Asstt. Commissioner of Income Tax-6, Kanpur V. M/s. Narain Institute of Management Studies P.Ltd., Kanpur

ITA 526/LKW/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78490 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 22-04-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 15-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K RAM
• Assessee Lawyers: V P YADAV
• Keywords: Rejection of books of accounts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B , LUCKNOW BEFORE SHRI S UNIL KUMAR YADAV , JUDICIAL MEMBER AND SHRI. A. K. GARODIA , ACCOUNTANT MEMBER ITA NO. 526/LKW/2012 ASSESSMENT YEAR: 2009 - 10 ACIT - 6 KANPUR V. M/S NARAIN INSTITUTE OF MANAG EMENT STUDIES PVT. LTD. KANPUR PAN: AACCN2356B (APP ELL ANT) (RESPONDENT) APP ELL ANT BY: SHRI. R. K. RAM, D.R. RESPONDENT BY: SHRI. V. P. YADAV, C.A. DATE OF HEARING: 22.04.2014 DATE OF PRONOUNCEMENT: 24 .04.2014 O R D E R PER SUNIL KUMAR YADAV: THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A), INTER ALIA, ON THE FOLLOWING GROUNDS: - 1 . THAT THE ID. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND ON FACTS IN REJECTING TH E STAND OF ASSESSING OFFICER FOR REJECTION OF BOOKS OF ACCOUNTS AS TH E ASSESSCE FAILED TO PROVE EXPENSES WITH DOCUMENTARY EVIDENCE AND AO RIGHTLY REJECTED THE BOOKS OF AS CORRECT RESULTS COULD NOT BE OBTAINED FROM THESE. 2 . THE ID. COMMISSIONER OF INCOME TAX (APPEALS) HAS ALSO ERRED IN LAW AND ON FAC TS IN NOT AGREEING WITH THE ARGUMENTS OF THE AO THAT IN ABSENCE OF COMPLETE BOOKS OF ACCOUNT HE HAD NO OTHER OPTION BUT TO REJECT THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND TO PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 2 - : EST IMATE THE INCOME OF THE ASSESSE E AT TH E TIME OF ASSESSMENT PROCEEDINGS. THE LD . CIT (A) HAS HIMSELF ENHANCED INCOME RETURNED ON THE GROUNDS OF EXPENSES NOT BEING SUBSTANTIATED. 3 . THAT THE ORDER OF THE ID. COMMISSIONER OF INCOME TAX (APPEALS) BEING E RRONEOUS IN LAW AND ON FACTS DESERVES TO BE VACATED AND THE ORDER OF THE ASSESSING OFFI CER BE RESTORED. 2 . THROUGH THESE GROUNDS , THE REVENUE HAS CHALLENGED THE FINDINGS OF THE LD. CIT(A) WITH REGARD TO THE REJECTION OF THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE REVENUE HAS NOT CHALLENGED THE APPEAL ON MERIT BY RAISING ANY SPECIFIC GROUND. TH E SOLE ISSUE BEFORE US IS WHETHER THE REJECTION OF THE BOOKS OF ACCOUNT IS PROPER OR NOT. 3 . FROM A CAREFUL PERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW, WE FIND THAT THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE ONLY FOR THE REASO N THAT THE EXPENSES CLAIMED BY THE ASSESSEE UNDER THE HEAD ADMINISTRATIVE EXPENSES ARE NOT VERIFIABLE AND HE ACCORDINGLY ESTIMATED THE NET PROFIT RATE AT 10% OF THE TRAINING FEE RECEIVED, RESULTING INTO AN ADDITION OF RS.31,47,234/ - , AGAINST WHICH AN APP EAL WAS FILED BEFORE THE LD. CIT(A) AND THE LD. CIT(A) HAS EXAMINED THE ISSUE AFRESH AND HAVING NOTED THAT ALL THE EXPENSES ARE NOT VERIFIABLE, HE DISALLOWED PART OF THE EXPENSES , RESULTING INTO AN ADDITION OF RS.15 LAKHS. 4 . AGGRIEVED, THE REVENUE HAS PREFER RED AN APPEAL BEFORE THE TRIBUNAL WITH THE SUBMISSION THAT WHEN THE EXPENDITURES ARE NOT VERIFIABLE, THE BOOKS OF ACCOUNT WERE RIGHTLY REJECTED BY THE ASSESSING OFFICER AND THESE FACTS WERE NOT PROPERLY CONSIDERED BY THE LD. CIT(A) WH ILE KNOCK ING DOWN THE REJECTION OF THE BOOKS OF ACCOUNT. 5 . THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, BESIDES PLACING HEAVY RELIANCE UPON THE ORDER OF THE LD. CIT(A), HAS ARGUED THAT THE PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 3 - : BOOKS OF ACCOUNT CAN ONLY BE REJ ECTED WHEN THE CORRECT PROFIT COULD NOT BE WORKED O UT OR THE BOOKS OF ACCOUNT ARE COMPLEX. BUT WHENEVER ANY PARTICULAR EXPENDITURE IS NOT VERIFIABLE , THE BOOKS OF ACCOUNT SHOULD NOT BE REJECTED AND CERTAIN EXPENDITURES, WHICH ARE NOT OPEN TO VERIFICATION, CAN ONLY BE DISALLOWED. IN SUPPORT OF HIS CONTENT ION, THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE UPON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. PARADISE HOLIDAYS 2010 (ITI) - GJX - 0371 - DEL, IN WHICH THE HONBLE HIGH COURT HAS HELD THAT IF ANY PARTICULAR EXPENSE CLAIMED BY THE ASSESSEE REMAINED UNVERIFIED, THE ASSESSING OFFICER COULD HAVE DISALLOWED THAT PARTICULAR EXPENSE, BUT THAT BY ITSELF CANNOT BE A GROUND FOR REJECTION OF THE BOOKS OF ACCOUNT AS A WHOLE UNDER SECTION 145(3) OF THE ACT. 6 . HAVING GIVEN A THOUGHTFUL CONSID ERATION TO THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF THE ORDERS OF THE LOWER AUTHORITIES , WE FIND THAT THE BOOKS OF ACCOUNT CAN BE REJECTED UNDER SECTION 145(3) OF THE ACT WHERE THE ASSESSING OFFICER IS NOT SATISFIED ABOUT THE CORRECTNESS OR COMP LETENESS OF THE ACCOUNTS OF THE ASSESSEE OR WHERE EITHER THE METHOD OF ACCOUNTING PROVIDED IN SUB - SECTION (1) OR THE ACCOUNTING STANDARDS AS NOTIFIED UNDER SUB - SECTION (2) HAV E NOT BEEN REGULARLY FOLLOWED BY THE ASSESSEE. BEFORE REJECTING THE BOOKS OF ACC OUNT, THE ASSESSING OFFICER IS REQUIRED TO ESTABLISH ANY OF THE AFORESAID CONDITIONS. FROM A CAREFUL PERUSAL OF THE ORDERS OF THE LOWER AUTHORITIES, WE FIND THAT THE BOOKS OF ACCOUNT WERE REJECTED BY THE ASSESSING OFFICER ONLY FOR THE REASON THAT CERTAIN EXPENDITURES CLAIMED BY THE ASSESSEE ARE NOT VERIFIABLE. IN THIS REGARD, WE HAVE CAREFULLY PERUSED THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. PARADISE HOLIDAYS (S UPRA), IN WHICH IT HAS BEEN CATEGORICALLY HELD THAT IF ANY PARTICULA R EXPENSE CLAIMED BY THE ASSESSEE REMAINED UNVERIFIED, THE ASSESSING OFFICER COULD HAVE DIS ALLOWED THAT PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 4 - : PARTICULAR EXPENSE , BUT THAT BY ITSELF CANNOT BE A GROUND FOR REJECTION OF THE BOOKS OF ACCOUNT AS A WHOLE UNDER SECTION 145(3) OF THE ACT. 7 . FROM THE PER USAL OF THE ORDER OF THE LD. CIT(A), WE FIND THAT THE LD. CIT(A) HAS OVERRULED THE DECISION OF THE ASSESSING OFFICER FOR REJECTING THE BOOKS OF ACCOUNT. BUT SO FAR AS THE VERACITY OF THE EXPENDITURES CLAIMED BY THE ASSESSEE IS CONCERNED, THE LD. CIT(A) WA S ALSO OF THE VIEW THAT ALL THESE EXPENDITURES ARE NOT OPEN TO VERIFICATION AND HE HAS MADE DISALLOWANCE OF PART OF THE EXPENDITURES. NOW THE REVENUE IS IN APPEAL BEFORE US BUT THEY HAVE NOT RAISED ANY GROUND OF APPEAL WITH REGARD TO THE QUANTUM OF DISALL OWANCE. THEY ARE AGGRIEVED ONLY WITH REGARD TO THE DECISION OF THE LD. CIT(A) FOR SETTING ASIDE THE ORDER OF THE ASSESSING OFFICER FOR REJECTING THE BOOKS OF ACCOUNT. W E HAVE CAREFULLY EXAMINED THE ORDER OF THE LD. CIT(A) AND WE FIND THAT THE LD. CIT(A) HAS RIGHTLY SET ASIDE THE ORDER OF THE ASSESSING OFFICER IN THIS REGARD IN THE LIGHT OF VARIOUS JUDICIAL PRONOUNCEMENTS THAT THE BOOKS OF ACCOUNT CANNOT BE REJECTED IF A PARTICULAR EXPENDITURE IS NOT OPEN FOR VERIFICATION. AT THE MOST , THAT PARTICULAR EXP ENDITURE MAY BE DISALLOWED. WE, THEREFORE, FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A). ACCORDINGLY WE CONFIRM THE SAME. 8 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24.4.2014. SD/ - SD/ - [ A. K. GARODI A ] [ S UNIL KUMAR Y ADAV ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 24 TH APRIL, 2014 JJ: 2204 PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 5 - : COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR ASSISTANT REGISTRAR PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ )