M/S RAM AVTAR PAREEK V. THE INCOME TAX OFFICER JAIPUR

ITA/274/2017

AI Insights

The case involves M/s Ram Avtar Pareek, the appellant, contesting the decisions of the Income Tax Officer and the Commissioner of Income Tax (Appeals), which were upheld by the Tribunal. The primary legal issues pertained to the application of Section 44AD and Section 68 of the Income Tax Act, 1961, concerning the depreciation and the treatment of unexplained cash credits, respectively. The appellant argued that the lower authorities erred in their interpretation and application of these sections, leading to an incorrect assessment of tax liabilities. The High Court of Rajasthan examined precedents and legal interpretations to resolve these issues in favor of the appellant.

• Counselvise Citation: [2017] 140 COUNSELVISE.COM (IT) 769979 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 21-12-2017
• Assessment Year: misc
• Other Referred Cases: Harish Kumar vs. ITO, Bundi, Shri Vinod Kumar Goyal vs. Commissioner of Income Tax, Commissioner of Income Tax vs. G.K. Contractor, Commissioner of Income Tax & Anr. vs. Bahubali Neminath Muttin
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: PRATEEK KEDAWAT; R B MATHUR
• Assessee Lawyers: GUNJAN PATHAK; ADITYA BOHRA
• Keywords: Depreciation; Net profit rate; Rejection of Books of Account; Unexplained cash credit; Written down value
• Section: 68; 44AD; 145(3)

Judgement Text

"HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 274 / 2017 M/s Ram Avtar Pareek, 4F, Natraj Colony, Tonk Road, Jaipur ----Appellant Versus The Income Tax Officer, Ward 6 (2), Jaipur ----Respondent _____________________________________________________ For Appellant(s) : Mr. Gunjan Pathak with Mr. Aditya Bohra For Respondent(s) : Mr. Prateek Kedawat for Mr. R.B. Mathur _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Judgment 21/12/2017 By way of this appeal, the appellant has assailed the judgment and order of the Tribunal whereby the Tribunal has dismissed the appeal of the assessee confirming the orders of both the authorities. This Court while admitting the matter framed the following questions of law:- “i) Whether for depreciation in the subsequent year to the year in which Section 44AD of the Income Tax Act, 1961 was applicable, the written down value adopted by the Appellant can be disregarded by the Ld. Assessing Officer? ii) Whether any addition under Section 68 of the Income Tax Act, 1961, is warranted when books have been rejected and addition has been made based on Net Profit Rate?” Counsel for the appellant has taken us to the order of the AO (2 of 4) [ITA-274/2017] as well as CIT(A) and contended that all the authorities have seriously committed an error in not considering the provisions of Section 44AD and Section 68 of the Income Tax Act, as envisaged. He has contended that now the issues are squarely covered by the decision of this Court in case of Harish Kumar vs. ITO, Bundi in DBITA No. 805/2008 decided on 2nd June, 2017 wherein it has been held as under:- “10. In view of the above, we confirm all the findings of the Tribunal and CIT(A) and we make it clear that he can be granted benefit of 44AF on the basis of regular assessment of all expenses which are allowed to the income.” He has relied upon another decision of this Court in case of Shri Vinod Kumar Goyal vs. Commissioner of Income Tax in DBITA No. 59/2008 decided on 5th September, 2017 wherein it has been held as under:- “4. Counsel for the appellant contended that AO has seriously committed an error in considering the assessment u/s 68 contrary to Division Bench judgment of this Court in case of Commissioner of Income Tax vs. G.K. Contractor reported in (2009) 19 DTR 305 wherein it has been held as under:- “7. Admittedly, the said amount of Rs. 38,28,086 was shown by the assessee in the books of account as \"market outstanding\". According to the assessee, the payment was outstanding against the labour and goods supplied. It is true that on being asked, the assessee was not able to explain these entries by producing the adequate proof to the satisfaction of the assessing officer. However, in our considered opinion, even if the assessee has failed to discharge his onus of proof in explaining the cash credits shown in the books of account as \"market outstanding\", the assessing officer having estimated the higher profit rate on total contract receipts after rejection of the books of account invoking the provisions of Section 145(3), no separate additions can be made on account of (3 of 4) [ITA-274/2017] unexplained cash credit under Section 68 of the Act of 1961. We are in complete agreement with the view taken by the Commissioner (Appeals), confirmed by the Tribunal. Thus, no substantial question of law arises for consideration of this Court in this appeal. 8. In the result, the appeal fails, it is hereby dismissed. No order as to costs.” 11. The CIT(A) has specifically observed that the cash flow statement was produced on record and taking into consideration the same he has allowed the appeal. However, the Tribunal in para 14 has observed contrary view and in view of the jurisdictional court judgment, regarding books of accounts of u/s 68, he reversed the judgment of CIT(A). 12. In view of the above, the issue is required to be answered in favour of the assessee against the department. He has further relied upon the decision in case of Commissioner of Income Tax vs. G.K. Contractor reported in 19 DTR 0305 wherein it has been held as under:- “7. Admittedly, the said amount of Rs. 38,28,086 was shown by the assessee in the books of account as \"market outstanding\". According to the assessee, the payment was outstanding against the labour and goods supplied. It is true that on being asked, the assessee was not able to explain these entries by producing the adequate proof to the satisfaction of the assessing officer. However, in our considered opinion, even if the assessee has failed to discharge his onus of proof in explaining the cash credits shown in the books of account as \"market outstanding\", the assessing officer having estimated the higher profit rate on total contract receipts after rejection of the books of account invoking the provisions of Section 145(3), no separate additions can be made on account of unexplained cash credit under Section 68 of the Act of 1961. We are in complete agreement with the view taken by the Commissioner (Appeals), confirmed by the Tribunal. Thus, no substantial question of law arises for consideration of this Court in this appeal. 8. In the result, the appeal fails, it is hereby dismissed. No order as to costs.” (4 of 4) [ITA-274/2017] He has relied upon the decision of Karnataka High Court in case of Commissioner of Income Tax & Anr. vs. Bahubali Neminath Muttin reported in 388 ITR 0608 wherein it has been held as under:- “The principle that if a finding of fact is not challenged as being perverse, the High Court is bound to accept such finding. Therefore, as no such substantial question of law has been framed and the questions pertain to findings of fact, which cannot be said to be perverse as it is evident that the books of accounts of the respondent had been rejected by the assessing authority, in which case the same books of accounts could not be relied upon in an addition on account of trade creditors and also for arriving at the closing stock. This is an established principle as has been held in the decisions relied upon by the respondent namely Indwell Constructions case, Banwari Lal Banshidhar's case, Aggarwal Engineering Company's case and Amman Steel and Allied Industries, case supra. In the light of the above, there is no substantial question of law that arises for consideration and the findings of the Tribunal cannot be said to be perverse, as the reasons assigned by the Tribunal are certainly acceptable and do not warrant interference. Consequently, the appeals are dismissed.” Taking into consideration the above, we are of the considered opinion that the issues are now covered by the decisions referred hereinabove. Hence, both the issues are required to be answered in favour of the assessee against the department. The appeal stands allowed. (VIJAY KUMAR VYAS) J. (K.S. JHAVERI)J. "