M/S CHEMICALS INDIA , KOTA V. JOINT COMMISSIONER OF INCOME TAX, KOTA

ITA 92/JPR/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 5990 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 8 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 25-01-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K MAHELA JCIT DHK
• Keywords: Opportunity of cross examination
• Section: 234B

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH SMC, JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; DS LE{K BEFORE: SHRI SHRI VIJAY PAL RAO, JUDICIAL MEMBER VK;DJ VIHY LA-@ ITA NO. 92/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2010-11. M/S. CHEMICALS INDIA, B-2, SMALL SCALE INDUSTRIAL AREA, KOTA 324 007. CUKE VS. THE JOINT COMMISSIONER OF INCOME TAX, RANGE-1, KOTA. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAAFC 9036 C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI SIDDHARTH RANKA (ADVOCATE) JKTLO DH VKSJ LS@ REVENUE BY : SHRI A.K. MAHELA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 25.09.2019. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 30/09/2019. VKNS'K@ ORDER PER VIJAY PAL RAO, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 8 TH NOVEMBER, 2017 OF LD. CIT (APPEALS), KOTA FOR THE A SSESSMENT YEAR 2010-11. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. THAT ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE AND IN VIEW OF THE DETAILED WRITTEN AND ORAL SUBMISSIONS MADE A ND THE EVIDENCE ALREADY AVAILABLE ON AOS OWN RECORD AND F URTHER EVIDENCES ADDUCED BY THE ASSESSEE THE ORDERS OF THE LEARNED LOWER AUTHORITIES ARE AGAINST THE LAW AND FACTS OF THE CASE. 2. THAT THE LD. ASSESSING OFFICER HAS ERRED IN MAKI NG ADDITION IN THE AMOUNT OF RS. 42,584/- OF ALLEGED DIFFERENCE IN THE TRANSACTIONS IN THE COPIES OF ACCOUNTS COLLECTED BY THE LD. ASSESSING OFFICER DIRECTLY FROM SUPPLIERS WHILE BRU SHING ASIDE THE DETAILED EXPLANATION AND RECONCILIATION OF THE TRANSACTION, FURNISHED BY THE ASSESSEE AND THE LEARNED CIT (APPE ALS), KOTA ALSO ERRED IN CONFIRMING THE SAME. 2 ITA NO. 92/JP/2018 M/S. CHEMICALS INDIA, KOTA. 3. THAT THE LD. ASSESSING OFFICER FURTHER ERRED IN DISALLOWING 25% OF PURCHASES DEBITED UNDER THE HEAD COAL AND FUEL EXPENSES IN THE AMOUNT OF RS. 5,88,651/- WHILE REJECTING THE SUBMISSION AND EXPLANATION PRODUCED BY THE ASSESSEE AND RELYIN G ON THE ALLEGED STATEMENTS OF THE SUPPLIERS WHICH HAVE BEEN RECORDED BY THE AO THAT TOO AT THE BACK OF THE ASSESSEE APPE LLANT AND THE ASSESSEE HAD NEVER BEEN PROVIDED ANY OPPORTUNITY BY THE AO TO CONFRONT THOSE SUPPLIERS NEITHER THE COPIES OF THE ALLEGED STATEMENTS HAVE BEEN PROVIDED TO THE ASSESSEE IN SP ITE OF A SPECIFIC DEMAND AND THE LEARNED CIT (APPEALS), KOTA ALSO ERRED IN CONFIRMING THE SAME. 4. THAT THE LD. ASSESSING OFFICER ALSO ERRED IN CHA RGING INTEREST U/S 234B AND 234C AND THE LEARNED CIT (APPEALS), KOTA A LSO ERRED IN CONFIRMING THE SAME. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER A NY GROUND AT/BEFORE THE TIME OF HEARING OF APPEAL. 2. GROUND NO. 1 IS GENERAL IN NATURE AND THE LD. CO UNSEL FOR THE ASSESSEE HAS STATED AT BAR THAT THE ASSESSEE DOES NOT PRESS GROU ND NO. 1 OF THE ASSESSEES APPEAL. ACCORDINGLY, THE GROUND NO. 1 OF THE ASSESS EES APPEAL IS DISMISSED BEING NOT PRESSED. GROUND NOS. 2 & 3 ARE REGARDING ADDITIONS MADE ON A CCOUNT OF DIFFERENCE IN THE CLOSING BALANCE ON ACCOUNT OF PUR CHASES IN COMPARISON TO THE ASSESSEES ACCOUNT IN THE BOOKS OF SUPPLIER AS WELL AS ADHOC DISALLOWANCE MADE BY THE AO ON ACCOUNT OF COAL AND FUEL EXPENSES. 3. I HAVE HEARD THE LD. COUNSEL FOR THE ASSESSEE AS WELL AS THE LD. D/R AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE LD . COUNSEL HAS REFERRED TO THE RECONCILIATION OF THE DIFFERENCES IN THE CLOSING BA LANCE AS FILED BEFORE THE AO AND FURTHER SUBMITTED THAT ONCE THE ASSESSEE HAS NOT CL AIMED ANY EXCESS AMOUNT ON ACCOUNT OF PURCHASES, THEN A MORE BALANCE SHOWN BY THE ASSESSEES SUPPLIER IN ITS BOOKS OF ACCOUNT WILL NOT BE A GROUND FOR MAKING AN Y ADDITION. AS REGARDS THE 3 ITA NO. 92/JP/2018 M/S. CHEMICALS INDIA, KOTA. ADHOC DISALLOWANCE ON ACCOUNT OF COAL AND FUEL EXPE NSES, HE HAS CONTENDED THAT THE AO AFTER REJECTING THE BOOKS OF ACCOUNT MADE TH IS ADHOC DISALLOWANCE WHICH IS OTHERWISE NOT PERMISSIBLE. EVEN OTHERWISE THE DISA LLOWANCE WAS MADE ON THE BASIS OF STATEMENT RECORDED AT THE BACK OF THE ASSESSEE W ITHOUT GIVING OPPORTUNITY OF CROSS EXAMINATION. THE LD. D/R HAS SUBMITTED THAT T HE ASSESSEE HAS FAILED TO RECONCILE THE DIFFERENCES AND, THEREFORE, TO THE EX TENT OF RS. 42,584/- WHICH REMAINS UN-RECONCILED, THE AO MADE THE ADDITION. AS REGARDS THE DISALLOWANCE ON ACCOUNT OF COAL AND FUEL EXPENSES, THE LD. A/R HAS CONTENDED T HAT THE AO HAS CONDUCTED A PROPER ENQUIRY AND EXAMINED THE SUPPLIERS WHO HAVE DENIED ISSUING ANY BILLS/INVOICES TO THE ASSESSEE AND ALSO ACCEPTED TH E MODUS OPERANDI OF RECEIVING THE PAYMENT FROM THE BANK ACCOUNT OF THE ASSESSEE. 4. HAVING CONSIDERED THE RIVAL SUBMISSIONS AND CARE FUL PERUSAL OF THE RECORD, IT IS NOTED THAT THE AO REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE BY INVOKING THE PROVISIONS OF SECTION 145(3). THUS ONCE THE AO HAS INVOKED THE PROVISIONS OF SECTION 145(3), THE ONLY COURSE OF ACTION LEFT WITH THE AO TO PROCEED WITH THE ASSESSMENT ON BEST JUDGMENT BASIS AND THE INCOME OF THE ASSESSEE OUGHT TO HAVE BEEN ESTIMATED ON SOME REASONABLE AND PROPER BASIS. IT IS ALSO NO T IN DISPUTE THAT THE PAST HISTORY I.E. THE GP/NP DECLARED BY THE ASSESSEE IS THE PROP ER AND REASONABLE BASIS AND GUIDANCE FOR ESTIMATION OF INCOME OF THE ASSESSEE F OR THE YEAR UNDER CONSIDERATION. INSTEAD OF MAKING THE ASSESSMENT BY CONSIDERING THE PROVISIONS OF SECTION 145(3) READ WITH SECTION 144, THE AO HAS PROCEEDED TO MAKE SPECIFIC DISALLOWANCE AFTER REJECTION OF BOOKS OF ACCOUNT. THIS ACTION OF THE AO IS NOT PERMITTED UNDER LAW AS THE BOOK RESULTS WERE REJECTED BY THE AO THEN THE I TEMS WHICH ARE PART OF THE TRADING ACCOUNT CANNOT BE DISALLOWED BUT THE INCOME OF THE ASSESSEE WAS REQUIRED 4 ITA NO. 92/JP/2018 M/S. CHEMICALS INDIA, KOTA. TO BE ESTIMATED. THE LD. COUNSEL FOR THE ASSESSEE H AS POINTED OUT THAT THE AO HAS NOT POINTED OUT ANY DECLINE IN THE GP RATE OF THE A SSESSEE FOR THE YEAR UNDER CONSIDERATION BUT THE INCOME DECLARED BY THE ASSESS EE SHOWS A BETTER GP AND NP RATE IN COMPARISON TO THE PRECEDING YEARS. HE HAS REFERRED TO THE COMPARATIVE CHART OF THE PRECEDING YEARS AS WELL AS FOR THE YEAR UNDE R CONSIDERATION SHOWING THE GP DECLARED BY THE ASSESSEE. THUS HAVING REGARD TO TH E FACT THAT THE AO HAS REJECTED THE BOOKS OF ACCOUNT AND THE GP DECLARED BY THE ASS ESSEE FOR THE YEAR UNDER CONSIDERATION IS 17.88% IN COMPARISON TO THE AVERAG E OF 3 YEARS AT 17.76%, THE REJECTION OF BOOKS OF ACCOUNT UNDER SECTION 145(3) WOULD NOT IPSO FACTO LEAD TO AN ADDITION IF THE ASSESSEE HAS DECLARED THE RESULTS E ITHER BETTER OR IN LINE WITH THE PRECEDING YEARS. THEREFORE, ONCE THE ASSESSEES GP DECLARED FOR THE YEAR UNDER CONSIDERATION IS BETTER THAN THE AVERAGE OF THE PRE CEDING YEAR, THEN INSPITE OF REJECTION OF BOOKS OF ACCOUNT, NO ADDITION IS CALLE D FOR. EVEN OTHERWISE, THE AO HAS NOT ATTEMPTED TO MAKE ANY TRADING ADDITION BUT MADE SPECIFIC DISALLOWANCE AFTER REJECTION OF BOOKS OF ACCOUNT WHICH IS NOT PERMISSI BLE. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ADDITIONS MADE BY TH E AO ON ACCOUNT OF SOME DISCREPANCIES IN THE BALANCE SHEET ON ACCOUNT OF CO AL AND FUEL EXPENSES ARE DELETED. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 30/09/20 19. SD/- ( FOT; IKY JKWO (VIJAY PAL RAO) U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 30/09/2019. DAS/ 5 ITA NO. 92/JP/2018 M/S. CHEMICALS INDIA, KOTA. VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- M/S. CHEMICALS INDIA, KOTA. 2. THE RESPONDENT THE JCIT, RANGE-1, KOTA. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 92/JP/2018) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR