Tayal Concast (p) Ltd., Muzaffarnagar V. ITO, Muzaffarnagar

ITA 5756/DEL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97204 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 01-09-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 09-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P CHANDREKAR
• Assessee Lawyers: PREM PRAKASH; ASISH AGARWAL
• Keywords: Rejection of books of accounts
• Section: 40A(3); 145

Judgement Text

1 ITA NO. 57 56/DEL/2012 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH:H NEW DELHI BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER & SMT. BEENA PILLAI, JUDICIAL MEMBER I.T.A .NO. 5756/DE L/2012 (ASSESSMENT YEAR-2009- 10) TAYAL CONCAST (P) LTD., 321, SANJAY MARG, MUZAFFARNAGAR. AABCT1327P VS ITO, WARD 2(3), MUZAFFARNAGAR. APPELLANT BY SH. PREM PRAKASH, ADV. & SH. ASISH AGARWAL, ADV. RESPONDENT BY SH. J.P. CHANDREKAR, SR. DR ORDER PER BEENA PILLAI, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A)S- MUZAFFARNAGAR DATED 31.08.2012 FOR A.Y. 2 009-10 THE REVISED GROUNDS FILED BY THE ASSESSEE ON 13/05/2013 ARE READ AS UNDER: 1. THAT THE ORDER IS AGAINST LAW & FACTS ON RECORD. 2. THAT LD. CIT(A) WAS WRONG IN NOT ALLOWING PAYMENTS OF RS. 20,86,795.00 U/S 40A(3) ALTHOUGH PAYMENTS WERE NOT EXCEEDING RS. 20,000.00 IN A DAY. DATE OF HEARING 01.09.2015 DATE OF PRONOUNCEMENT 03.09.2015 2 ITA NO. 57 56/DEL/2012 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY DERIVING INCOME FROM MANUFACTURE AND SALE O F CEMENT. RETURN DECLARING NIL INCOME WAS FILED ON 13.09.2009 . DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ON THE EXAMINA TION OF BOOKS OF ACCOUNT, IT WAS GATHERED BY THE AO THAT THE ASSE SSEE HAD PURCHASED DAMAGED CEMENT AS RAW MATERIAL AT RS. 26, 24,613/- FROM M/S SINGHAL SUPPLIERS, MEERUT IN THE YEAR UNDE R CONSIDERATION . IT WAS GATHERED BY THE AO THAT TOT AL PURCHASES HAD BEEN MADE IN CASH ONLY. THE AO RECORDS THAT THOUGH CASH WAS AVAILABLE IN THE BOOKS OF THE ASSESSEE, THE ASSESSE E MADE PAYMENTS BELOW RS. 20,000/- TO THE AFORESAID CONCERN. THUS, THE AO SPECIFICALLY CALLED UPON THE ASSESSEE REGARDING THE SAME. THE ASSESSEES NEITHER FILED ANY DETAILS SUCH AS NAME OF THE PERSON TO WHOM THE PAYMENT WAS MADE NOR PROVIDE ANY REASON FO R MAKING PAYMENTS BELOW RS. 20,000/- WAS FURNISHED BY THE AS SESSEE. IT HAS BEEN FURTHER HELD BY THE AO THAT THE ASSESSEE HAD D ELIBERATELY SHOWN THE TRANSACTIONS BELOW RS. 20,000/- TO AVOID RIGORS OF SECTION 40A(3) OF THE ACT. THEREFORE, THE AO REJEC TED THE BOOKS OF ACCOUNT BY INVOKING PROVISIONS OF SECTION 145 OF TH E ACT. THE LD A.O ALSO DISALLOWED CASH PAYMENTS AGGREGATING TO RS . 26,24,613/- AND ADDED TO THE INCOME OF THE ASSESSEE. 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE WENT INTO APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) JUSTIF IED THE ACT OF LD.AO IN DISALLOWING CASH PAYMENTS AND THEREBY MAKING ADD ITION TO THE EXTENT OF RS. 20,86,795/-. THE APPELLANT HAS CONTEN DED THAT OUT OF TOTAL PURCHASES MADE AT RS. 26,24,613/-, THE AMOUNT OF RS. 3 ITA NO. 57 56/DEL/2012 5,37,818/- RELATED TO PURCHASES MADE ON SUNDAYS OR OTHER BANK HOLIDAYS AND AS SUCH PURCHASES WERE COVERED UNDER R ULE 6DD(J) OF THE I.T. RULES, 1962 THE LD.CIT(A) HELD THAT SINCE THE AMOUNT OF RS. 5,37,818/- IS COVERED BY CLAUSE (I) OF RULE 6DD, TH EREFORE, PROVISIONS OF SECTION 40A(3) ARE NOT ATTRACTED ON T HE IMPUGNED SUM. 4. AGGRIEVED BY THE ORDER PASSED BY THE LD.CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW; THE JUDGMENTS RELIED UPON BY BOTH THE PARTIES; THE COMPILATION OF JUDGMENTS FILED BY THE ASSESSEE AND THE ARGUMENT S OF BOTH THE SIDES. 6. IT IS OBSERVED THAT THE LD.A.O REJECTED THE ASSE SSEES BOOKS OF ACCOUNTS UNDER THE PROVISO TO SECTION 145 OF THE AC T BUT HAD NOT COMPUTED THE ASSESSEES INCOME BY APPLYING THE GROS S PROFIT RATE OR NET PROFIT RATE. THE SHORT ISSUE THAT NEEDS TO BE CONSIDERED IS AS TO WHETHER IN SUCH A CASE ANY DISALLOWANCE ON ACCOUNT OF PURCHASES U/S.40A(3), AT ALL BE MADE. 7. SIMILAR FACTS AROSE BEFORE THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. BANWARI LAL BANSHIDHAR, REPORTE D IN(1998) 229 ITR 229 WHEREIN IT WAS HELD THAT ONCE THE BOOKS OF ACCOUNT OF ASSESSEE ARE REJECTED, PROFIT HAS TO BE ESTIMATED B Y COMPARING THE G.P RATES ADOPTED BY THE ASSESSEE IN THE PRECEDING YEARS. NO ADDITION U/S.40A(3) CAN BE MADE ONCE THE BOOKS ARE REJECTED. THE LD. A.O AS WELL AS LD.CIT(A) COMMITTED ERROR IN MAK ING ADDITION U/S.40A (3) AFTER REJECTION OF BOOKS OF ACCOUNTS. A PPLYING THE RATIO TO THE FACTS OF THE PRESENT CASE BEFORE US, THE LD. A.O AS WELL AS LD. 4 ITA NO. 57 56/DEL/2012 CIT(A) HAS WRONGLY MADE THE DISALLOWANCE U/S.40A(3) OF THE ACT. IN OUR CONSIDERED VIEW, NO DISALLOWANCE COULD HAVE BEEN MADE UNDER THE PROVISIONS OF SECTION 40A(3) READ WITH RULE 6DD (J) AS THE BOOKS OF ACCOUNTS WERE REJECTED BY THE AO, THEREFORE, THE RE WAS NO QUESTION OF CONSIDERING THE ENTRIES IN THESE BOOKS OF ACCOUNTS. IN OUR OPINION WHEN THE GROSS PROFIT RATE IS TO BE APP LIED, THAT WOULD TAKE CARE OF THE LEAKAGE, IF ANY. EVEN OTHERWISE, O NCE THE BOOKS HAVE BEEN REJECTED, THE PROFITS HAS TO BE ARRIVED O N ESTIMATION BY APPLYING THE GROSS PROFIT RATE OR NET PROFIT RATE B Y CONSIDERING THE PAST HISTORY OF THE CASE. 8. WE THEREFORE FOLLOWING THE SAME RATIO LAID DOWN IN THE CASE OF CIT VS. BANWARILAL BANSIDHAR (SUPRA) SET ASIDE THE ISSUE TO THE FILE OF LD. A.O, TO ARRIVE AT THE ESTIMATED PROFIT ON CO MPARATIVE BASIS OF G.P RATE, ADOPTED BY THE ASSESSEE IN THE PRECEDING YEARS AND DECIDE THE ISSUE AFRESH AFTER AFFORDING REASONABLE OPPORTU NITY OF BEING HEARD TO THE ASSESSEE, IN ACCORDANCE WITH LAW. 9. ACCORDINGLY, GROUND OF APPEAL FILED BY THE ASSE SSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 03/09/ 2015 SD/- SD/- (N.K. SAINI) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 03/09/2015 *KAVITA, P.S. 5 ITA NO. 57 56/DEL/2012 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 6 ITA NO. 57 56/DEL/2012 DATE 1. DRAFT DICTATED ON 01.09.2015, 02.09.2015 2. DRAFT PLACED BEFORE AUTHOR 02.09.2015, 03.09.2015 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 03.09.2015 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 03.09.2015 5. APPROVED DRAFT COMES TO THE SR.PS/PS 03.09.2015 6. KEPT FOR PRONOUNCEMENT ON 03.09.2015 7. FILE SENT TO THE BENCH CLERK 03.09.2015 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.