Shri Prakash Chandra Ranka, RAJSAMAND V. ACIT, Circle-2, UDAIPUR

ITA 76/JODH/2019

AI Insights

The case involves an appeal by Prakash Chandra Ranka against the order of the Commissioner of Income Tax Appeals (CIT(A)), Udaipur, which sustained a part of the estimated addition of INR 5,00,000 on account of the gross profit rate for the assessment year 2010-11. The Assessing Officer had rejected the books of accounts and estimated the gross profit by applying a rate of 28.44%. The CIT(A) partly sustained this addition. The Tribunal found that the rejection of the books of accounts and the estimation of the gross profit rate were not supported by adequate evidence, leading to the decision to allow the appeal and adjust the gross profit rate to 17.05%.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 113014 (ITAT-JODHPUR)
• Duration Of Justice: 4 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 21-03-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 21-03-2019
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Corroborative evidences
• Section: 143(3); 145(3)

Judgement Text

1 | Page IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA No.76/Jodh/2019 (ASSESSMENT YEAR- 2010- 2011) Prakash Chandra Ranka, Hathinada, Kankroli, Rajsamand-313324 (Raj.) vs ACIT, Circle-2, Udaipur-313001. (Appellant) (Respondent) PAN No.AAUPR8767K Assessee By Shri Rakesh Lodha, CA Revenue By Shri S.M.Joshi, JCIT DR Date of hearing 22/03/2023 Date of Pronouncement 23/03/2023 O R D E R PER KUL BHARAT, J.M.: The present appeal filed by the assessee for the assessment year 2010-11 is directed against the order of Ld. CIT(A)-1, Udaipur dated 18.12.2018. The assessee has raised following grounds of appeal:- 1. “The Ld. Commissioner of Income tax Appeals erred in law in confirming the rejection of books of accounts u/s 145(3) of the Act. 2. The Ld. Commissioner of Income Tax Appeals further erred in law in sustaining part of estimated addition of Rs.5,00,000/- on account of GP rate. 2 | Page 3. The appellant craves to add, alter, amend, modify and/or delete all or any of the grounds of the appeal on or before the final hearing, if necessary.” 2. The only effective ground in this appeal is against the sustaining part of estimated addition of INR 5,00,000/- made on account of G.P.rate. 3. Facts giving rise to the present appeal are that the assessee had furnished its return of income on 17.09.2010, declaring total income of INR 10,05,292/-. The case of the assessee was selected for scrutiny assessment under CASS. During the course of assessment proceedings, the Assessing Officer (“AO”) by framing the assessment u/s 143(3) of the Income Tax Act, 1961 (“the Act”) order dated 28.02.2013, rejected the books of accounts and estimated the gross profit by applying gross profit at 28.44%. 4. Aggrieved against this, the assessee preferred appeal before Ld.CIT(A), who after considering the submissions, partly sustained the addition by making lump sum addition of INR 5,00,000/-. 5. Aggrieved against the order of Ld.CIT(A), the assessee is in appeal before this Tribunal. 6. Apropos to grounds of appeal, Ld. Counsel for the assessee submitted that the AO grossly erred in rejecting the books of 3 | Page accounts of the assessee without pointing out any specific instances related to non-availability of bills and vouchers. He further submitted that the assessment was made on casual and adhoc basis without bringing on record any justification or corroborative evidences. In the absence of such corroborative evidences, authorities below were not justified in sustaining the addition. Moreover, Ld.CIT(A) sustained part addition on adhoc basis. 7. On the other hand, Ld. JCIT DR opposed these submissions and supported the order of Assessing authority. He submitted that the AO in the assessment order has pointed out that the assessee could not file supporting evidences related to expenditure. Hence, the books of accounts furnished by the assessee were not giving true and fair picture of its accounts. The AO was justified under the facts and circumstances of the present case to reject the books of account of the assessee and estimate the profit on the basis of material available on records by making best judgement. 8. We have heard Ld. Authorized Representatives of the parties and perused the material available on record and gone through the orders of the authorities below. The law is well settled that in the event, the AO is not satisfied regarding correctness of books of 4 | Page account furnished by the assessee. He can reject the same but such action should not be taken in a casual manner. The action of the Assessing Authority should be based on credible evidences. The AO after rejecting the books of accounts, is under legal obligation to estimate the profit and such estimation should be based on the material available on record and further gathered by the Assessing Authority. He may consider the profit declared by the other entities in same line of business and the past history of the assessee. In the present case, the AO has not given any reasoning as to why he wants to adopt the gross profit rate at a higher rate than the earlier years, declared by the assessee. Ld.CIT(A) also sustained the part addition purely on the adhoc basis. Therefore, considering the totality of the facts and circumstances of the present case, we are of the considered view that the authorities below are not justified in computing the gross profit rate at a higher rate without being supported by any evidence. The assessee also has not placed comparative instances of the gross profit. However, we find merit into the contention of the assessee that the reasoning adopted by the AO, is unjustified. The AO could have estimated the gross profit rate on the basis of past history by taking the average rate of gross profit of the last three years. The assessment year under consideration is 2010-11. 5 | Page It is not coming out on record that what was the gross profit rate during the AY 2007-08. Therefore, the average G.P. rate of the last two AYs is available with us that comes to 20.81%. Further, looking to the facts that under the year under consideration, there was also an increase in turnover of the business of the assessee. If the increase in turnover is taken into account, then there would be further reduction in the gross profit. We therefore, direct the AO to adopt the gross profit rate @ 17.05% and re-compute the addition accordingly. Grounds of appeal raised by the assessee are thus, allowed in terms indicated herein above. 9. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court on 23/03/2023. Sd/- Sd/- (MANISH BORAD) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIAL MEMBER *Amit Kumar* Copy to: 1. The Appellant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR 6. Guard File Asstt. Registrar Jodhpur Bench