Asst. Commissioner of Income Tax, Circle-6, Pune, Pune V. Shree Chaitanya Enterprises Pvt. Ltd., Pune

ITA 944/PUN/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 5233 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 10-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y K BHASKAR
• Keywords: Rejection of books of accounts; Source of fund; Fair market value; Reason to believe
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 944/PN/2012 (ASSTT.YEAR : 2008-09) ACIT, CIRCLE-6, PMT BUILDING SWARGATE, PUNE 411 037 .. APPELLANT VS. SHREE CHAITANYA ENTERPRISES PVT. LTD., 1132/3, VISHNU DARSHAN, F.C. ROAD, SHIVAJINAGAR, PUNE-411016. .. RESPONDENT PAN NO. AACCS 5944A APPELLANT BY : SHRI Y.K. BHASKAR RESPONDENT BY : SHRI NIKHIL PATHAK DATE OF HEARING : 08-08-2013 DATE OF PRONOUNCEMENT : 13-08-2013 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 29-02-2012 OF THE CIT(A) CENTRAL, PUNE RELATING TO ASSESSMENT YEAR 2008- 09. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF PROMOTERS AND CO NTRACTORS AND ALSO TRADING IN COMPUTER HARDWARE. IT FILED ITS RETURN OF INCOME ON 30-09-2008 DECLARING TOTAL LOSS OF RS.36,45,577/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR, I.E. A.Y.2007-08 THE ASSESSEE HAD DECLARED INCOME OF RS.1,50,50,140/-. SIMILARLY, THE ASSESSEE HAD SHOW N NET PROFIT OF RS.1,40,75,738/- ON A TURNOVER OF RS.5,25,53,206/- DURING A.Y. 2007-08. HOWEVER, IN THE CURRENT ASSESSMENT YEAR THE ASSESSE E HAD CLAIMED LOSS OF 2 RS.71,91,178/- ON A TURNOVER OF RS.2,90,79,259/-. T HE ASSESSING OFFICER EXAMINED THE VARIOUS DETAILS FILED BY THE ASSESSEE AND ASKED THE ASSESSEE TO EXPLAIN THE REASONS AS TO WHY THE ASSESSEE HAS SHOW N LOSS DURING THE IMPUGNED ASSESSMENT YEAR ALTHOUGH HE HAD SHOWN PROF IT IN THE PRECEDING ASSESSMENT YEAR. REJECTING THE VARIOUS EXPLANATION S GIVEN BY THE ASSESSEE THE ASSESSING OFFICER ESTIMATED THE NET PROFIT AT 1 0% OF THE RECEIPTS SHOWN AT RS.2,90,79,259/- AND DETERMINED THE INCOME AT RS .29,07,925/- AS AGAINST THE LOSS DECLARED AT RS.36,45,577/- FOR THE FOLLOWI NG REASONS : (I) AS STATED EARLIER, THE ASSESSEE IS IN THE BUSI NESS OF BUILDING AND CONSTRUCTION AND MISCELLANEOUS COMPUTER RELATED SER VICES. DUE TO UNRELATED AND DIVERSE SOURCES OF INCOME, IT IS DIFFICULT TO E STIMATE INCOME FROM TOTAL BUSINESS ACTIVITIES. (II) IN VIEW OF THE TWO DISTINCT SOURCES OF INCOME, THE ASSESSEE SHOULD HAVE MAINTAINED TWO SEPARATE SETS OF ACCOUNTS. THE ASSES SEE HAS NOT DONE THIS. HENCE, IT IS DIFFICULT TO VERIFY THE NET RESULT AT THE END OF THE ACCOUNTING PERIOD. (III) MANY OF THE EXPENSES LIKE RENT, SALARY ARE PA ID TO FAMILY MEMBERS AND THE SAME IS ON HIGHER SIDE. (IV) THE DIRECTOR IS ALLOWED SALARY OF RS. 27,00,00 0/- THOUGH THE CONSTRUCTION ACTIVITY WAS COMPLETED ACCORDING TO ASSESSEE ITSELF . THIS IS ALSO NOT LOGICAL IN VIEW OF THE LOSS SUFFERED BY THE COMPANY IN THE ACC OUNTING PERIOD UNDER CONSIDERATION. (V) THE BUSINESS ACTIVITY RELATED TO COMPUTER SERVI CES ARE LUCRATIVE AND THE ASSESSEE IS NOT LIKELY TO INCUR ANY LOSS TO THE EXT ENT IT IS CLAIMED. (VI) AS EXPLAINED BY THE ASSESSEE IN ITS LETTER DAT ED 06/12/2010, THE PROFIT IS TO BE SHOWN ON COMPLETION OF CONTRACT I.E. IN THE PRES ENT ASSESSMENT YEAR. IN CASE, THE ASSESSEE CLAIMS THAT THERE ARE SOME EXPEN SES WHICH RELATED TO EARLIER ASSESSMENT YEARS, THE SAME CALLS FOR REVISI ON OF INCOME SHOWN IN THE EARLIER ASSESSMENT YEAR AND NOT IN THIS ASSESSMENT YEAR. (VII) AS REGARDS, THE CONSTRUCTION ACTIVITY, THE AS SESSEE'S RECORDS ARE NOT CAPABLE OF ANY VERIFICATION. THIS ALSO EVIDENT FROM THE FACT THAT THE ASSESSEE AGREED TO DISCLOSURE OF 1.4 CRORES IN THE SURVEY AC TION. THERE IS NO REASON TO BELIEVE THAT THE ASSESSEE HAS CHANGED ITS TACTICS A ND HAS PREPARED CORRECT ACCOUNTS. WHILE DOING SO THE ASSESSING OFFICER FURTHER HELD T HAT THE FINANCIAL RESULTS SHOWN BY THE ASSESSEE ARE NEITHER VERIFIABLE NOR AC CEPTABLE AND THEREFORE THE PROFIT HAS TO BE ESTIMATED. 3 3. BEFORE THE CIT(A) THE ASSESSEE MADE ELABORATE SU BMISSIONS. IT WAS SUBMITTED THAT THE VARIOUS REASONS GIVEN BY THE ASS ESSING OFFICER FOR REJECTING THE BOOKS ARE NOT JUSTIFIED. IT WAS SUBM ITTED THAT THE ASSESSEE HAD UNDERTAKEN ONLY ONE CONTRACT OF CONSTRUCTION OF HOS PITAL AT SHIVAJINAGAR, PUNE FOR PHADNIS CLINIC PVT. LTD. THE TOTAL CONTRA CT VALUE WAS RS.9.05 CRORES INCLUDING SERVICE TAX AND VAT. AS PER THE C ONTRACT THE ASSESSEE WAS ELIGIBLE FOR FURTHER AMOUNTS OVER AND ABOVE RS.9.05 CRORES ONLY ON ACCOUNT OF EXTRA WORK AND NOT FOR ESCALATIONS OR DELAY IN E XECUTION OF THE PROJECT. AT THE TIME OF SEARCH, WHICH WAS CONDUCTED ON THE A SSESSEE ON 24.01.2007, THE ASSESSEE WAS ASKED TO PREPARE TENTATIVE TRADING ACC OUNT OF THIS CONTRACT AND ALSO THE ESTIMATED FURTHER EXPENDITURE TO BE INCURRED. AT T HAT TIME, THE TOTAL EXPENDITURE TO BE INCURRED IN SUBSEQUENT YEAR WAS ESTIMATED AT RS.1.5 0 CRS. AND AFTER REDUCING THIS FIGURE, THE WIP AS ON THE DAY OF SEARCH WAS WORKED OUT AND THE ASSESSEE DECLARED AN AMOUNT OF RS.1.55 CRS. ON ACCOUNT OF WIP OF THE CONTRACT. 3.1 IT WAS ARGUED THAT SINCE IT HAD ESTIMATED THE FUTURE EXPENDITURE AT ONLY RS.1.50 CRS., THERE WAS ADDITIONAL DECLARATION ON A CCOUNT OF WIP IN THAT YEAR. HOWEVER, THE ACTUAL EXPENDITURE INCURRED SUBSEQUENT LY WAS RS.2.87 CRS. WHICH WAS MUCH MORE THAN THE ESTIMATED EXPENDITURE. IT WAS FU RTHER STATED THAT THE ASSESSEE HAD TO CARRY OUT EXTRA WORK OF RS.2.20 CRS. WHICH WAS N OT YET APPROVED BY THE PRINCIPAL AND THE SAME WAS NOT SHOWN AS REVENUE IN THIS YEAR. HENCE, IN VIEW OF THESE REASONS, THE ASSESSEE HAD INCURRED LOSS IN TH IS YEAR. IT WAS ALSO CLARIFIED THAT ALL THESE POINTS WERE CLARIFIED TO THE A.O. IN THE ASSE SSMENT PROCEEDINGS. IT WAS ARGUED THAT UPTO MARCH, 2008 THE CUMULATIVE G.P. SH OWN BY THE ASSESSEE IN RESPECT OF THE SAID CONTRACT WAS AROUND 29.42% AND THE N.P. WAS 14.38%. THE ASSESSEE FILED RELEVANT CHARTS TO SUBSTANTIATE THE ABOVE. I T WAS ACCORDINGLY ARGUED THAT THE 4 PROFIT DECLARED FROM THE CONTRACT WAS VERY REASONAB LE AND HENCE, THE A.O. WAS NOT JUSTIFIED IN REJECTING THE BOOKS FOR THIS YEAR AND ESTIMATING THE PROFIT. 3.2 IT WAS SUBMITTED THAT THE ASSESSEE IS AT LIBERT Y TO CARRY OUT ANY NUMBER OF DIFFERENT BUSINESSES AND THERE IS NO SUCH LAW WHICH PROVIDES THAT THE ASSESSEE CAN UNDERTAKE ONLY ONE BUSINESS. SIMI LARLY, ALTHOUGH THE ASSESSEE HAD MAINTAINED SEPARATE BOOKS OF ACCOUNT F OR THE CONSTRUCTION BUSINESS AS WELL AS SOFTWARE BUSINESS WHICH WERE SU BMITTED BEFORE THE ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS, TH E AO HAD WRONGLY STATED THAT THE ASSESSEE HAS NOT MAINTAINED SEPARAT E BOOKS OF ACCOUNT. AS REGARDS THE OBSERVATION OF THE ASSESSING OFFICER TH AT MANY EXPENSES LIKE SALARY, RENT ETC. TO THE FAMILY MEMBERS ARE ON THE HIGHER SIDE, IT WAS SUBMITTED THAT SUCH SALARY AND RENT PAID ARE VERY REASONABLE AND NO DISALLOWANCE U/S.40A(2)(B) HAS BEEN MADE BY THE ASS ESSING OFFICER. FURTHER, SIMILAR EXPENDITURE INCURRED IN THE PRECED ING ASSESSMENT YEAR WAS ALLOWED BY THE ASSESSING OFFICER IN THE 143(3) ASS ESSMENTS. IT WAS SUBMITTED THAT THE ASSESSEE HAD MADE SUBSTANTIAL PR OFIT IN THE COMPUTER TRADING ACTIVITY AND HAS INCURRED LOSS ONLY IN THE CONSTRUCTION ACTIVITY. HOWEVER, IT IS NOT A VALID REASON FOR REJECTING THE BOOKS AND ESTIMATING THE PROFIT IN ABSENCE OF ANY DEFECTS IN THE BOOKS OF AC COUNTS. 3.3 AS REGARDS THE OBSERVATION OF THE ASSESSING OFF ICER IN PARA (VI) OF THE ORDER THAT THE ASSESSEE IN ITS LETTER HAD STATED TH AT CERTAIN EXPENSES RELATED TO THE EARLIER YEAR AND THAT THE ASSESSEE SHOULD HAVE REVISED ITS INCOME FOR THE EARLIER YEARS, IT WAS SUBMITTED THAT NOWHERE IN ITS LETTER DATED 06-12-2010, IT HAS BEEN STATED THAT CERTAIN EXPENSES PERTAINED TO THE EARLIER YEAR. IT WAS SUBMITTED THAT THE ASSESSEE ONLY CLARIFIED THAT THE RE WAS SOME EXTRA WORK 5 CARRIED OUT. IT WAS ARGUED THAT THE VARIOUS REASON S FOR INCURRING LOSSES WERE EXPLAINED TO THE AO WHICH WERE NOT AT ALL CONSIDERE D BY THE ASSESSING OFFICER. ACCORDINGLY, IT WAS ARGUED THAT THIS OBJE CTION OF THE ASSESSING OFFICER IS NOT VALID. 3.4 AS REGARDS THE ALLEGATION OF THE ASSESSING OFFI CER THAT THE BOOKS OF ACCOUNTS ARE NOT VERIFIABLE WHICH IS EVIDENT FROM T HE DECLARATION DURING SURVEY ASSESSMENT WHERE THE ASSESSEE HAD DECLARED R S.1.40 CRORES AS ADDITIONAL INCOME IT WAS SUBMITTED THAT THE DECLARA TION WAS MADE IN 2007- 08 AND THE SAME CANNOT BE MADE A BASIS FOR REJECTIN G THE BOOK RESULTS FOR A.Y. 2008-09 ESPECIALLY IN ABSENCE OF ANY DEFECTS B EING POINTED OUT IN THE BOOKS OF ACCOUNTS. VARIOUS DECISIONS WERE ALSO BRO UGHT TO THE NOTICE OF THE LD.CIT(A). 4. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. WHILE DOING SO, HE OBSERVED THAT THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY MATERIAL TO CONTROVERT THE EXPLANATION GIVEN BY THE ASSESSEE IN ITS SUBMISSION DATED 01-12-2010 DURING THE ASSESSMENT PROCEEDINGS. ACCO RDING TO THE LD.CIT(A) MERELY BECAUSE THE ASSESSEE HAS INCURRED LOSS IN THE CONTRACT RECEIPTS THE SAME CANNOT BE A GROUND FOR REJECTING THE BOOK RESULTS IN ABSENCE OF ANY EVIDENCE BROUGHT ON RECORD REGARDING THE DEFECTS IN THE BOOKS OF ACCOUNT. HE OBSERVED THAT THE ASSESSEE HAS MAINTAINED SEPARATE BOOKS OF ACCOUNTS FOR THE CONSTRUCTION BUSINESS AS WELL AS COMPUTER HARDWARE BUSINESS AND THEREFORE THE ASSESSING OFFIC ER WAS NOT JUSTIFIED IN 6 OBSERVING THAT THE PROFIT CANNOT BE COMPUTED BECAUS E OF DIVERSE ACTIVITY AND NO SEPARATE BOOKS OF ACCOUNTS ARE MAINTAINED. 4.1 AS REGARDS THE ALLEGATION OF THE ASSESSING OFFI CER THAT THE ASSESSEE HAS PAID RENT AND SALARY TO THE DIRECTORS AND THEIR RELATIVES WHICH ARE VERY HIGH AND THE MANAGING DIRECTOR WAS PAID HUGE SALARY EVEN THOUGH THE CONSTRUCTION ACTIVITY WAS COMPLETED DURING THE YEAR HE OBSERVED THAT NO SUCH DISALLOWANCE HAS BEEN MADE BY THE ASSESSING OF FICER U/S.40A(2)(B). FURTHER, SUCH PAYMENTS WERE ALSO MADE IN THE EARLIE R YEAR AND NO DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER. TH E MANAGING DIRECTOR WAS PAID SALARY OF RS.24 LAKHS FOR A.Y. 2007-08 WHI CH WAS ACCEPTED BY THE ASSESSING OFFICER IN THE PAST U/S.143(3). THE ASSE SSEE HAS ALSO JUSTIFIED THE SALARY PAID TO THE MD IN ITS SUBMISSION FILED BEFOR E THE ASSESSING OFFICER ON 29-11-2010. NOTHING HAS BEEN BROUGHT ON RECORD TO SHOW THAT THE FAIR MARKET VALUE OF THE SERVICES RENDERED BY THE MD WAS LESS THAN THE AMOUNT PAID TO HIM. 4.2 AS REGARDS THE ALLEGATION OF THE ASSESSING OFFI CER THAT THE BOOKS ARE NOT CAPABLE OF VERIFICATION HE OBSERVED THAT THE AS SESSING OFFICER HAS NOT POINTED OUT ANY SPECIFIC DEFECT IN THE BOOKS OF ACC OUNT WHICH MAKES THEM NOT CAPABLE OF VERIFICATION. MERELY BECAUSE THE AS SESSEE HAS DECLARED AN AMOUNT OF RS.1.40 CRORES DURING THE SURVEY IN THE I MMEDIATELY PRECEDING ASSESSMENT YEAR THAT CANNOT BE THE BASIS FOR REJECT ING THE BOOKS OF ACCOUNT FOR THE IMPUGNED ASSESSMENT YEAR IN ABSENCE OF ANY DEFECTS BEING POINTED OUT. IN VIEW OF THE ABOVE THE LD.CIT(A) HELD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN REJECTING THE BOOK RESULTS DEC LARED BY THE ASSESSEE. 7 5. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVE NUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. THE ORDER OF THE CIT(A) IS CONTRARY TO LAW AND TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE CIT(A) HAS ERRED ON FACTS AND IN LAW, IN NOT UPHOLDING THE REJECTION OF BOOKS OF ACCOUNTS AND ESTIMATION OF PR OFIT, THOUGH THE ASSESSING OFFICER HAS POINTED OUT SPECIFIC DEFECTS IN BOOKS OF ACCOUNTS AND COGENT REASONS FOR TAKING HIS DECISION . 3. THE ORDER OF THE CIT(A) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 4. THE APPELLANT CRAVES, LEAVE TO ADD, AMEND, ALTER OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL DURING THE COURSE OF THE APPELLATE PROCEEDINGS BEFORE THE ITAT. 6. THE LD. DEPARTMENTAL REPRESENTATIVE HEAVILY RELI ED ON THE ORDER OF THE ASSESSING OFFICER. 7. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HA ND WHILE SUPPORTING THE ORDER OF THE CIT(A) REFERRED TO PAGE 55 OF THE PAPER BOOK AND DREW THE ATTENTION OF THE BENCH TO THE PROFIT DECLARED BY TH E ASSESSEE FROM THE CONSTRUCTION BUSINESS FROM A.Y. 2006-07 TO 2009-10. HE SUBMITTED THAT THE OVERALL PROFIT PERCENTAGE DECLARED BY THE ASSES SEE COMES TO 14.47% FROM THE CONTRACT WORK UNDERTAKEN. HE SUBMITTED TH AT THE ASSESSEE IN THE INSTANT CASE HAS DECLARED HIGHER INCOME IN THE PREC EDING YEARS AND HAS RATHER PREPONED ITS PROFIT. HE SUBMITTED THAT THE ASSESSEE HAS MAINTAINED SEPARATE BOOKS OF ACCOUNTS WHICH ARE EVIDENT FROM P APER BOOK PAGES 31 TO 47. HE SUBMITTED THAT THE SALARY, RENT ETC. PAID TO THE DIRECTORS AND THEIR RELATIVES WERE ALSO PAID IN THE PRECEDING ASSESSMEN T YEAR WHICH WAS ACCEPTED BY THE ASSESSING OFFICER IN THE ASSESSMENT COMPLETED U/S.143(3). THE ASSESSING OFFICER HAS NOT MADE ANY DISALLOWANCE U/S.40A(2)(B). NO 8 SPECIFIC DEFECTS WERE POINTED OUT BY THE ASSESSING OFFICER IN THE BOOKS OF ACCOUNTS MAINTAINED AND PRODUCED BEFORE HIM FOR THE IMPUGNED ASSESSMENT YEAR. HE SUBMITTED THAT THE ASSESSING OFFICER WITH OUT APPLICATION OF MIND AND IN A MECHANICAL WAY HAS REJECTED THE BOOK RESUL TS WHICH IS NOT JUSTIFIED. REFERRING TO THE DECISION OF HONBLE BOMBAY HIGH CO URT IN THE CASE OF R.B. BANSILAL ABIRCHAND SPINNING AND WEAVING MILLS VS. CIT REPORTED IN 75 ITR 260 HE SUBMITTED THAT IN THE ABSENCE OF ANY FINDING RECORDED AS TO THE UNACCEPTABILITY OF THE METHOD AND IRREGULARITY OF THE ACCOUNTS THE BOOK RESULTS CANNOT BE IGNORED OR BRUSHED ASIDE. HE ACC ORDINGLY SUBMITTED THAT THE ORDER OF THE LD.CIT(A) BE UPHELD AND THE GROUND S RAISED BY THE REVENUE BE DISMISSED. 8. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE IN THE INSTANT CASE IS ENGAGED IN THE BUSINESS OF CONS TRUCTION AS WELL AS TRADING IN COMPUTER HARDWARE. WE FIND THE ASSESSING OFFICE R REJECTED THE BOOK RESULTS AND ESTIMATED THE PROFIT @10% OF THE TOTAL RECEIPTS ON THE GROUND THAT THE ASSESSEE IN THE IMMEDIATELY PRECEDING ASSE SSMENT YEAR HAS DISCLOSED PROFIT WHEREAS FOR THE IMPUGNED ASSESSMEN T YEAR IT HAS SHOWN LOSS FROM CONSTRUCTION ACTIVITIES. FURTHER, NO SEP ARATE BOOKS OF ACCOUNTS ARE MAINTAINED, SALARY AND RENT ETC. PAID TO THE DIRECT ORS AND THEIR RELATIVES ARE ON THE HIGHER SIDE. FURTHER, ACCORDING TO THE ASSE SSING OFFICER DUE TO DIVERSE SOURCE OF INCOME IT IS DIFFICULT TO ESTIMAT E THE INCOME SINCE NO SEPARATE BOOKS ARE MAINTAINED FOR EACH BUSINESS AND THE ASSESSEES BOOKS OF ACCOUNTS ARE NOT CAPABLE OF VERIFICATION. THE ASSE SSING OFFICER FURTHER 9 OBSERVED THAT THE ASSESSEE HAD DECLARED ADDITIONAL INCOME OF RS.1.40 CRORES IN THE PRECEDING ASSESSMENT YEAR. IN VIEW OF THE A BOVE, THE ASSESSING OFFICER REJECTED THE BOOK RESULTS AND ESTIMATED THE PROFIT @10% OF THE TOTAL RECEIPTS. 8.1 WE FIND FROM THE VARIOUS DETAILS FURNISHED BY T HE ASSESSEE THAT IT HAS MAINTAINED SEPARATE BOOKS OF ACCOUNTS WHICH SHOWS P ROFIT FROM COMPUTER HARDWARE TRADING AND LOSS FROM CONSTRUCTION BUSINES S. NO DEFECTS HAVE BEEN POINTED OUT BY THE ASSESSING OFFICER IN THE BO DY OF THE ASSESSMENT ORDER REGARDING ANY DEFECT IN THE BOOKS OF ACCOUNT. NO DISALLOWANCE HAS BEEN MADE U/S.40A(2)(B) ON ACCOUNT OF SALARY, RENT ETC. PAID TO SPECIFIED PERSONS U/S.40A(2)(B). WE FURTHER FIND THE LD. DEP ARTMENTAL REPRESENTATIVE ALSO COULD NOT CONTROVERT THE FINDIN GS GIVEN BY THE LD. CIT(A) THAT IN THE PRECEDING ASSESSMENT YEAR THE AS SESSING OFFICER HAS ALLOWED SUCH SALARY AND RENT PAID TO DIRECTORS AND THEIR RELATIVES IN THE ORDER PASSED U/S.143(3) AND NO DISALLOWANCE WAS MADE. WE FURTHER FIND THE LD. DEPARTMENTAL REPRESENTATIVE ALSO COULD NOT CONTROV ERT THE FINDINGS GIVEN BY THE LD.CIT(A) THAT THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY MATERIAL TO CONTROVERT THE EXPLANATION GIVEN BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS VIDE ITS LETTER DA TED 01-12-2010 AND 29- 11-2010. 8.2 WE FIND THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF R.B. BANSILAL ABIRCHAND SPINNING AND WEAVING MILLS (SUPRA) HAS OB SERVED AS UNDER (SHORT NOTES) : 10 . . . . . . . . . . . . . . . . THE OFFICERS RIGHT UNDER THE PROVISO TO SECTION 13 ARISES ONLY AFTER A FINDING IS RECORDED AS TO THE UNACCEPTABILITY OF TH E METHOD AND IRREGULARITY OF THE ACCOUNT KEPT. IN THE ABSENCE O F SUCH A FINDING RECORDED BY THE AUTHORITIES, THE BOOK RESULTS CANNO T BE IGNORED OR BRUSHED ASIDE. THE MERE FACT THAT THE PERCENTAGE O F DEAD LOSS OF COTTON IS HIGH IN A PARTICULAR YEAR CANNOT LEAD TO AN INFERENCE THAT THEREBY THERE HAS BEEN A SUPPRESSION OF THE PRODUCT ION IN A SPINNING MILL. THEREFORE, THE ADDITION OF RS.50,000/- TO TH E TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF THE ALLEGED UNDERSTATED PROD UCTION OF YARN AND SOFT WASTE WAS NOT JUSTIFIED. 8.3 SINCE IN THE INSTANT CASE NOTHING HAS BEEN POIN TED OUT BY THE ASSESSING OFFICER REGARDING THE DEFECTS IN THE BOOK S OF ACCOUNTS OF THE IMPUGNED ASSESSMENT ORDER, THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT THE DECLARATION OF ADDITIONAL INCOME OF RS.1.4 0 CRORE IN THE A.Y. 2007- 08 AFTER THE SURVEY CANNOT BE THE BASIS FOR REJECTI NG THE BOOKS OF ACCOUNTS FOR THE IMPUGNED ASSESSMENT YEAR. THE ASSESSEE IN THE INSTANT CASE HAS POINT-WISE NEGATED THE OBSERVATION GIVEN BY THE ASS ESSING OFFICER FOR REJECTING THE BOOKS OF ACCOUNTS WHICH HAS ALREADY B EEN MENTIONED IN THE CIT(A)S ORDER AND THE LD. DEPARTMENTAL REPRESENTAT IVE WAS UNABLE TO CONTROVERT ANY OF THE FINDINGS. IN VIEW OF THE ABO VE AND IN VIEW OF THE DETAILED REASONING GIVEN BY THE LD.CIT(A) ACCEPTING THE BOOK RESULTS OF THE ASSESSEE WE FIND NO INFIRMITY IN HIS ORDER. ACCORD INGLY, WE UPHOLD THE SAME. GROUNDS RAISED BY THE REVENUE ARE ACCORDINGL Y DISMISSED. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 13 TH DAY OF AUGUST 2013. SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED : 13 TH AUGUST 2013 SATISH 11 COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT(A) CENTRAL, PUNE 4. THE CIT CENTRAL, PUNE 5. D.R. A BENCH, PUNE 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE