ACIT 16(3), MUMBAI V. RAHUL J JAIN, MUMBAI

ITA 5986/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 3186 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 08-06-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 10-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JEETENDRA KUMAR
• Keywords: Corroborative evidences

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI D BENCH, MUMBAI BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER. ITA. NO. 5986/MUM/2013 (ASSESSMENT YEAR:2009-10) ASSTT. COMMISSIONER OF INCOME TAX 16(3), MATRU MANDIR, TARDEO ROAD, MUMBAI 400 007 APPELLANT VS. SHRI RAHUL J. JAIN, 154/156, 3 RD KHETWADI LANE, MUMBAI 400 004 RESPONDENT PAN: AEMPJ8236K /BY APPELLANT : SHRI JEETENDRA KUMAR, D.R. /BY RESPONDENT :SHRI RAJKUMAR SINGH, A.R. /DATE OF HEARING : 21.09.2015 /DATE OF PRONOUNCEMENT : 28.09.2015 ORDER PER ASHWANI TANEJA, A.M: THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-27, MUMBAI, DATED 15.07.2013 FOR A.Y. 2009-10 PASSED AGAINST TH E ASSESSMENT ORDER U/S.143(3) DATED 30.12.2011. ITA NO.5986/MUM/13 A.Y. 09-10 [ACIT VS. SHRI RAHUL J. JAIN] PAGE 2 2. FOLLOWING GROUNDS RAISED BY THE REVENUE ALONG WI TH THE APPEAL MEMO: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN ALLOWING THE APPEAL OF T HE ASSESSEE AND LOSS OF RS.18,74,33,043/- INCURRED DURING THE Y EAR EVEN THOUGH BOOKS OF ACCOUNTS WERE NOT PRODUCED? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) HAS ERRED IN NOT GIVING CREDENCE TO T HE METHOD ADOPTED BY ASSESSING OFFICER OF EVALUATING G.P. ON THE BASIS OF G.P. RATIO OF THE PREVIOUS TWO YEARS WHICH WAS MOST LOGICAL METHOD IN ABSENCE OF BOOKS OF ACCOUNT MANDATORY FOR ASSESSEE TO BE MAINTAINED AND PRESERVED? 3. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 3. THE SOLITARY ISSUE RAISED IN BOTH THE GROUNDS IS THAT WHETHER THE ASSESSING OFFICER WAS JUSTIFIED IN REJE CTING THE RETURN OF INCOME FILED BY THE ASSESSEE AND DISREGARDING TH E BOOK RESULT SHOWN THEREIN AND ESTIMATING THE INCOME UNDER THE H EAD BUSINESS AT RS.57,95,266/- AS AGAINST THE LOSS OF RS.18,74,33,043/- AS SHOWN BY THE ASSESSEE IN THE R ETURN OF INCOME FILED. DURING COURSE OF HEARING, LD. SR. D. R. APPEARING ON BEHALF OF REVENUE HAS ARGUED THAT DURING COURSE OF ASSESSMENT PROCEEDING, THE ASSESSEE FAILED TO PRODUCE THE BOOK S OF ACCOUNT AND THEREFORE, THE ASSESSING OFFICER CONSULTED THE PAST HISTORY OF THE ASSESSEE AND ESTIMATED THE GP AT RS.1,40,57,727 /-, AFTER DEDUCTING THE EXPENDITURE SHOWN BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS AT RS.82,62,461/-, THE NET PROFIT OF ASSES SEE WAS ESTIMATED AT RS.57,95,266/-. THE BOOKS OF ACCOUNTS WERE NOT PRODUCED BY THE ASSESSEE, THEREFORE, THE ASSESSING OFFICER HAD NO OPTION BUT TO ESTIMATE THE PROFIT. IT WAS ARGUED B Y THE LD. D.R. THAT CIT(A) HAS ERRED IN REVERSING THE ORDER OF THE ASSESSING ITA NO.5986/MUM/13 A.Y. 09-10 [ACIT VS. SHRI RAHUL J. JAIN] PAGE 3 OFFICER AND THEREFORE, THE ADDITION MADE BY ASSESSI NG OFFICER SHOULD BE UPHELD AND ACTION OF LD. CIT(A) SHOULD BE REVERSED. 4. ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESSING OFFICER WAS HIGHLY UNJUSTIFIED IN ES TIMATING THE INCOME OF THE ASSESSEE. IT WAS SUBMITTED BY THE LD . COUNSEL THAT DUE TO HEAVY RAINS IN MUMBAI, THERE WAS FLOODING IN THE OFFICE OF THE ASSESSEE, WHICH IS LOCATED IN THE BASEMENT. AS A RESULT THEREOF, VARIOUS RECORDS WERE DESTROYED INCLUDING S OME OF THE RECORDS PERTAINING TO THE CURRENT YEAR. BUT THE DA TA WAS SAVED IN THE COMPUTERS AND THE ASSESSEE TOOK ANOTHER PRINT O UT OF THESE BOOKS OF ACCOUNTS FROM THE COMPUTER. THESE WERE PR ODUCED TO THE ASSESSING OFFICER FOR HIS VERIFICATION. THE AS SESSEE ALSO ARRANGED CONFIRMATIONS AND OTHER SUBSIDIARY RECORDS BEFORE THE ASSESSING OFFICER. IT WAS REQUESTED TO THE ASSESSI NG OFFICER DURING THE ASSESSMENT PROCEEDING THAT DIRECT VERIFI CATION COULD BE MADE BY THE ASSESSING OFFICER WITH THE SUPPLIERS AND CUSTOMERS OF THE ASSESSEE. BUT THE ASSESSING OFFIC ER DID NOT AGREE WITH THE REQUEST OF THE ASSESSEE AND BOOKS RE SULTS SHOWN BY THE ASSESSEE WERE REJECTED. IT WAS FURTHER SUBM ITTED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN ESTIMATING THE INCOME AT GP RATE OF PA ST YEARS BECAUSE THERE HAS BEEN DRASTIC DECLINE IN THE PRICE S OF THE MATERIAL IN WHICH ASSESSEE WAS DEALING. THE ASSESS EE HAD SUBMITTED ALL THE EVIDENCES BEFORE THE ASSESSING OF FICER IN SUPPORT OF HIS CLAIM. HOWEVER, THE ASSESSING OFFIC ER DISREGARDED ALL THE SUBMISSIONS AND EVIDENCES BROUGHT ON RECORD BY THE ASSESSEE AND RESORTED TO ESTIMATION OF INCOME. IT WAS FINALLY ITA NO.5986/MUM/13 A.Y. 09-10 [ACIT VS. SHRI RAHUL J. JAIN] PAGE 4 SUBMITTED THAT THE CIT(A) HAS TAKEN INTO CONSIDERAT ION ALL THE FACTS AND CIRCUMSTANCES OF THE CASE AND TAKING A JU DICIOUS VIEW IN THE MATTER, THE LD. CIT(A) HAS DELETED THE ADDIT ION MADE BY THE ASSESSING OFFICER. IT WAS REQUESTED THAT THE ORDER OF LD. CIT(A), BEING IN ACCORDANCE WITH LAW AND FACTS, DESERVES TO BE UPHELD. LD. COUNSEL TOOK US THROUGH VARIOUS PAGES OF THE PA PER BOOK SHOWING VARIOUS EVIDENCES FILED BEFORE THE LOWER AU THORITIES IN SUPPORT OF THE CLAIM OF THE ASSESSEE. 5. WE HAVE HEARD BOTH THE SIDES AND GONE THROUGH TH E MATERIAL PLACED BEFORE US IN THE FORM OF PAPER BOOK . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIV IDUAL AND WAS ENGAGED IN THE TRADING BUSINESS OF FERROUS AND NON FERROUS METALS IN THE NAME OF HIS PROPRIETARY CONCERN I.E. M/S. SUN IMPEX. THE ASSESSEE HAD FILED HIS RETURN SHOWING B USINESS LOSS OF RS.18,74,33,043/-. DURING COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT IN ABSENCE OF P HYSICAL BOOKS OF ACCOUNTS, EVIDENCES FOR SALES, PURCHASES AND EXP ENSES CLAIMED, VERIFICATION OF THE FIGURES REPORTED BY TH E ASSESSEE IN P&L ACCOUNT COULD NOT BE DONE. THEREFORE, THE ASSE SSING OFFICER ESTIMATED NET PROFIT OF THE ASSESSEE BASED UPON GP RATE OF PREVIOUS TWO YEARS. IT HAS BEEN NOTED BY US THAT B OOKS OF ACCOUNTS OF THE ASSESSEE ARE AUDITED BY THE TAX AUD ITORS. THESE AUDITED ACCOUNTS ALONG WITH TAX AUDIT REPORT WAS AV AILABLE BEFORE THE ASSESSING OFFICER. THE ASSESSEE SUBMITTED BEFO RE THE ASSESSING OFFICER THAT DUE TO FLOODING CAUSED BY HE AVY RAINS, VARIOUS RECORDS WERE DESTROYED AND THEREFORE, WITH A VIEW TO ENABLE THE ASSESSING OFFICER TO MAKE VERIFICATION O F THE RETURN ITA NO.5986/MUM/13 A.Y. 09-10 [ACIT VS. SHRI RAHUL J. JAIN] PAGE 5 FILED BY THE ASSESSEE, THE ASSESSEE COLLECTED VARIO US EVIDENCES FROM ITS SUPPLIERS AND SUBMITTED THE SAME TO THE AS SESSING OFFICER ALONG WITH VARIOUS ACCOUNTS GENERATED ON TH E COMPUTER SYSTEMS. IT IS NOTED FROM THE RECORDS SHOWN TO US THAT ASSESSEE HAD SUBMITTED FOLLOWING DETAILS AND DOCUMENTARY EVI DENCES BEFORE THE ASSESSING OFFICER: SR. NO. PARTICULARS OF DOCUMENTS ENCLOSED PAGE NO. 1. COPY OF LETTER DATED 26TH DECEMBER 2011 FILED BEFORE LD. A.O. WITH THE FOLLOWING DOCUMENTS:- I) AFF IDAVIT OF ASSESSEE DATED 16/07/2009 FOR DESTRUCTION OF PHYSICAL ACCOUNTING RECORDS DUE TO HEAVY RAINS ON 08/07/2009. II) COPY OF POLICE COMPLAINT DATED 16/07/2009. 1 TO 2 3 TO 4 5 2. COPY OF LETTER DATED 23RD DECEMBER 2011 FILED BEFORE LD. A.O. WITH FOLLOWING DOCUMENTS. I) DULY CONFIRMED LEDGER A/C OF M/S. DOMET TRADING PVT. LTD. IN RESPECT OF SALES MADE BY ASSESSEE APPELLANT DURING THE ASSESSMENT YEAR UNDER APPEAL. II) DULY CONFIRMED LEDGER A/C OF M/S. DOMET TRADING PVT. LTD. IN RESPECT OF PURCHASES MADE BY ASSESSEE APPELLANT DURING THE ASSESSMENT YEAR UNDER APPEAL. III) ITEMWISE PURCHASES & SALES OF GOODS MADE DURING THE YEAR WITH DESCRIPTION OF MATERIAL, QUANTITY & VALUE. IV) EXTRACT OF ITEMWISE GOODS OF STOCK REGISTER OF ENTIRE YEAR. 6 TO 8 9 TO 12 13 TO 16 17 TO 18 19 TO 33 ITA NO.5986/MUM/13 A.Y. 09-10 [ACIT VS. SHRI RAHUL J. JAIN] PAGE 6 V) DETAILS OF PAYMENTS MADE TO OLD SUNDRY CREDITORS. VI) PRICE GRAPH OF NICKEL QUOTED ON LONDON METAL - EXCHANGE FOR THE ENTIRE YEAR FROM 01/04/2008 TO 31/03/2009. 34 35 3. COPY OF LETTER DATED 16/11/2011FLLED BEFORE LD. A.O. ALONGWITH CONFIRMATION LETTER OF SALES PARTIES & FOLLOWING OTHER DOCUMENTS. I) PARTYWISE SALES WITH ADDRESS & VALUE. II) PARTYWISE PURCHASE WITH ADDRESS & VALUE. III) PARTYWISE LIST OF LOANS & ADVANCES GIVEN & INTEREST RECEIVED & LEDGER EXTRACT OF INTEREST INCOME. IV) COPY OF 11 NOS. OF TDS CERTIFICATE OF RS. 4,14,427/- 36 TO 40 41 TO 43 44 45 TO 51 51 TO 62 4. COPY OF LETTER DATED 17 TH OCTOBER 2012 FILED BEFORE LD. A.O. ALONGWITH FOLLOWING DOCUMENTS :- I) COPY OF ACKNOWLEDGEMENT OF ITR II) COMPUTATION OF TOTAL INCOME & TAX CALCULATION STATEMENT III) COPY OF TAX AUDIT REPORT WITH ALL EXHIBITS IV) COPY OF AUDITED BALANCE SHEET & PROFIT & LOSS A/C WITH ALL SCHEDULES. 63 64 TO 65 66 67 TO 84 85 TO 94 IT HAS BEEN FURTHER BROUGHT TO OUR NOTICE THAT THE ASSESSEE ALSO PRODUCED BOOKS OF ACCOUNTS INCLUDING STOCK RECORDS MAINTAINED AND GENERATED ON THE COMPUTER SYSTEM, WHICH WAS VER IFIED BY THE ASSESSING OFFICER AS WELL. DETAILS OF PARTY-WISE S ALES AND PURCHASES MADE DURING THE ASSESSMENT YEAR WERE ALSO FILED. SOME CONFIRMATIONS OF SALES AND PURCHASES WERE ALSO FILED ITA NO.5986/MUM/13 A.Y. 09-10 [ACIT VS. SHRI RAHUL J. JAIN] PAGE 7 CONTAINING REQUISITE PARTICULARS OF THE PARTIES CON CERNED I.E. NAME, COMPLETE ADDRESS, PAN ETC. THE ASSESSEE ALS O FILED DETAILED NOTE OF JUSTIFICATION FOR THE LOSS SUFFERE D IN BUSINESS BY THE ASSESSEE DURING THE YEAR UNDER APPEAL ALONG WIT H CORROBORATIVE EVIDENCES AND ALSO CITING THE COMPARA BLE CASE OF OTHER ASSESSEES HAVING SIMILAR BUSINESS AND HAVING SUFFERED SIMILAR LOSSES IN THE SAME YEAR. IN SUPPORT OF ITS CLAIM OF DESTRUCTION OF RECORDS DUE TO WATER LOGING IN THE B USINESS PREMISES CAUSED BY HEAVY RAINS ON 8 TH JULY, 2009, THE ASSESSEE FILED AFFIDAVITS AND POLICE COMPLAINT AND COPY OF N EWSPAPER REPORT. THE ASSESSING OFFICER DID NOT MAKE VERIFIC ATION OF ANY OF THESE DOCUMENTS, BUT DISBELIEVED THE SAME WITHOUT B RINGING ANYTHING CONTRARY ON RECORD. WITH REGARD TO JUSTIF ICATION OF THE LOSS, THE ASSESSEE HAD SUBMITTED EVIDENCES SHOWING THAT THE RATE OF NICKEL (THE MAIN INGREDIENT OF NON FERROUS METAL TRADED BY THE ASSESSEE), CRASHED CONSISTENTLY THROUGHOUT THE YEAR AND CAME DOWN FROM RS.30,000/-PER M.T. IN APRIL 2008 TO RS.9 ,000/- PER M.T. IN MARCH 2009, REGISTERING STEEP FALL OF MORE THAN 70%. THE ASSESSEE HAD FILED EVIDENCES IN THE FORM OF QUOTATI ONS FROM LONDON METAL EXCHANGE, IN SUPPORT OF HIS ASSERTION. IT WAS SUBMITTED THAT MOST OF THE SALES HAVE BEEN SHOWN BY ASSESSEE OUT OF THE OPENING STOCK HELD, AND ALL THE PURCHASE S WERE MADE IN THE EARLIER YEARS AT HIGHER RATE PREVAILING AT T HAT TIME. DUE TO THE AFORESAID STEEP FALL OF MORE THAN 70% IN THE RA TE OF GOODS TRADED BY THE ASSESSEE, GROSS LOSS WAS INCURRED BY THE ASSESSEE. 6. WE HAVE CONSIDERED ALL THESE FACTS AND CIRCUMSTA NCES VERY CAREFULLY. IT IS NOTED THAT DUE TO THE REASONS BEY OND THE CONTROL ITA NO.5986/MUM/13 A.Y. 09-10 [ACIT VS. SHRI RAHUL J. JAIN] PAGE 8 OF THE ASSESSEE, THE MAIN DOCUMENTS IN THE FORM OF PURCHASE BILLS AND SALE BILLS COULD NOT BE SUBMITTED BY THE ASSESS EE TO THE ASSESSING OFFICER. THE ASSESSEE MADE EFFORTS AND S UBMITTED AMPLE EVIDENCES, AS AN ALTERNATIVE MEASURE TO SUBST ANTIATE THE RETURN AND THE FINAL ACCOUNTS SUBMITTED BY THE ASSE SSEE. THE DOCUMENTARY EVIDENCES AND DETAILS SUBMITTED BY THE ASSESSEE CONTAINED SUFFICIENT INFORMATION ON THE BASIS OF WH ICH THE ASSESSING OFFICER COULD HAVE DONE REQUISITE VERIFIC ATION FROM ANY PARTY, WHEREVER THE ASSESSING OFFICER HAD ANY DOUBT . THE DOCUMENTARY EVIDENCES SUBMITTED, THE DETAILS OF WHI CH HAVE BEEN REPRODUCED IN THIS ORDER ABOVE, WOULD SHOW THAT ON THE BASIS OF THESE DOCUMENTARY EVIDENCES, THE ASSESSING OFFICER COULD HAVE VERY WELL SATISFIED HIMSELF TO CLEAR ANY DOUBTS. D URING COURSE OF HEARING, LD. D.R. COULD NOT BRING ANYTHING CONTRARY ON RECORD TO CONTROVERT THESE FACTS, HE COULD NOT POINT OUT ANYT HING WRONG IN THE AFORESAID DOCUMENTARY EVIDENCES SUBMITTED BY TH E ASSESSEE BEFORE THE ASSESSING OFFICER AS WELL AS BEFORE THE CIT(A). IN ADDITION TO THAT, ASSESSEE HAS ALSO GIVEN JUSTIFICA TION FOR INCURRING LOSS DURING THE YEAR DUE TO THE REASONS W HICH WERE BEYOND HIS CONTROL I.E. A DRASTIC CRASH IN THE GLOB AL MARKET, WORLD OVER. NONE OF THESE FACTS HAVE BEEN CONTROVERTED B Y THE ASSESSING OFFICER IN THE ASSESSMENT PROCEEDINGS OR BY LEARNED DEPARTMENTAL REPRESENTATIVE AT THIS STAGE. WE NOTI CE THAT THE LD. ASSESSING OFFICER CHOSE TO MAKE A BEST JUDGMENT ASS ESSMENT. WE CAN VERY WELL APPRECIATE THAT AT TIMES, THE ASSE SSING OFFICER HAS NO CHOICE BUT TO MAKE A BEST JUDGMENT ASSESSMEN T. BUT IN OUR CONSIDERED VIEW, THE FAIRNESS OF JUSTICE DEMAND S THAT BEST JUDGMENT ASSESSMENT SHOULD NOT BE MADE AS A BEST PUNISHMENT ITA NO.5986/MUM/13 A.Y. 09-10 [ACIT VS. SHRI RAHUL J. JAIN] PAGE 9 ASSESSMENT. WE HAVE FURTHER NOTED THAT LD. CIT(A) AFTER CONSIDERING ALL FACTS AND CIRCUMSTANCES AND THE DOC UMENTARY EVIDENCES PLACED BY THE ASSESSEE BEFORE THE ASSESSI NG OFFICER AS WELL AS BEFORE THE LD. CIT(A) HAS DELETED THE ADDIT ION MADE BY THE ASSESSING OFFICER. THE FINDINGS GIVEN BY THE LD. C IT(A) ARE QUITE DETAILED AND JUDICIOUS. NOTHING WRONG COULD BE POI NTED OUT BY THE LD. D.R. IN THE FINDING OF LD. CIT(A). THEREFO RE, KEEPING IN VIEW ALL THE FACTS AND CIRCUMSTANCES AND EVIDENCES PLACE D BEFORE US, WE FIND THAT NO INTERFERENCE IS CALLED FOR IN THE O RDER OF LD. CIT(A). SAME IS UPHELD. 7. AS A RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 28 TH DAY OF SEPTEMBER, 2015. SD/- SD/- (SHAILENDRA KUMAR YADAV) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: DATED 28/09/2015 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE !# / ASSESSEE $ %&%'( ) / CONCERNED CIT * )+ / CIT (A) ,-./00'(1 '( 12 %& / DR, ITAT, MUMBAI 3/4567 / GUARD FILE. BY ORDER / #8 1 9: ;% 1 '( 12 %&<