The Income Tax Officer, Jammu & Kashmir V. M/s. Chinar Motors, Srinagar

ITA 566/ASR/2013

• Counselvise Citation: 56620914 RSA 2013
• Duration Of Justice: 2 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 17-05-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 30-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts
• Section: 44AD; 143(3)

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. 566(ASR)/2013 ASSESSMENT YEAR: 2009-10 PAN: AAEFC3803F INCOME TAX OFFICE WARD 3(1), SRINAGAR. VS. M/S. CHINAR MOTORS, M.A. ROAD, SRINAGAR, KASHMIR. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. TARSEM LAL (DR) RESPONDENT BY: SH. SUDHIR SEHGAL (ADV.) DATE OF HEARING: 2 6.10.2015 DATE OF PRONOUNCEM ENT: 13.11.2015 ORDER PER T. S. KAPOOR (AM): THIS IS AN APPEAL FILED BY THE REVENUE AGAINST TH E ORDER OF CIT(A), JAMMU, DATED 18.06.2013 FOR ASST. YEAR 2009-10. THE APPEAL WAS EARLIER DISMISSED ON ACCOUNT OF NON REMOVAL OF DEFECT BY TH E DEPARTMENT VIDE TRIBUNAL ORDER DATED 20 TH DECEMBER, 2013. HOWEVER, THE SAID TRIBUNAL ORDER W AS RECALLED VIDE ORDER DATED 26 TH SEPTEMBER, 2014 AND APPEAL WAS LISTED FOR HEARING ON MERITS. 2. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS OF A PPEAL. (I) ON THE FACTS AND CIRCUMSTANCES WHETHER THE LEA RNED CIT(A) WAS RIGHT IN DELETING THE ADDITION OF RS.14,90,815/- WHICH HAS B EEN MADE BY THE AO ON ACCOUNT OF APPLYING A NET PROFIT OF 1.5% BEFORE ALL OWING INTEREST AND SALARY TO PARTNERS BY REJECTING THE BOOKS OF ACCOUNTS OF THE APPELLANT. (II) ON THE FACTS AND CIRCUMSTANCES WHETHER THE LEA RNED CIT(A) WAS RIGHT IN DELETING THE ADDITION OF RS.13,32,536/- ON ACCOUNT OF DIRECT INCOME. 2. ITA NO. 5 66(ASR)/2013 ASST. YEAR 2009-10 (III) ON THE FACTS AND CIRCUMSTANCES WHETHER THE LE ARNED CIT(A) WAS RIGHT IN DELETING THE ADDITION OF RS.21,296/- ON ACCOUNT OF INTEREST INCOME BASED ON AIR INFORMATION. (IV) ON THE FACTS AND CIRCUMSTANCES WHETHER THE LEA RNED CIT(A) WAS RIGHT IN DELETING THE ADDITION OF RS.12,88,683/- OUT OF RS.2 5,77,366/- WHICH HAS BEEN MADE BY THE AO ON ACCOUNT OF APPLYING A NET PROFIT OF 20% ON CONTRACT RECEIPTS. (V) THE APPELLANT CRAVES TO AMEND OR ADD ANY ONE OR MORE GROUNDS OF APPEAL. 3. AT THE OUTSET, THE LEARNED DR SUBMITTED THAT THE LEARNED CIT(A) HAS NOT CONSIDERED THE OBSERVATIONS MADE BY ASSESSING OFFIC ER REGARDING NON PRODUCTION OF COMPLETE BOOKS OF ACCOUNT INCLUDING C ASH BOOKS AND ASSESSING OFFICER IN VIEW OF NON FURNISHING OF COMPLETE BOOKS OF ACCOUNT WAS FORCED TO REJECT THE BOOKS OF ACCOUNT AS THOSE WERE NOT RELIA BLE AND THEREFORE, HAD MADE BEST JUDGMENT ASSESSMENT. HE FURTHER SUBMITTED THAT THE LEARNED CIT(A) IS HAVING CO-TERMINUS POWERS WITH THAT OF ASSESSING OF FICER AND IF ASSESSING OFFICER HAD NOT DONE SOMETHING IN ASSESSMENT; THE C IT(A) SHOULD HIMSELF HAVE DONE THAT. HE JUST CANNOT SHIFT THE ONUS TO ASSESSI NG OFFICER OF NOT DOING SOMETHING AND THEN ALLOW THE RELIEF TO ASSESSEE. AS REGARDS THE MERITS OF THE CASE, THE LEARNED DR SUBMITTED THAT THERE WAS GLARI NG DEFICIENCIES IN THE PARTLY PRODUCED BOOKS OF ACCOUNTS AND THERE WAS CERTAIN EN TRIES WHICH WERE NOT RECORDED. IN VIEW OF THE ABOVE, THE ASSESSING OFFIC ER HAD RIGHTLY ESTIMATED THE NET PROFIT @ 1.5% AS WITHOUT CONSIDERING THE OTHER DIRECT INCOMES, THE TRADING INCOME OF ASSESSEE WAS AT A LOSS WHICH IS NOT POSSI BLE. HE FURTHER ARGUED THAT SINCE THE ASSESSING OFFICER HAD ESTIMATED THE TRADI NG PROFIT @ 1.5% ON TURN OVER THEREFORE, THE DIRECT INCOME CREDITED TO THE T RADING ACCOUNT AMOUNTING TO RS.13,32,536/- HAD TO BE TAXED SEPARATELY. REGARDIN G DELETING OF INTEREST INCOME AMOUNTING TO RS.21,296/- THE LEARNED DR SUBM ITTED THAT AO HAD 3. ITA NO. 5 66(ASR)/2013 ASST. YEAR 2009-10 RECORDED A FINDING THAT INTEREST WAS NOT DECLARED. AS REGARDS GROUND NO. 4, THE LEARNED DR PLACED HIS RELIANCE ON THE ORDER OF ASSE SSING OFFICER. 4. THE LEARNED AR ON THE OTHER HAND, SUBMITTED THAT THE ASSESSEE HAS BEEN DOING MULTIPLE ACTIVITIES AND ITS ASSESSMENT FROM 2 007-08 TO 2010-11 WAS COMPLETED UNDER SECTION 143(3) AND NO ADDITION WAS MADE IN THESE YEARS EXCEPT IN THE YEAR UNDER CONSIDERATION. HE FURTHER SUBMITTED THAT THE ASSESSING OFFICER DID NOT POINT OUT ANY SPECIFIC DE FECT IN THE BOOKS OF ACCOUNT AND COMPLETE BOOKS OF ACCOUNT, VOUCHERS, BILLS ETC. WERE DULY PRODUCED AND THE RECEIPTS AS PER AIR INFORMATION WAS DULY FOUND RECO RDED IN THE BOOKS OF ACCOUNT AND THEREFORE, THE BASE OF REJECTING THE BO OKS OF ACCOUNT OF THE ASSESSEE WAS NOT CORRECT AND THEREFORE, APPLICATION OF AD HOC RATE WAS NOT JUSTIFIED. THE LEARNED AR FURTHER ARGUED THAT THE A SSESSING OFFICER SHOULD HAVE CITED SOME COMPARABLE CASES FOR ASSESSING THE INCOM E BY ESTIMATION AND MOREOVER, HE SUBMITTED THAT THE ASSESSEE WAS ALSO N OT CONFRONTED BEFORE REJECTION OF BOOKS OF ACCOUNTS. THE LEARNED AR SUBM ITTED THAT BOOKS OF ACCOUNT OF THE ASSESSEE WERE AUDITED AND THE DEFECTS AS POI NTED OUT BY ASSESSING OFFICER IN HIS ASSESSMENT ORDER WERE NOT CORRECT FO R WHICH LEARNED CIT(A) HAS RECORDED A FINDING OF FACT THAT ALL ENTRIES POINTED OUT BY ASSESSING OFFICER WAS FOUND RECORDED IN THE BOOKS OF ACCOUNT. THE LEARNED AR IN THIS RESPECT RELIED UPON THE CASE LAWS RELIED BY LEARNED CIT(A) AND FUR THER RELIED UPON THE FOLLOWING CASE LAWS: (A) CIT VS. PARADISE HOLIDAYS (325 ITR 0013) (DEL. HC) 4. ITA NO. 5 66(ASR)/2013 ASST. YEAR 2009-10 (B) CIT VS. JACKSONS HOUSE 39 DTR 0212(DEL. HC) (C) CIT VS. OM OVERSEAS 315 ITR 0185 (P&H HC) (D) CIT VS. LUDHIANA STEEL ROLL MILLS 295 ITR 0111( P&H HC). 5. AS REGARDS THE ISSUE OF ADDITION OF 13,32,536/-, THE LEARNED AR SUBMITTED THAT ASSESSEE HAD CREDITED THE INCOME IN THE PROFIT & LOSS ACCOUNT AND IT FORMED PART OF THE NET PROFIT DECLARED BY TH E ASSESSEE AND NO SEPARATE ADDITION WAS WARRANTED. HE RELIED UPON THE ORDER OF LEARNED CIT(A) IN THIS RESPECT. 6. AS REGARDS THE ADDITION OF RS.21,296/-, THE LEAR NED AR SUBMITTED THAT THE LEARNED CIT(A) IN PARA 4.4 AT PAGE 10 OF HIS OR DER HAS HELD THAT THE SAID INCOME HAS BEEN TAKEN INTO ACCOUNT BY THE ASSESSEE. THE LEARNED AR ALSO REFERED TO PAGE 7 OF CIT(A) ORDER FOR THE ARGUMENT THAT LEDGER ACCOUNT FROM WHOM INTEREST WAS RECEIVED WAS FILED WITH THE DEPAR TMENT. 7. REGARDING THE ISSUE OF ADDITION OF RS.25,77,366/ -, THE LEARNED AR SUBMITTED THAT THE ASSESSING OFFICER HAD APPLIED RA TE OF 20% WHICH WAS FOUND TO BE EXCESSIVE BY LEARNED CIT(A), THEREFORE, HE ES TIMATED THE INCOME @ 10%. THE LEARNED AR FURTHER SUBMITTED THAT IN CASE OF CO NTRACTORS, SECTION 44AD CLEARLY STATES THAT IN THE ABSENCE OF BOOKS OF ACCO UNT THE PROFIT IS TO BE CALCULATED @ 8% WHEREAS IN THE CASE OF ASSESSEE WHO HAD EARNED THE INCOME AS CONTRACTOR THE LEARNED CIT(A) HAS UPHELD THE ADDITI ON @ 10% WHICH IS HIGHER THAN THE RATE PRESCRIBED UNDER SECTION 44AD OF THE ACT. IN VIEW OF THE ABOVE, IT WAS SUBMITTED THAT THE LEARNED CIT(A) HAS RIGHTLY A LLOWED THE RELIEF. 5. ITA NO. 5 66(ASR)/2013 ASST. YEAR 2009-10 8. WE HAVE HEARD RIVAL PARTIES AND HAVE GONE THROUG H THE MATERIAL PLACED ON RECORD. WE FIND THAT THE ASSESSING OFFICER HAD R EJECTED THE BOOKS OF ACCOUNT MAINLY ON THE OBSERVATION THAT CERTAIN RECEIPTS FRO M M/S EXCIDE INDUSTRIES LTD., M/S MICHELIN INDIA TYRES PVT LTD. AND BRIDGES TONE INDIA PVT. LTD. WERE NOT REFLECTED IN THE BOOKS OF ACCOUNTS, WHEREAS THE LEA RNED CIT(A) HAS MADE A FINDING OF FACT THAT RECEIPTS FROM THESE COMPANIES WERE DULY REFLECTED IN THE BOOKS OF ACCOUNT AND TDS WAS ALSO DEDUCTED AND WAS AVAILED BY THE ASSESSEE AS TAX CREDIT. THE SECOND OBSERVATION OF ASSESSING OFFICER FOR REJECTING THE BOOKS OF ACCOUNT WAS THAT IF DIRECT INCOMES WAS TAK EN OUT FROM TRADING ACCOUNT THE TRADING INCOME WILL BE NEGATIVE. HOWEVE R, IN OUR VIEW ON THESE BASIS ALONE REJECTION OF BOOKS OF ACCOUNT IS NOT MA INTAINABLE UNLESS THE ASSESSING OFFICER FINDS SOME DEFECTS IN THE FIGURE OF SALE AND PURCHASE. THE ASSESSING OFFICER SHOULD HAVE RELATED HIS ESTIMATIO N OF INCOME TO SOME EVIDENCE OR MATERIAL ON RECORD AND SHOULD HAVE AVOI DED GUESSWORK WHILE MAKING ADDITION. SINCE THE ASSESSING OFFICER DID NO T FIND ANY DEFECT IN THE FIGURE OF SALES AND PURCHASE, THE ESTIMATION OF GRO SS PROFIT IS NOT JUSTIFIED. AS REGARDS NON RECORDING OF INCOME IN THE BOOKS OF ACC OUNTS, WE FIND THAT LEARNED CIT(A) HAS RECORDED A FINDING OF FACT THAT THE SAME WAS RECORDED IN THE BOOKS OF ACCOUNT. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY I NFIRMITY IN THE ORDER OF LEARNED CIT(A). THEREFORE, GROUND NO.1 IS DISMISSED . 8.1 GROUND NO.2 RAISED BY THE REVENUE IS DIRECTLY RELATED TO GROUND NO.1. THE ASSESSEE HAS DULY RECORDED THE DIRECT INCOMES I N ITS PROFIT & LOSS ACCOUNT AND ASSESSING OFFICER HAD NO DISPUTE ABOUT THIS. SI NCE THE ASSESSING OFFICER 6. ITA NO. 5 66(ASR)/2013 ASST. YEAR 2009-10 HAD REJECTED THE BOOKS OF ACCOUNTS AND HAD ESTIMATE D THE INCOME ARBITRARILY, THEREFORE, HE SEPARATELY ADDED BACK THE OTHER INCOM E CREDITED IN TRADING ACCOUNT WHICH IS NOT A CORRECT PROPOSITION AS ASSES SEE HAD ALREADY CREDITED THE DIRECT INCOME IN THE TRADING ACCOUNT AND RESULTANT PROFIT WAS DECLARED IN THE RETURN OF INCOME. THE GROSS PROFIT EARNED BY AN ASS ESSEE ALWAYS INCLUDE DIRECT INCOMES. UNLESS THE ASSESSING OFFICER FINDS CERTAIN DEFECTS IN THE PROFIT & LOSS ACCOUNT SO PREPARED HE CANNOT ARBITRARILY MAKE ADDI TIONS. IN VIEW OF THE ABOVE GROUND NO.2 IS ALSO DISMISSED. 8.2 AS REGARDS GROUND NO.3, REGARDING ADDITION ON A CCOUNT OF INTEREST, WE FIND THAT AS RECORDED BY LEARNED CIT(A) THE INTERES T INCOME WAS DULY RECORDED IN THE BOOKS OF ACCOUNT AND THEREFORE, WE DO NOT FI ND ANY INFIRMITY IN THE ORDER OF CIT(A). HENCE, GROUND NO.3 IS DISMISSED. 8.3 AS REGARDS GROUND NO.4, REGARDING PART RELIEF G IVEN BY LEARNED CIT(A), WE FIND THAT THE ASSESSING OFFICER HAD ESTIMATED THE P ROFIT ON CONTRACT BUSINESS AT 20% AND LEARNED CIT(A) HAS RESTRICTED THE SAME TO 1 0% WHICH IS QUITE REASONABLE AND WHICH IS QUITE IN LINE WITH THE PROV ISIONS OF SECTION 44AD WHICH STATES THAT IN THE ABSENCE OF BOOKS OF ACCOUNT THE CONTRACT INCOME IS TO BE ESTIMATED @ 8% OF GROSS RECEIPTS. IN THE PRESENT CA SE, THE LEANED CIT(A) HAS RESTRICTED THE ESTIMATION OF INCOME @ 10% WHICH IS ABOVE THE GUIDING RATE OF 8% AND THEREFORE, WE DO NOT FIND ANY INFIRMITY IN T HE ORDER OF CIT(A) ON THIS ACCOUNT. IN VIEW OF THE ABOVE, GROUND NO.4 IS ALSO DISMISSED. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 7. ITA NO. 5 66(ASR)/2013 ASST. YEAR 2009-10 ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH NOVEMBER, 2015. SD/- SD/- (A.D. JAIN) (T. S. KAPOOR) JUDICIAL MEMBER ACCOUNTA NT MEMBER DATED:13.11.2015. /PK/ PS. COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE: M/S CHINAR MOTORS, M.K.ROAD, SRINAGA R 2. THE INCOME TAX OFFICER, WARD 3(1) SRINAGAR (J&K). 3. THE CIT, 4. THE SR DR, I.T.A.T., TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.