M/s Adknack Advertising, Lucknow V. Dy. Commissioner Of Income Tax, Lucknow

ITA 6/LKW/2015

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 2004 (ITAT-LUCKNOW)
• Duration Of Justice: 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 31-08-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 05-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIDHI VERMA
• Assessee Lawyers: SHYAM LAL
• Keywords: Rejection of books of accounts
• Section: 43B; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCHES: B LUCKNOW BEFORE SHRI A.K. GARODIA, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO: 06/LKW/2015 AY: - 2010-11 M/S. ADKNACK ADVERTISING VS. DCIT 33, CANTT ROAD, LUCKNOW-226001 RANGE 11 LUCKNOW (PAN AAGFA4655H) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SHYAM LAL, CA RESPONDENT BY : SMT. NIDHI VERMA, DR DATE OF HEARING : 31.8.2015 DATE OF PRONOUNCEMENT : 3 0.10. 2015 O R D E R PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 1.10.2014 PASSED BY THE LD. CIT (A)-I, LUCKNOW. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE I S AN ADVERTISING AGENCY DEALING IN PRINT MEDIA AND WORKING FOR THE CORPORATE AND THE G OVT. DEPARTMENTS BY PROVIDING THEM SERVICES FOR RELEASING THEIR ADVERTISEMENTS. D URING THE YEAR UNDER CONSIDERATION, THE ASSESSEE DISCLOSED A NET PROFIT OF RS. 24,97,110/- @ 1.2% OF GROSS RECEIPTS OF RS. 23,79,70,788/-. THE ASSESSMEN T WAS COMPLETED U/S 144 OF THE INCOME TAX ACT, 1961 BECAUSE, AS PER THE AO, DESPIT E SEVERAL OPPORTUNITIES BEING AFFORDED BY THE AO, THE ASSESSEE DID NOT PRODUCE TH E BOOKS OF ACCOUNTS AND ITA NO.6/LKW/ 2015 M/S. ADKNA CK ADVERTISING VS. DCIT 2 SUPPORTING DOCUMENTS RELATING TO THE NEW DELHI BRAN CH ALTHOUGH A MAJOR PART OF THE TURNOVER WAS RELATED TO THE NEW DELHI BRANCH. IT IS THE OBSERVATION OF THE AO THAT THE EXPENSES AND RECEIPTS OF THE NEW DELHI OFFICE C OULD NOT BE VERIFIED IN ABSENCE OF BOOKS OF ACCOUNTS AND SUPPORTING DOCUMENTS. THE AO THEREFORE REJECTED THE BOOKS OF ACCOUNTS AND APPLIED A NET PROFIT RATE OF 3% ON ESTIMATED GROSS RECEIPT OF RS. 28 CRORES AND ESTIMATED THE NET INCOME AT RS. 84 LACS. SINCE THE ASSESSMENT WAS FRAMED U/S 144 OF THE INCOME TAX ACT, NO DEDUCTION BY WAY OF PAYMENT OF SALARY AMOUNTING TO RS. 21,60,000/- TO THE PARTNERS WAS AL LOWED IN VIEW OF THE PROVISIONS OF SECTION 184 (5) OF THE INCOME TAX ACT. THE AO ALSO MADE AN ADDITION OF INTEREST INCOME OF RS. 3,56,646/- ON THE BASIS OF 26AS STATE MENT AND SERVICE TAX LIABILITY OF RS. 2,15,256/- U/S 43B OF THE INCOME TAX ACT. ASSES SMENT WAS COMPLETED AT A TOTAL INCOME OF RS. 96,31,070/- AS AGAINST THE RETURNED INCOME OF RS. 24,97,110/-. 3. LD. CIT(A) IN HIS ORDER GAVE A CATEGORICAL FINDING THAT THE BOOKS OF ACCOUNTS AND OTHER DOCUMENTS RELATING TO THE NEW DELHI OFFIC E WERE NOT PRODUCED FOR THE REASON THAT THERE WERE SOME DISPUTES BETWEEN THE PA RTNERS MANAGING THE NEW DELHI OFFICE AND THE LUCKNOW OFFICE. HE HOWEVER HEL D THAT THE AVERMENT OF THE ASSESSEE WAS NOT SUPPORTED BY ANY EVIDENCE AND UNDE R THE CIRCUMSTANCES THERE WAS NO WAY IN WHICH THE AO COULD SATISFY HIMSELF ABOUT THE CORRECTNESS AND COMPLETENESS OF THE BOOKS OF ACCOUNTS MAINTAINED BY THE APPELLANT. LD. CIT (A), THEREFORE, HELD THAT THE AO WAS JUSTIFIED IN REJECT ING THE BOOK RESULTS AND TAKING RECOURSE TO ESTIMATION FOR ARRIVING AT THE PROFIT O F THE ASSESSEE. LD. CIT (A) ALSO CONFIRMED THE DISALLOWANCE ON ACCOUNT OF SALARY PAI D TO PARTNERS AMOUNTING TO RS. 21,61,000/-. THE ISSUE PERTAINING TO DISALLOWANCE O F SERVICE TAX PAYABLE U/S 43B OF ITA NO.6/LKW/ 2015 M/S. ADKNA CK ADVERTISING VS. DCIT 3 THE INCOME TAX ACT WAS SET ASIDE BY THE LD. CIT (A) FOR PROPER VERIFICATION BY THE AO. 4. IN THE APPEAL BEFORE US, THE LD. AR FOR THE ASS ESSEE SUBMITTED THAT THE BOOKS OF ACCOUNTS AND RELATING RECORDS OF THE NEW D ELHI OFFICE WERE IN FACT PRODUCED BEFORE THE LD. CIT (A) AND THAT SINCE THE SCOPE OF HIS POWERS WAS CO-TERMINUS WITH THAT OF THE AO, HE SHOULD HAVE CONSIDERED THE SAME. LD. AR ALSO DREW OUR ATTENTION TO PAGE 7 OF THE PAPER BOOK FILED WHICH CONTAINS A COPY OF THE SUBMISSIONS MADE BEFORE THE LD. CIT (A) REGARDING THE PRODUCTION OF BOOKS OF ACCOUNTS AND VOUCHERS OF THE NEW DELHI BRANCH WHICH COULD NOT BE PRODUCED BEFORE THE AO BUT WERE BEING PRODUCED BEFORE THE LD. CIT (A). LD. AR SUBMITTED T HAT THE LD. CIT (A) HAS NOT DISCUSSED THE ISSUE OF PRODUCTION OF BOOKS OF ACCOU NTS/DOCUMENTS AND RECORDS OF THE NEW DELHI OFFICE PRODUCED BEFORE HIM AND AS SUC H THE ORDER PASSED BY HIM IS ERRONEOUS. 5. LD. DR SUBMITTED THAT THE ASSESSEE HAD FAI LED TO PRODUCE THE BOOKS OF ACCOUNTS BEFORE THE AO AFTER BEING GIVEN NUMEROUS O PPORTUNITIES AND AS SUCH NO FURTHER OPPORTUNITY SHOULD BE AFFORDED TO IT. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS A ND HAVE ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS TRUE THAT THE ASSESSEE C OULD NOT PRODUCE BOOKS OF ACCOUNTS AND SUPPORTING DOCUMENTS PERTAINING TO THE NEW DELH I OFFICE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IT IS ALSO TRUE THAT THE AS SESSEE HAD PRODUCED BOOKS OF ACCOUNTS OF LUCKNOW, ALLAHABAD AND DEHRADUN OFFICES DURING THE ASSESSMENT PROCEEDINGS. THUS IT IS EVIDENT THAT THE BOOKS OF A CCOUNTS OF ONLY THE NEW DELHI OFFICE COULD NOT BE PRODUCED AND THUS A NEGATIVE IN FERENCE WAS DRAWN AND THE ITA NO.6/LKW/ 2015 M/S. ADKNA CK ADVERTISING VS. DCIT 4 BOOKS WERE REJECTED. WE ARE OF THE OPINION THAT NON -PRODUCTION OF BOOKS OF ONE OF THE OFFICES SHOULD NOT HAVE RESULTED IN REJECTING T HE ENTIRE BOOKS OF ACCOUNT. IT IS ALSO SEEN FROM RECORDS THAT THE ASSESSEE HAD PRODUC ED THE BOOKS OF ACCOUNTS BEFORE LD. CIT (A). HOWEVER, LD. CIT (A) DID NOT CONSIDER THE SAME AND SIMPLY CONFIRMED THE ORDER OF THE AO. IN OUR VIEW THIS ACTION OF LD. CIT (A) WAS INCORRECT. WE THEREFORE, IN THE INTEREST OF JUSTICE, DEEM IT TO B E A CASE FIT FOR BEING SET ASIDE. THUS, WE SET ASIDE THE ORDER OF AO AND DIRECT THAT THE FR ESH ASSESSMENT SHOULD BE MADE AFTER AFFORDING DUE OPPORTUNITY TO THE ASSESSEE AND AFTER PROPER EXAMINATION OF THE BOOKS OF ACCOUNTS / OTHER DOCUMENTS AND RECORDS WHI CH MAY BE PRODUCED. WE ALSO DIRECT THE ASSESSEE TO EXTEND ALL DUE ASSISTANCE TO THE DEPARTMENT FOR AN EARLY DISPOSAL OF THIS CASE. 7. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH OCTOBER, 2015. SD/- SD/- (A.K. GARODIA) (SUDHAN SHU SRIVASTAVA ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: THE 30 TH OCTOBER. 2015 VEENA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER DY. REGISTRAR ITA NO.6/LKW/ 2015 M/S. ADKNA CK ADVERTISING VS. DCIT 5 SL. NO. DESCRIPTION DATE 1. DATE OF DICTATION BY THE AUTHOR 19.10.2015 2. DRAFT PLACED BEFORE THE DICTATING MEMBER 19.10 .2015 3. DRAFT PLACED BEFORE THE SECOND MEMBER 4. DRAFT APPROVED BY THE SECOND MEMBER 5. DATE OF APPROVED ORDER COMES TO THE SR. PS 6. DATE OF PRONOUNCEMENT OF ORDER 7. DATE OF FILE SENT TO THE BENCH CLERK 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER