Asstt.Commissioner of Income Tax , GONDA V. Shri Suraj Singh , GONDA

ITA 595/LKW/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83424 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 07-12-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: Y P SRIVASTAV
• Assessee Lawyers: VIVEK MEHROTRA
• Section: 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI. A. K. GARODIA, ACCOUNTANT MEMBER ITA NO.595/LKW/2012 ASSESSMENT YEAR:2009-10 ASSTT. CIT CIRCLE, GONDA V. SHRI. SURAJ SINGH BALLIPUR, NAWABGANJ GONDA TAN/PAN:BENPS3844C (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI. Y. P. SRIVASTAV, D.R. RESPONDENT BY: SHRI. VIVEK MEHROTRA, C.A. DATE OF HEARING: 10 11 2014 DATE OF PRONOUNCEMENT: 03 12 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. THE ORDER OF THE LD. CIT(A)-II, LUCKNOW IS BAD IN LAW AND FACTS OF THE CASE. 2. THE LD. CIT(A)-II, LUCKNOW HAS IGNORED THE FACT THAT THE BOOKS OF ACCOUNT AND VOUCHERS WERE NOT PRODUCED BEFORE THE A.O. THEREFORE, THE A.O. HAD NO OCCASION TO VERIFY THE CORRECTNESS OF THE SAME. 3. THE LD. CIT(A), LUCKNOW HAS FAILED TO APPRECIATE THE FACT THAT THE ASSESSING OFFICER HAS CORRECTLY REJECTED THE BOOKS OF ACCOUNT BY INVOKING THE PROVISION OF SECTION 145(3) OF THE I.T. ACT IN THE EVENT OF NON-PRODUCTION OF BOOKS OF ACCOUNT AND VOUCHERS. :- 2 -: 2. DURING THE COURSE OF HEARING, THE LD. D.R. HAS INVITED OUR ATTENTION TO THE FACT THAT BEFORE THE ASSESSING OFFICER ASSESSEE HAS NOT PRODUCED THE BOOKS OF ACCOUNT DESPITE REQUEST AND THE ASSESSING OFFICER HAD NO OTHER OPTION BUT TO REJECT THE BOOKS OF ACCOUNT AND TO ESTIMATE THE NET PROFIT, BUT THE LD. CIT(A) HAS SET ASIDE THE ORDER OF REJECTION OF BOOKS OF ACCOUNT ON THE GROUND THAT SPECIFIC BOOKS OF ACCOUNT WERE NOT REQUIRED TO BE MAINTAINED BY THE ASSESSEE AS PER PROVISIONS OF SECTION 44AA OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED IN SHORT THE ACT') AND THE LD. CIT(A) ACCORDINGLY ACCEPTED THE BOOK RESULTS DECLARED BY THE ASSESSEE. 3. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, HAS SUBMITTED THAT THE ASSESSEE HAS PRODUCED THE RELEVANT BOOKS OF ACCOUNT BEFORE THE ASSESSING OFFICER, BUT THE ASSESSING OFFICER HAD REJECTED THE SAME AND ESTIMATED THE NET PROFIT RATE AT 5% ON THE GROSS RECEIPTS RESULTING INTO AN ADDITION OF RS.24,36,214/-; WHEREAS THE LD. CIT(A) HAS APPRECIATED THE MAINTENANCE OF BOOKS OF ACCOUNT AND ACCEPTED THE BOOK RESULTS. 4. HAVING GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF THE RECORD, WE FIND THAT BEFORE THE ASSESSING OFFICER, THE BOOKS OF ACCOUNT WERE NOT PRODUCED AND ONLY STOCK REGISTER FOR GUN SHOP, WHICH WAS MANDATORY UNDER STATE LAWS, WAS PRODUCED, BUT FROM THAT STOCK REGISTER THE PROFITS OF THE ASSESSEE CANNOT BE WORKED OUT. THE ASSESSING OFFICER CATEGORICALLY MENTIONED IN HIS ORDER THAT IN THE ABSENCE OF COMPLETE BOOKS OF ACCOUNT, IT IS VERY DIFFICULT TO ASCERTAIN THE EXPENSES OR PROFIT UNDER A PARTICULAR BUSINESS ACTIVITY. IT WAS ALSO MENTIONED BY THE ASSESSING OFFICER THAT THE ASSESSEE WAS ENGAGED IN THREE LINES OF BUSINESS, BUT MAINTAINED ONLY ONE SET OF BOOKS OF ACCOUNT DEBITING SEVERAL EXPENSES. FOR THE SAKE OF REFERENCE, WE EXTRACT THE RELEVANT OBSERVATIONS OF THE ASSESSING OFFICER AS UNDER:- :- 3 -: 3. THUS, ONLY ONE PROFIT AND LOSS A/C IS PREPARED FOR THE THREE BUSINESSES AND SEVERAL EXPENSES DEBITED TO PROFIT AND LOSS A/C. ARE ALSO COMBINED. THIS IS VERY UNUSUAL WAY OF MAINTAINING THE ACCOUNTS AS IT WILL NOT REFLECT THE CORRECT PICTURE OF AFFAIRS OF A PARTICULAR BUSINESS ACTIVITY WHICH IS CONTRARY TO THE PRINCIPLE OF MAINTAINING ACCOUNTS PARTICULARLY WHEN THE BUSINESS ARE DIVERGENT AND HAVE NOTHING IN COMMON. IN THIS SCENARIO, IT IS ALSO DIFFICULT TO ASCERTAIN THE EXPENSES OR PROFIT UNDER A PARTICULAR BUSINESS ACTIVITY. THE ASSESSEE ALSO COULD NOT GIVE DETAILS OF EXPENSES SEPARATELY FOR DIFFERENT BUSINESSES. THE REPLY FILED BY THE ASSESSEE IN RESPONSE TO NOTICE UNDER SECTION 142(1) IS ROUTINE AND CASUAL. NO BOOKS OF ACCOUNT OR VOUCHERS WERE PRODUCED EXCEPT STOCK REGISTER OF GUN SHOP, WHICH IS OTHERWISE MANDATORY TO MAINTAIN UNDER STATE LAWS. HENCE, FINAL ACCOUNTS FILED BY THE ASSESSEE AS PER AUDIT REPORT ARE NOT ACCEPTABLE AND ARE HEREBY REJECTED BY INVOKING PROVISIONS U/S 145(3) OF I.T. ACT, 1961 AND PROFIT HAS TO BE ESTIMATED. GROSS RECEIPTS FROM ALL THE THREE BUSINESS ACTIVITIES SHOWN BY THE ASSESSEE ARE RS.6,88,61,064/-. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, IT WOULD BE IN ALL FAIRNESS TO APPLY N.P. RATE OF 5% ON THE TOTAL GROSS RECEIPTS/TURNOVER. NET PROFIT COMES TO RS.34,43,052/- @5% ON GROSS RECEIPTS OF RS.6,88,61,064/-. THE ASSESSEE HAS DISCLOSED NET PROFIT AT RS.10,06,838/-. HENCE, AN ADDITION OF RS.24,36,214/- (RS.34,43,052- 10,06,838/-) IS MADE TO THE INCOME OF THE ASSESSEE. 5. BUT WHEN THE MATTER REACHED TO THE LD. CIT(A), THE LD. CIT(A) HAS ACCEPTED THE BOOK RESULTS WITHOUT APPRECIATING THE FACT THAT THE BOOK WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER. THE LD. CIT(A) HAS DELETED THE ADDITION MAINLY ON THE GROUND THAT MAINTENANCE OF SPECIFIC BOOKS OF ACCOUNT IS NOT PRESCRIBED UNDER SECTION 44AA OF THE ACT. NO DOUBT, MAINTENANCE OF SPECIFIC BOOKS OF ACCOUNT MAY NOT BE PRESCRIBED UNDER SECTION 44AA OF THE ACT, BUT THE ASSESSEE IS REQUIRED TO MAINTAIN PARTICULAR SET OF BOOKS OF ACCOUNT WHEREFROM THE PROFITS OF THE ASSESSEE CAN BE WORKED OUT. IF THE PROFIT OF THE ASSESSEE CANNOT BE WORKED OUT FROM THE :- 4 -: BOOKS OF ACCOUNT, THAT BOOKS OF ACCOUNT ARE TO BE REJECTED. IN THE INSTANT CASE, THE ASSESSEE HAS NOT PRODUCED THE BOOKS OF ACCOUNT, THEREFORE, IT CANNOT BE SAID THAT WHETHER THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE WERE IN ACCORDANCE WITH LAW AND ARE SUFFICIENT TO DETERMINE THE PROFITS FROM THE BUSINESS ACTIVITY OF THE ASSESSEE. IT WAS ALSO OBSERVED BY THE ASSESSING OFFICER IN HIS ORDER THAT THE ASSESSEE WAS ENGAGED IN THREE LINES OF BUSINESS FOR WHICH ASSESSEE WAS REQUIRED TO MAINTAIN SEPARATE BOOKS OF ACCOUNT. IN THE ABSENCE OF BOOKS OF ACCOUNT, THE ASSESSING OFFICER COULD NOT DETERMINE THE PROFIT FROM THE BUSINESS OF THE ASSESSEE AND ACCORDINGLY REJECTED THE BOOKS OF ACCOUNT AND IT IS NOT CLEAR FROM THE ORDER OF THE LD. CIT(A) WHETHER THE ENTIRE BOOKS OF ACCOUNT WERE PRODUCED BEFORE HIM. HE HAS SIMPLY ALLOWED RELIEF ON THE BASIS THAT THE BOOKS OF ACCOUNT WERE AUDITED. THE REASONS GIVEN BY THE LD. CIT(A) WHILE DELETING THE ADDITION DO NOT APPEAR TO BE PLAUSIBLE. WE, HOWEVER, IN THE INTEREST OF JUSTICE, SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO HIS FILE WITH A DIRECTION TO RE-ADJUDICATE THE ISSUE OF REJECTION OF BOOKS OF ACCOUNT IN THE LIGHT OF THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. ACCORDINGLY, THE ASSESSEE IS ALSO DIRECTED TO PRODUCE THE BOOKS OF ACCOUNT BEFORE THE LD. CIT(A) FOR VERIFICATION AND DETERMINATION OF THE NET PROFIT FROM THE BUSINESS OF THE ASSESSEE. 6. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE. SD/- SD/- [A. K. GARODIA] [SUNIL KUMAR YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:3 RD DECEMBER, 2014 JJ:2511 :- 5 -: COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR