ASSESSEE BY: RAJENDRA SHARMA, ADV. REVENUE BY: WASHIM ARSHAD, SR. DR DATE OF HEARING: 2 1/02 /2017 DATE OF PRONOUNCEMENT: 30 /03 /2017 ORDER PER, DR. MITHA LAL MEENA, AM: THIS APPEAL, BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME TAX, (APPEALS) - 1, AGRA, [ HEREIN AFTER REFERRED TO AS THE CIT ( A)], IN RESPECT OF ASSESSMENT YEAR 20 09 - 10. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. I. ON FACT S AND CIRCUMSTANCES OF THE CASE , THE CIT (APPEALS) WAS NOT JUSTIFIED IN CONFIRMING THE NET PROFIT RATE OF 8% ON 2 ITA NO. 52 /AGR/2013 ASSESSMENT YEAR: 2009 - 10 GROSS CONTRACT RECEIPT WITHOUT LOOKING INTO PAST HISTORY OF THE CASE AND COMPARABLE CASES. II. ON FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT ( APPEALS) WAS NOT JUSTIFIED IN CONFIRMING DISALLOWANCE OF RS. 1,58,154/ - TO THE THREE WORKING PARTNERS. III. ON FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(APPEALS) ERRED IN CONFIRMING AN ADDITION OF RS. 47,46,617/ - ON ACCOUNT OF CURRENT LIABILITIES AND PROVISIONS BEING CREDITORS FOR GOODS. THE GROUND NO. 2 ND IS NOT PRESSED AND CONSIDERED AS WITHDRAWN BY THE ASSESSEE . 1.0 IN THE 1 ST GROUND OF APPEAL, THE ASSESSEES CONTENTION I S THAT THE CIT (APPEALS) WAS NOT JUSTIFIED IN CONFIRMING THE NET PROFIT RATE OF 8% ON GROSS CONTRACT RECEIPT , WITHOUT LOOKING INTO THE PAST HISTORY OF THE CASE AND COMPARABLE CASES. 2.0 DURING THE COURSE OF ASSESSMENT PROCEEDING S , T HE AO OBSERVED THAT THE ASSESSEE DID NOT PRODUCE VOUCHERS IN R ESPECT OF PURCHASE S AND EXPENSES AND THUS RECORDING THIS DISCREPANCY , THE AO HA S REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE BY INVOK ING THE PROVI SIONS OF SEC 145(3). THEREAFTER , THE AO HAS ESTIMATED THE INCOME OF THE ASSESSEE BY APPLYING THE NET PROFIT RATE OF 8% ON THE GROSS TOTAL RECEIPTS DEC LARED BY THE ASSESSEE BEFORE DEPRECIATION, INTEREST AND REMUNERATION PAYABLE TO 3 ITA NO. 52 /AGR/2013 ASSESSMENT YEAR: 2009 - 10 MALE PARTNERS AND THAT THE AO HAS F URTHER ADDED RS. 4746617/ - TOWARDS THE INCOME OF THE APPELLANT, WHICH REPRESENTS THE ACCRETION IN THE AMOUNT OF SUNDRY CREDITORS FOR NON - FURNISHING OF CONFIRMATION OF THE SAME . 3.0 THE LD. CIT ( A) HAS CONFIRMED THE ADDITION, INTER - ALIA , AGREE ING WITH THE VIEW OF THE AO OF REJECTING THE BOOKS OF ACCOUNT AND APPL ICATION OF NET PROFIT RATE OF 8% MADE BEFORE ALLOWING REMUNERATION T O THE PARTNER S AND THAT OF ADDITION ON ACCOUNT OF ACCRETION IN THE AMOUNT OF THE SUNDRY CREDITORS. 4. 0 THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THE AUTHORITIES BELOW , WHILE APPLYING THE NET PROFIT RATE OF 8% BY REJECTING THE BOOKS OF ACCOUNT AND ESTIMATING THE INCOME AT RS. 2026953/ - , AS AGAINST RS. 466830/ - DISCLOSED BY ASSESSEE, HAVE COMPLETELY IGNORED THE PROCEDURE LAID DOWN U/S 145(3) READ WITH SEC 144, CONTE NDIN G THAT IF THE PROVISIONS OF SEC 145(3) ARE INVOKED , THE ASSESSMENT HAS TO BE COMPLETED AS PER THE PROCEDURE LAID DOWN IN THE SEC 144 OF THE INCOME TAX A CT, BY WHICH, THE AO SHALL COMPLETE THE ASSESSMENT OF THE ASSESSEE ON THE BASIS OF MATERIAL GATHERED BY HIM . HE FURTHER SUBMITTED THAT THE AO HAS NOT 4 ITA NO. 52 /AGR/2013 ASSESSMENT YEAR: 2009 - 10 GATHERED ANY MATERIAL ON THE BASIS OF WHICH THE ASSESSMENT COULD BE COMPLETED IN THE MANNER, IT WAS DONE IN THE CASE OF THE ASSESSEE . 5.0 IN SUPPORT , HE RELIED ON THE DECISION OF THE JURISDICTIONAL HIGH COURT OF MADHYA PRADESH AND ALSO THAT OF THE ITAT, AGRA B ENCH , AGRA . IN THE DECISION S OF THE HONBLE HIGH COURT OF MADHYA PRADESH AND THE ITAT AGRA BENCH , IT IS HELD THAT WHILE ESTIMATING INCOME OF THE ASSESSEE, THE AO SHOULD CONSIDER THE ASSESSEES PAST HISTORY , WHICH WOULD BE THE BEST COMPARABLE CASE FOR THE COMPLETION OF THE ASSESSMENT . THE OTHER DECISIONS OF VARIOUS H IGH C OURTS RELIED ON BY THE ASSESSEE IN SUPPORT OF HIS CASE ARE LISTED BELOW . I. DECISION OF HONBLE HIGH COURT OF MADHYA PRADESH, IN THE CASE OF DINA NATH DUBEY VS. C.I.T., 160 ITR 1 (MP) II. DECISIONS OF HONBLE HIGH COURT OF RAJASTHAN IN THE CASE OF C.I.T. VS. INANI MARBLES (P) LTD. 31 ITR 125 III. DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF DELTA ENGINEERING CO. (P) LTD. VS. C.I.T. 186 ITR 383. IV. DECISION OF HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF SHANKAR KHANDASARI SUGAR MILLS VS. C.I.T. 193 ITR 669 V. DECISION OF HONBLE HIGH COURT OF CALCUTTA IN THE CASE OF C.I.T. VS. RANICHERRA TEA CO. LTD. 207 ITR 979 5 ITA NO. 52 /AGR/2013 ASSESSMENT YEAR: 2009 - 10 VI. DECISION OF ITAT, AGRA BENCH, AGRA IN THE CASE OF OM CONSTRUCTION CO. VS. C.I.T., GWALIOR VIDE ITA NO. 368/AGR/2013 THE LD AR CONTENDED T HAT THE INCOME OF THE ASSES SEE HAS TO BE ESTIMATED TAKING INTO CONSIDERAT ION THE ASSESSEES PAST HISTORY AND JUDICIAL PRECEDENTS RELEVANT IN HIS CASE . A S PER THE ASSESSEES PAST HISTORY , THE PROFIT OF THE ASS ESSEE FOR THE LAST TWO YEARS IS AS UNDER: PARTICULARS A/Y 2009 - 10 A/Y 2008 - 09 A/Y 2007 - 08 GROSS RECEIPTS 50,120,007.00 57,623,108.00 54,998,753.00 NET PROFIT AFTER INTEREST AND SALARY PAID TO PARTNERS 470165.00 676732.00 888748.00 N.P. RATE AFTER INTEREST PAID TO PARTNERS 0.938% 1.18% 1.6% NET PROFIT BEFORE INTEREST AND SALARY PAID TO PARTNERS 1774795.00 1952991.00 2102171.00 N.P. RATE BEFORE INTEREST PAID TO PARTNERS 3.54% 3.3% 3.8% SUNDRY CREDITORS 14,763,840.00 8,846,706 8,171,203.00 THE AR ALSO SUBMITTED T HAT THERE IS CONSISTENCY IN THE TRADING RESULTS SHOWN BY THE APPELLANT , THUS , AS PER PAST HISTORY , THE ASSESSEES INCOME DURING THE YEAR UNDER CONSIDERATION IS ENTITLED TO BE ACCEPTED AND ADDITION MADE ON THIS SCORE BY APPLYING THE NET RATE OF 8% IS LIABLE TO BE DELETED , HAVING NO BASIS FOR SUCH ESTIMATION. 6. THE LD. DR , ON THE OTHER HAND , SUPPORTED THE IMPUGNED ORDER . 6 ITA NO. 52 /AGR/2013 ASSESSMENT YEAR: 2009 - 10 7 . IT IS UNDISPUTED FACT THAT BOOKS OF ACCOUNT ARE REJECTED BY INVOKING PROVISIONS OF SECTION 145(3) OF THE ACT, POINTING OUT THAT PURCHASES AND EXPENDITURE VOUCHERS OF TH E ASSESSEE ARE NOT VERIFIABLE. THE AS SESSEE HAS NOT OBJECTED TO THE REJECTION OF THE BOOKS OF ACCOUNT. THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THE AO HAS NOT BROUGHT ANY SPECIFIC MATERIAL EVIDENCE ON RECORD FOR DRAWING SUCH INFERENCE, BY POINTING OUT AS TO WHICH PURCHASE OR EXPE NSES VOUCHER S WERE NOT VERIFIABLE . HE FURTHER SUBMITTED THAT THE AO HAS NOT APPLIED ANY COMPARABLE CASE, IN SUPPORT, FOR APPLICATION OF HIGH PROFIT RATE ON GROSS TOTAL RECEIPT. HE CONTENDED THAT EITHER THE AO OR THE 1 ST APPELLATE AUTHORITY OUGHT TO HAVE DISTINGUISHED THE FINDING S OF THE JURISDICTIONAL HONBLE HIGH COURT GIVEN IN THE CASE S CITED AS ABOVE ON , IDENTICAL FACTS , IN SUPPORT OF THE INSTANT CASE. 8. WE FIND THAT THE AO HAS NEITHER POINTED OUT ANY SPECIFIC DEFICIENCY , IN THE PURCHASE INVOICE S OR THE EXPENSE INVOICE S, NOR DISCUSSED ANY COMPARABLE CASE ON IDENTICAL FACTS, TO FORM THE BASIS FOR APPLICATION OF A PARTICULAR NET PROFIT RATE ON GROSS TOTAL RECEIPTS, IN THE CASE OF THE ASSESSEE. ON PERUSAL OF THE COMPARATIVE NET PROFIT C HART OF THE ASSESSES S PAST HISTORY ON PROFIT RATE , AS ABOVE, IT IS EVIDENT THAT THE 7 ITA NO. 52 /AGR/2013 ASSESSMENT YEAR: 2009 - 10 NET PROFIT RATE BEFORE INTEREST PAID TO PARTNERS CAPITAL IS REASONABLY DECLARED AT 3.54 % AS AGAINST 3.3 % AND 3.8 % OF THE PREVIOUS YEARS . HOWEVER, AFTER INTEREST PAID TO PARTNERS CAPITAL, IT IS REDUCED TO BELOW 1% AS COMPARED TO 1.18 % AND 1.6% FROM THE EARLIER ASSESSMENT YEAR S AS ABOVE. AFTER CONSIDERING THE DECISIO NS CITED AND THE HISTORY OF THE CASE , IT IS FACTUALLY CLEAR THAT THE PROFIT RATE APPLIED BY A UTHORITIES BELOW AT 8% IS TOO MUCH ON THE HIGHER SI DE AND IS UNREASONABLE. FOLLOWING THE ORDER OF THE ITAT , AGRA BENCH, IN THE CASE OF M/S OM CONSTRUCTION COMPANY , ON IDENTICAL FACTS, WE FIND IT JUST , FAIR AND REASONABLE TO ESTIMATE THE INCOME OF THE ASSE SSEE AT THE NET PROFIT RATE OF 4 % OF THE GROSS TOTAL RECEIPTS BEFORE SALARY AND INTEREST TO THE PARTNERS OF THE FIRM, FOR THE YEAR UNDER APPEAL. THU S, THE ASSESSEE GETS RELIEF OF 4 % IN ESTIMATION OF PROFIT RATE ON THE GROSS TOTAL RECEIPTS , AS AGAINST THE 8 % NET PROFIT RATE ESTIMATED BY THE A UTHORITIES BELOW . THUS, THE 1 ST GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 9. IN THE 3 RD GROUND OF APPEAL, THE ASSESSEE HAS CHALLENGED THE ADDITION OF RS. 47,46,617/ - ON ACCOUNT OF CURRENT LIABILITIES AND PROVISIONS , BEING CREDITORS FOR GOODS. 8 ITA NO. 52 /AGR/2013 ASSESSMENT YEAR: 2009 - 10 9.1 THE AO HAS MADE AN ADDITION OF RS. 47,46,617/ - ON A /C OF C URRENT LIABILITIES & PROVISIONS, BEING CREDITOR S FOR GOODS. THE AMOUNT OF RS. 47,46,617/ - HAS BEEN WORKED OUT BY DEDUCTING THE BALANCES UNDER THE CURRENT LIABILITIES & PROVISIONS OF A SSESSMENT YE AR 2008 - 09 FROM THE A SSESSMENT YEAR 2009 - 10 . 9.2 WHILE UPHOLDING THE ADDITION, T HE LD CIT (A), INTER - ALIA , OBSERVED AS UNDER - THE APPELLANT HAS NOT BEEN ABLE TO FURNISH ANY EVIDENCE TO PROVE THE GENUINENESS OF THE LIABILITIES APPEARING IN THE BALANCE SHEET. THEREFORE, THE ACTION OF THE A.O. TREATING THE SAME AS UNPROVED LIABILITY IS REQUIRED TO BE CONFIRMED BECAUSE EVEN DURING THE COURSE OF APPELLATE PROCEEDINGS ALSO THE APPELLANT HAS NOT BEEN ABLE TO FURNISH ANY EVIDENCE TO PROVE THE GENUINENESS OF TH ESE LIABILITIES. AS FAR AS THE DECISION OF THE ITAT CITED BY THE APPELLANT ARE CONCERNED, IT IS OF NO HELP TO THE APPELLANT AS THE FACTS OF THE CASE OF THE APPELLANT ARE DIFFERENT FROM THE FACTS OF THE CASE CITIED BY THE APPELLANT. ACCORDINGLY, THIS GROUND OF THE APPEAL IS DISMISSED AND THE ORDER OF THE A.O. IS CONFIRMED . 9.3 FOR THE ASSESSEE, THE LD AR FILED A WRITTEN REPLY THAT READS AS UNDER - GROUND NO. 3 : (A) THAT THE AO HAS MADE THE ADDITION AT RS. 4746617/ - TREATING THE TRADE CREDITORS APPEARING IN THE BOOKS OF ACCOUNT WHICH ARE INCREASED BY 4746617/ - IF COMPARED WITH THE BALANCE AS ON 31.03.2008 AS PER THE 9 ITA NO. 52 /AGR/2013 ASSESSMENT YEAR: 2009 - 10 BALANCE SHEET OF THE ASSESSEE. IN THIS CONNECTION I T IS RESPECTFULLY SUBMITTED THAT IN THE CASE OF ASSESSEE THE AO HAS REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED THE INCOME BY APPLYING THE NET PROFIT RATE OF 8% ON THE GROSS TOTAL RECEIPTS, IT IS SUBMITTED THAT WHERE THE BOOKS OF ACCOUNTS ARE REJECTED, IN THAT CASE, THE AO CANNOT PICK UP SOME OF THE ENTRIES FROM SAME BOOKS OF ACCOUNTS WHICH ARE REJECTED BY THE AO, ONCE BOOKS OF ACCOUNT ARE REJECTED SAME ARE TO BE CONSIDERED AS REJECTED FOR ALL PURPOSES, THE AO SHOULD NOT PICK AND CHOOSE THE ENTRIES FOR COMP UTING OF THE INCOME. THAT AS REGARDS THE NATURE OF THESE ENTRIES/AMOUNTS ARE CONCERNED THESE REPRESENT THE OUTSTANDING PAYMENT WHICH IS TO BE PAID TO VARIOUS TRADERS FROM WHOM THE ASSESSEE HAD MADE THE PURCHASES AND THESE AMOUNTS REPRESENT THE OUTSTANDING AMOUNT PAYABLE TO VARIOUS TRADERS RELATED TO THE PURCHASES MADE BY ASSESSEE UTILISED IN THE CONTRACT AND CONSTRUCTION WORK UNDERTAKEN BY THE ASSESSEE WHICH ARE DIRECTLY RELATED WITH THE RECEIPTS FROM CONTRACT BUSINESS OF THE ASSESSEE DULY ACCEPTED BY THE A O, IF THE RECEIPTS/PAYMENTS RECEIVED TO THE ASSESSEE IS ACCEPTED THEN THE EXPENSES RELATED TO THESE RECEIPTS CANNOT BE DOUBTED PARTICULARLY WHEN THE BOOKS OF ACCOUNT ARE REJECTED AND PROFIT IS WORKED OUT BY WAY OF ESTIMATION. (B) IN THIS CONNECTION KIND AT TENTION IS INVITED TOWARDS THE FOLLOWING DECISIONS WHEREIN HONBLE HIGH COURTS HELD THAT IF THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE REJECTED THEN NO FURTHER ADDITION COULD BE MADE FROM SAME BOOKS OF ACCOUNT WHICH ARE REJECTED BY THE AO. THUS NO ADDITION ON THIS SCORE IS CALLED FOR, ADDITION MADE BY THE AO AND SUSTAINED BY THE C.I.T. APPEALS IS LIABLE TO BE DELETED. 1. DECISION OF HONBLE HIGH COURT OF PUNJAB & HARYANA, IN THE CASE OF C.I.T. VS. AGGARWAL ENGG. CO. (JAL.), 302 ITR 246 (PH.) 2. DECISION OF HONBLE ITTAT, AGRA BENCH, AGRA IN THE CASE OF AC.I.T. VS. JAGDISH PRASAD SHARMA, ITA NO. 613/AGR/08 10 ITA NO. 52 /AGR/2013 ASSESSMENT YEAR: 2009 - 10 3. DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF C.I.T. VS. BANWARILAL BANSHIDHAR, 229 ITR 229 (ALL.) 4. DECISION OF HONBLE HIGH COURT OF AND RA PRADESH, IN THE CASE OF INDWELL CONSTRUCTIONS VS. C.I.T., 232 ITR 776 (AP) 5. DECISION OF HONBLE HIGH COURT OF PUNJAB & HARYANA , IN THE CASE OF C.I.T. VS. SMT. SANTOSH JAIN, 296 ITR 324 (PH). 9.4 PER CONTRA, T HE LD. DR SUPPORTED THE ORDER OF THE CIT(A), RELYING ON THE FOLLOWING DECISIONS - I. DEVINDER SINGH VS. CIT - III,FEROJPUR [2007] 104 ITD 325 (AMRITSAR), ITAT, AMRITSAR BENCH. II. CIT VS K. PALANIAPPAN, [2000] 242 ITR 719 MAD (HC). III. CIT VS M/S KERALA SPONGE IRON LTD, KERALA, ITA NO. 195 OF 2014 IN KERALA (HC) CIVIL APPEAL NO. 9772 OF 2013 IV. ALLAHABAD (HC) SARRAF TRADING CO. V. LIBERTY PLYWOOD P. LTD VS. ACIT AMBALA, ITA NO. 727/CHD/2012. ITAT CHANDIGARH. 9.5 T HE LD AR ARGU ED FURTHER THAT THE CASES RELIED ON BY THE DEPARTMENT ARE D ISTINGUISHABLE O N FACTS . 9.5.1 THAT IN THE CASE OF DEVENDRA SINGH VS. ACIT, FIROZPUR, AMRITSAR, THE FACTS ARE THAT THE ASSESSEE WAS COMMISSION AGENT FOR SALE OF AGRICULTURAL PRODUCE , LIKE COTTON , NARMA AND ADDITION WA S MADE UNDER SECTION 68 , IN RESPECT OF SPECIFIC ENTRIES IN THE BOOKS OF ACCOUNT OF THE 11 ITA NO. 52 /AGR/2013 ASSESSMENT YEAR: 2009 - 10 ASSESSEE, IN THE BACK GROUND OF MEAGRE CAPITAL OWNED AND YET SHOWN SEVERAL CREDITS IN BALANCE S WHILE IN THE CASE OF THE APPELLANT, THE BOOKS OF ACCOUNT ARE REJECTED AND THE ADDITION WAS MADE ON ACCOUNT OF ACCRETION TO TRADE CREDITORS . THUS, THE ISSUE AND FACTS INVOLVED IN THE C ASE OF THE APPELLANT ARE DIFFERENT . 9.5.2 THAT IN ANOTHER CASE OF COMMISSIONER OF INCOME TAX VS. PALANIAPPAN , THE ADDITION WAS MADE IN RESPECT OF CREDIT ENTRIES IN THE ACCOUNT OF THE ASSESSEE IN RESPECT OF THE EARLIER YEAR ON ACCOUNT OF VDIS . WHETHER THEY WOULD CONSTITUTE THE SOURCE OF CREDIT ENTRIES IN THE SUBSEQUENT YEAR AND THE MATTE R WA S RESTORED AS REGARDS TO ONE SPECIFIC ENTRY OF VDIS. IT WAS NOT A CASE WHERE THE BOOKS OF ACCOUNT WERE REJECTED AND ADDITION ON ACCOUNT OF ACCRETION TO TRADE CREDITORS WAS MADE . WHEREAS IN THE INSTANT CASE T HE FACTS AND ISSUE INVOLVED ARE NOT IDENTICAL WITH THE FACTS AND ISSUE OF THE CASE UNDER CONSIDERATION. 9.5. 3. THAT IN THE DECISION OF COMMISSIONER OF INCOME TAX, TRICHUR VS. M/S KERALA SPONGE IRON , ( SUPRA ), THE ISSUE WAS IN RESPECT OF ASSESSMENT OF PROFIT FROM COMMODITY TRADING AS CASH CREDITS UNDER SECTION 68 , WHEREAS THE FACTS ARE ALTOGETHER DIFFERENT IN THE INSTANT CASE . 12 ITA NO. 52 /AGR/2013 ASSESSMENT YEAR: 2009 - 10 9.5. 4. IN T HE CASE , OF COMMISSIONER OF INCOME TAX, KANPUR VS. SHARAF TRADING CO. (SUPRA) , THE ISSUE IS RELATED TO THE ADDITIONS OF UNEXPLAINED PEAK CREDIT , MADE IN RESPECT OF THE EARLIER YEARS AND THAT TO O CONSTITUTE THE SOURCE FOR CREDIT ENTRIES IN THE SUBSEQUENT YEAR. TH E SAID CASE IS ALSO DISTINGUISH ABLE ON FACT S AND THEREFORE , IT IS OF NO HELP TO THE DEPARTMENT . 9.5. 5. LIKEWIS E , IN THE CASE OF , ITAT CHANDIGARH, LIBERTY FOOD PVT. LTD. VS. ACIT AMBALA (SUPRA) THE ISSUE INVOLVED WA S WHETHER THE SURRENDERED INCOME CAN BE TAXED AS DEEMED INCOME , WITHOUT SETTING OF F THE LOSSES UNDER SECTIO NS 70 AND 71. THIS ISSUE IS DIFFERENT FROM THE ISSUE INVOLVED IN THE INSTANT CASE. THUS, T HE FACTS OF THE CASE, AS REFERRED BY THE LEARNED D.R. ARE NOT IDENTICAL TO THE FACTS OF THE CASE OF THE ASSESSEE AND , THEREFORE , CAN NOT BE USED AS JUDICIAL PRECEDENT IN THE CASE OF THE ASSESSEE. 9.6 WE HAVE HEARD BOTH THE SIDES , PERUSED THE MATERIAL ON R ECORD AND THE CITATION S RELIED ON IN SUPPORT THEREOF, ON THE ISSUE OF ADDITION OF ACCRETION TO TRADE CREDITORS . IT IS UNDISPUTED FACT THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE HA VE BEEN REJECTED BY THE AO . THE PROFIT OF THE ASSESSE E IS ESTIMATED , AS PROVIDED UNDER SECTION 145(3) OF THE ACT. IT IS 13 ITA NO. 52 /AGR/2013 ASSESSMENT YEAR: 2009 - 10 SEEN THAT W HEN GP RATE IS APPLIED FOR ESTIMATION OF INCOME OF THE ASSESSEE, IT WOU L D COVER ANY AND EVERY INFIRMITY AND THERE WAS NO NEED FOR THE AO TO MAKE FURTHER SCRUTINY OF PURCHASES , EXPENSES AND OTHER ACCOUNTS OF THE ASSESSEE . THE LD AR CONTENDED THAT O NCE BOOKS OF ACCOUNT WE RE REJECTED U/S 145(3) OF THE ACT, THE AO OUGHT TO HAVE PROCEEDED TO COMPLETE THE ASSESSMENT AS PER THE PROCEDURE LAID DOWN U/S 144 OF THE ACT . HE WAS REQUIRED TO COLLECT SPECIFIC DOCUMENTARY EVIDENCES IN SUPPORT OF THE NECESSARY ADDITIONS REQUIRED TO BE MADE , BUT HE HAD FAILED TO DO SO. I N ANY EVENT , THE REVENUE WOULD NOT B E IN A POSITION TO RELY ON THE REJECTED BOOKS OF ACCOUNT FOR MAKING THE ADDITION ON ACCOUNT OF TRADE CREDITORS . 9.6.1 THE LD AR FURTHER CONTENDED THAT ONCE THE BOOKS OF ACCOUNT ARE REJECTED, THE SAME ARE REJECTED FOR ALL PURPOSES. HE RELIED ON THE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH C OURT IN THE CASE OF CIT VS. AGRAWAL ENGINEERING CP. , 302 ITR 246(P & H), AS REFERRED AT SR. NO. 7 OF THE PAPER BOOK, AND FURTHER RELIED ON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. BAHUBALI NEMINATH MUTTIN , 291 CTR 214 (KARNATAKA) WHEREIN IT IS HELD THAT AS IT IS EVIDENT THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE REJECTED BY THE ASSESSING 14 ITA NO. 52 /AGR/2013 ASSESSMENT YEAR: 2009 - 10 AUTHORITY IN WHICH CASE , THE SAME BOOKS OF ACCOUNT COULD NOT BE RELIED ON FOR AN ADDITION ON ACCOUNT OF TRADE CREDITORS. 9.6. 2 FOLLOWING THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. BAHUBALI NEMINATH MUTTIN , 291 CTR 214 (KARNATAKA) ON THE IDENTICAL FACT S , WE HOLD THAT THE ORDER OF THE LD. CIT(A) IS NOT BASED ON ANY FINDING OF FACT AND ALSO THE CORRECT APPLICATION OF LAW. THEREFORE, WE HOLD THAT THE THE LD. CIT (A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION ON THE ISSUE OF ACCRETION TO TRADE CREDITORS. ACCORDINGLY , GROUND 3 RD OF THE APPEAL OF THE ASSESSEE IS ACCEPTED . 10. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 /03/2017. SD/ - SD/ - (A.D. JAIN) (DR. MITHA LAL MEENA) JUCICIAL MEMBER ACCOUNTANT MEMBER DATED: 30 /03/2017 * R COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR