The Income tax Officer -5(2), Lucknow V. Shri Mithlesh Agarwal, Lucknow

ITA 748/LKW/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83290 (ITAT-LUCKNOW)
• Duration Of Justice: 2 year(s) 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 15-07-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 27-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P K KAPOOR
• Section: 68; 145; 144

Judgement Text

1 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.748/LKW/2011 ASSESSMENT YEAR:2007 - 08 INCOME TAX OFFICER - 5(2), RANGE - V, LUCKNOW. VS. SHRI MITHILESH AGARWAL, 38, SARAI PATHAK, DURVIJAYGANJ, LUCKNOW. PAN:ADOPA7778E (APPELLANT) (RESPONDENT) APPELLANT BY SHRI AMIT NIGAM, D. R. RESPONDENT BY SHRI P. K. KAPOOR, C.A. DATE OF HEARING 15/07/2014 DATE OF PRONOUNCEMENT 2 2 /08/2014 O R D E R PER A. K. GARODIA, A.M. THIS IS REVENUES APPEAL DIRECTED AGAINST THE ORDER PASSED BY LEARNED CIT (A) - II, LUCKNOW DATED 17/10/2011 FOR THE ASSESSMENT YEAR 2007 - 2008. 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: 1. THE CIT (A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE ADDITION MADE BY THE AO AFTER ESTABLISHING THAT THE CREDITORS APPEARING IN THE BOOKS OF ACCOUNTS ARE NOT GENUINE. 2. THE CIT (A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE ESTIMATED ADDI TION MADE OUT OF THE NON - GENUINE CREDITS, WITHOUT GIVING ANY REASON FOR THE SAME. 2 3. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN ESTIMATING THE G.P. OF 6%. WHILE DOING SO HE HAS ACCEPTED THE AO'S FINDING THAT THE SUNDRY CREDITORS ARE NOT GENUINE. ONCE HE HAS ACCEPTED THIS CONCLUSION OF THE AO, HE COULD NOT HAVE REDUCED THE ADDITION MADE BY THE AO, ON THIS ACCOUNT WITHOUT GIVING ANY REASON FOR THE SAME. 4. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT NO DISALLOWANCE COULD HAVE BEEN MADE OUT OF EXPENSES CLAIMED ONCE PROFIT HAS BEEN ESTIMATED. HE FAILED TO APPRECIATE THAT THE AO HAS NOT ESTIMATED THE PROFIT BUT HAS MADE SPECIFIC DISALLOWANCES UNDER VARIOUS HANDS. 5. APPELLANT CRAVE LEAVES TO ADD OR AMEND ANY ONE OR MORE OF THE GROUNDS OF APPEALS, AS STATED ABOVE, AS AND WHEN NEED TO DOING SO ARISES WITH THE PRIOR PERMISSION OF THE COURT. 3. LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). 4. WE HAVE CO NSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT IN THE PRESENT CASE , THE ASSESSING OFFICER HAS INVOKED THE PROVISIONS OF SECTION 145(3) OF THE INCOME TAX ACT AND HAS REJECTED THE BOOKS OF ACCOUNT. THEREAFTER THE ASSESSING OFFICER HAS MADE DISALLOWANCE TO TH E EXTENT OF 20% OF THE EXPENSES AND IN THIS MANNER , HE MADE ADDITION OF RS.1,31,696/ - APART FROM THIS, THE ASSESSING OFFICER ALSO MADE AN ADDITION OF RS.13,75,996/ - TO THE EXTENT OF 20% OF THE SUNDRY CREDITORS SHOWN AT RS. 68,79,983/ - BY HOLDING THAT THESE CREDITORS ARE UNSUBSTANTIATED AND UNEXPLAINED. THE ASSESSMENT WAS COMPLETED BY THE ASSESSING OFFICER U/S 144 OF THE ACT. IN OUR CONSIDERED OPINION, WHEN BEST JUDGMENT ASSESSMENT IS MADE BY THE A.O. U/S 144 AFTER REJECTING THE BOOKS OF 3 ACCOUNT U/S 14 5 (3) OF THE ACT, HE CAN ASSESS THE INCOME OF THE ASSESSEE AT A REASONABLE FIGURE EITHER BY WAY OF ESTIMATING THE GROSS PROFIT OR BY WAY OF MAKING PART DISALLOWANCE O UT OF EXPENSES ON ESTIMATED BASIS . THE DISALLOWANCE MADE BY THE ASSESSING OFFICER OUT OF VARIO US EXPENSES TO THE EXTENT OF RS.1,31,696/ - HAS BEEN DELETED BY CIT(A) ON THE BASIS THAT ONCE PROFIT HAS BEEN ESTIMATED, THERE IS NO CASE FOR MAKING SEPARATE DISALLOWANCE/ADDITION. OUT OF THE ADDITION MADE BY THE ASSESSING OFFICER OF RS.13,75,996/ - BY WAY OF DISALLOWING 20% OF SUNDRY CREDITORS, CIT(A) HAS ALLOWED RELIEF OF RS.12,71,416/ - AND CONFIRMED THE ADDITION OF RS.1,01,870/ - ON THE BASIS THAT GROSS PROFIT IS TO BE ESTIMATED. THE CIT(A) HAS ESTIMATED THE GROSS PROFIT @6% OF THE TURNOVER AS AGAINST 5.0 5% SHOWN BY THE ASSESSEE IN THE PRESENT YEAR. WE ARE AWARE THAT AS PER A JUDGMENT OF HON'BLE ALLAHABAD HIGH COURT, IT IS VERY MUCH PERMISSIBLE THAT IN ADDITION TO MAKING ADDITION BY ESTIMATING THE GROSS PROFIT AFTER REJECTING THE BOOKS OF ACCOUNT, ADDITIO N CAN BE MADE U/S 68 ALSO BUT THEN FOR MAKING SUCH ADDITION U/S 68, THE ASSESSING OFFICER HAS TO GIVE A FINDING THAT ANY PARTICULAR CREDIT IS NOT ACCEPTABLE BECAUSE THE ASSESSEE HAS FAILED TO ESTABLISH THE IDENTITY AND CREDITWORTHINESS OF THE CREDITOR AS W ELL AS GENUINENESS OF THE TRANSACTION. IN THE PRESENT CASE, NO SUCH FINDING IS GIVEN BY THE ASSESSING OFFICER AND HE HAS MADE ADDITION TO THE EXTENT OF 20% OF THE TOTAL CREDITOR S ON AD HOC BASIS. SUCH AD HOC ADDITION OUT OF SUNDRY CREDITORS BY INVOKING T HE PROVISIONS OF SECTION 68 IS NOT SUSTAINABLE BECAUSE WHEN THE ASSESSING OFFICER IS ACCEPTING 80% OF THE CREDITORS, IT MEANS THAT THE ASSESSING OFFICER IS ACCEPTING THE IDENTITY OF THE CREDITOR S AS WELL AS GENUINENESS OF THE TRANSACTION AND HE IS ALSO ACC EPTING THE CREDITWORTHINESS OF THE CREDITOR ALSO TO THE EXTENT OF 80% OF THE CREDIT OUTSTANDING IN THE NAME OF CONCERNED CREDITOR AND IS MAKING AD HOC ADDITION OF 20% WITHOUT GIVING ANY SPECIFIC FINDING THAT THE 4 CREDITWORTHINESS OF THE CREDITOR IS ESTABLIS HED TO THE EXTENT OF 80% ONLY OF THE CREDIT SHOWN BY THE ASSESSEE. CONSIDERING ALL THESE FACTS, WE ARE OF THE CONSIDERED OPINION THAT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF CIT(A). 5. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 2 /08/2014. *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR