Dy. Commissioner of Income Tax, Lucknow V. Smt. Vidya Agarwal, Lucknow

ITA 800/LKW/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92151 (ITAT-LUCKNOW)
• Duration Of Justice: 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 30-03-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 30-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK MISRA
• Assessee Lawyers: K R RASTOGI
• Keywords: Business income
• Section: 68; 145

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.800/LKW/2014 ASSESSMENT YEAR:2010-11 DCIT RANGE 2 LUCKNOW V. SMT. VIDYA AGARWAL 9-10, CATT. ROAD LUCKNOW TAN/PAN:ABMPA2558E (APPELLANT) (RESPONDENT) C.O. NO.40/LKW/2014 [ARISING OUT OF ITA NO.800/LKW/2014] ASSESSMENT YEAR:2010-11 SMT. VIDYA AGARWAR 9-10, CATT. ROAD LUCKNOW V. DCIT RANGE 2 LUCKNOW TAN/PAN:ABMPA2558E (CROSS OBJECTOR) (RESPONDENT) REVENUE BY: SHRI. VIVEK MISRA, CIT (DR) ASSESSEE BY: SHRI. K. R. RASTOGI, FCA DATE OF HEARING: 30 03 2015 DATE OF PRONOUNCEMENT: 05 06 2015 O R D E R PER SUNIL KUMAR YADAV: THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A) ON A SOLITARY GROUND THAT THE LD. CIT(A) HAS ERRED IN ESTIMATING THE PROFIT OF THE ASSESSEE AT RS.2.31 CRORES @ 7.5% OF THE GROSS RECEIPTS :- 2 -: WHICH SHOULD NOT HAVE BEEN LESS THAN 10% OF THE GROSS RECEIPTS AS HELD IN THE CASE OF CIT VS. RAGHUVENDRA PRATAP SINGH, 14 MTC 415. 2. THE ASSESSEE HAS FILED CROSS OBJECTION ASSAILING THE ORDER OF THE LD. CIT(A) THAT THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE INCOME FROM INTEREST ON FDR WITH BANK UNDER THE HEAD INCOME FROM OTHER SOURCES INSTEAD OF TREATING THE SAME AS BUSINESS INCOME, SINCE FDRS ARE MADE SOLELY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. THEREFORE, NET PROFIT OF 7.5% CONSIDERED BY THE LD. CIT(A) SHOULD BE AFTER TAKING INTO ACCOUNT THE INTEREST ON FDR WITH BANK. 3. SINCE THE APPEAL AND CROSS OBJECTION WERE HEARD TOGETHER, THEY ARE BEING DISPOSED OF THROUGH THIS CONSOLIDATED ORDER. 4. THE FACTS IN BRIEF BORNE OUT FROM THE RECORD ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE COULD NOT PRODUCE THE BOOKS OF ACCOUNT AND THE ASSESSING OFFICER HAS MADE AD-HOC ADDITIONS UNDER DIFFERENT HEADS REJECTING THE CLAIM OF EXPENSES RAISED UNDER THE HEAD LABOUR CHARGES, PURCHASE EXPENSES, ETC. AND ALSO UNDER SECTION 68 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED IN SHORT THE ACT'). 5. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WITH THE SUBMISSION THAT ONCE THE BOOKS OF ACCOUNT ARE REJECTED, THE SAME CANNOT BE RELIED ON FOR MAKING ADDITION UNDER THE DIFFERENT HEADS DENYING THE EXPENSES CLAIMED BY THE ASSESSEE. IT WAS ALSO CONTENDED THAT THE ASSESSING OFFICER HAS MADE AD-HOC DISALLOWANCES WITHOUT BRINGING ANY MATERIAL ON RECORD. FINDING FORCE IN THE CONTENTIONS OF THE ASSESSEE, THE LD. CIT(A), AFTER TAKING INTO ACCOUNT THE PAST RECORD OF THE ASSESSEE, HAS ESTIMATED THE GROSS PROFIT RATE AT 7.5% OF THE GROSS RECEIPTS OF RS.30,88,71,943/-. 6. WITH REGARD TO THE ADDITIONS MADE UNDER DIFFERENT HEADS, THE LD. CIT(A) HAS HELD THAT NO DISALLOWANCE FOR CORRESPONDING UNPAID :- 3 -: PURCHASES/LABOUR CHARGES UNDER SECTION 68 OF THE ACT CAN BE MADE. SINCE THEY WERE TRADE CREDITS, PROVISIONS OF SECTION 68 OF THE ACT CANNOT BE INVOKED. 7. WITH REGARD TO THE INTEREST GENERATED ON FDRS, THE LD. CIT(A) HAS RESTORED THE MATTER TO THE ASSESSING OFFICER TO VERIFY THE CLAIM OF THE ASSESSEE AND MODIFIED THE INTEREST INCOME ON FDRS DECLARED BY THE ASSESSEE. 8. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD. D.R. HAS PLACED RELIANCE UPON THE ORDER OF THE ASSESSING OFFICER WITH THE SUBMISSION THAT WHEN THE ASSESSEE COULD NOT PRODUCE THE BOOKS OF ACCOUNT, THE ASSESSING OFFICER WAS JUSTIFIED IN MAKING ADDITION UNDER DIFFERENT HEADS. 9. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, HAS SUBMITTED THAT ON ACCOUNT OF NON-PRODUCTION OF THE BOOKS OF ACCOUNT, THE BOOKS OF ACCOUNT CAN BE REJECTED UNDER SECTION 145 OF THE ACT AND THE ASSESSING OFFICER MAY ESTIMATE THE GROSS PROFIT IN THE LIGHT OF THE PAST RECORD OF THE ASSESSEE. IN THE ABSENCE OF THE BOOKS OF ACCOUNT, THE ENTRIES IN THE BOOKS OF ACCOUNT CANNOT BE TAKEN INTO ACCOUNT FOR MAKING DISALLOWANCES. MOREOVER, THE ASSESSING OFFICER HAS MADE AD-HOC DISALLOWANCES WITHOUT BRINGING ANYTHING ON RECORD. 10. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT UNDISPUTEDLY THE BOOKS OF ACCOUNT WERE NOT PRODUCED BY THE ASSESSEE DESPITE VARIOUS OPPORTUNITIES AFFORDED BY THE ASSESSING OFFICER. IN THE ABSENCE OF THE BOOKS OF ACCOUNT, ONLY TWO OPTIONS ARE AVAILABLE WITH THE ASSESSING OFFICER ONE IS TO REJECT THE BOOKS OF ACCOUNT AND TO ESTIMATE THE GROSS PROFIT OF THE ASSESSEE AND THE SECOND IS TO EXAMINE EACH AND EVERY CLAIM OF THE ASSESSEE IN THE LIGHT OF THE BALANCE SHEET AND OTHER MATERIAL PLACED BEFORE HIM. WE HAVE :- 4 -: CAREFULLY PERUSED THE ORDER OF THE ASSESSING OFFICER AND WE FIND THAT HE HAS MADE ADDITION UNDER DIFFERENT HEADS ON AD-HOC BASIS. BEFORE MAKING ADDITIONS UNDER DIFFERENT HEADS, THE ASSESSING OFFICER HAS TO BRING SOMETHING ON RECORD TO ESTABLISH THAT THE ACCOUNTS PLACED BEFORE HIM ARE UNRELIABLE AND SOME DISALLOWANCES ARE REQUIRED TO BE MADE, BUT THE ASSESSING OFFICER HAS NOT BROUGHT ANYTHING ON RECORD. IN THE ABSENCE OF THE BOOKS OF ACCOUNT, THE RIGHT COURSE AVAILABLE WITH THE ASSESSING OFFICER IS TO REJECT THE BOOKS OF ACCOUNT AND TO ESTIMATE THE GROSS PROFIT OF THE ASSESSEE IN THE LIGHT OF THE PAST RECORD OF THE ASSESSEE AND THE LD. CIT(A) HAS ADOPTED THE SAME PROCEDURE AND AFTER REJECTING THE BOOKS OF ACCOUNT, HE HAS ESTIMATED THE GROSS PROFIT AT 7.5% KEEPING IN VIEW THE PAST RECORD OF THE ASSESSEE. THE CONTENTION OF THE REVENUE FOR ESTIMATION OF GROSS PROFIT AT 10% CANNOT BE ACCEPTED WITHOUT ANY BASIS. WE ARE, THEREFORE, OF THE VIEW THAT THE LD. CIT(A) HAS MADE A REASONABLE ESTIMATION OF THE GROSS PROFIT AND THEREFORE NO INTERFERENCE IS CALLED THEREIN. ACCORDINGLY, WE CONFIRM THE ORDER OF THE LD. CIT(A). 11. SO FAR AS THE ISSUE OF INTEREST INCOME RAISED IN THE CROSS OBJECTION IS CONCERNED, WE FIND THAT THE LD. CIT(A) HAS RESTORED THE MATTER TO THE ASSESSING OFFICER WITHOUT GIVING ANY FINDING WITH REGARD TO THE NATURE OF INTEREST. THEREFORE, IT CANNOT BE SAID THAT THE LD. CIT(A) HAS HELD THE NATURE OF INTEREST AS INCOME FROM OTHER SOURCES. WHEN THE MATTER IS SUB- JUDICED BEFORE THE ASSESSING OFFICER, HE MAY EXAMINE THE NATURE OF INTEREST AS TO WHETHER IT IS BUSINESS INCOME OR AN INCOME FROM OTHER SOURCES. THEREFORE, NO INTERFERENCE IN THE DIRECTION OF THE LD. CIT(A) IS CALLED FOR. HOWEVER, ASSESSEE IS AT LIBERTY TO PLACE THE RELEVANT EVIDENCE BEFORE THE ASSESSING OFFICER TO ESTABLISH THAT THE INTEREST INCOME IS RECEIVED ON FDRS ON ACCOUNT OF BUSINESS EXIGENCY, IN ORDER TO ESTABLISH THAT IT IS A BUSINESS INCOME. ONCE IT IS HELD TO BE BUSINESS INCOME, NO SEPARATE ADDITION IS CALLED FOR, AS THE INCOME IS ESTIMATED AFTER REJECTING THE BOOKS OF ACCOUNT. :- 5 -: 12. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED AND THE CROSS OBJECTION OF THE ASSESSEE IS PARTLY ALLOWED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTIONED PAGE. SD/- SD/- [A. K. GARODIA] [SUNIL KUMAR YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:5 TH JUNE, 2015 JJ:2904 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR