SHRI RAMESH SINGH RANA,LUCKNOW V. DEPUTY COMMISSIONER OF INCOME TAX-4, LUCKNOW

ITA 576/LKW/2019

AI Insights

This case involves an appeal by Shri Ramesh Singh Rana against the order of the Learned Commissioner of Income-tax (Appeals)-2, Lucknow, which confirmed the rejection of the appellant's books of accounts and the subsequent additions to his income for the assessment year 2012-13. The Assessing Officer had rejected the books of accounts under section 145(3) of the Income Tax Act, 1961, due to non-verification of purchases and expenses, discrepancies in TDS deductions, and non-production of books and vouchers. The Tribunal dismissed the appeal, agreeing with the lower authorities that the books of accounts were not verifiable and the additions made were justified.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 298582 (ITAT-LUCKNOW)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-04-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Other Referred Cases: DCIT Gurgaon vs. JSL Architecture, GVDI vs. DCIT, CIT vs. Anand Kumar Modi, Century Tiles Ltd. vs. JCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: REVENUE DID NOT EXPRESS ANY; SANJEEV KRISHNA SHARMA
• Assessee Lawyers: INVOKING
• Keywords: Condonation of delay; Business income; Corroborative evidences; Rejection of books of accounts; TDS
• Section: 143(3); 43; 133(6); 244A; 145(3)

Judgement Text

"आयकर अपीलȣय अͬधकरण ‘बी’ Ûयायपीठ, लखनऊ। IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH “B”, LUCKNOW Įी क ुल भारत, उपाÚय¢ एवं Įी अनाǑद नाथ ͧमèĮा, लेखा सदèय क े समछ BEFORE SHRI KUL BHARAT, VICE PRESIDENT AND SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER आयकर अपील सं/ ITA No.576/LKW/2019 Ǔनधा[रण वष[/ Assessment Year: 2012-13 Shri Ramesh Singh Rana 3-B, Talkatora Road, Rajaji Puram, Lucknow-226017. v. DCIT Range-4 5-Ashok Marg, Aaykar Bhawan, Lucknow- 226001. PAN:AGGPR0749B अपीलाथȸ/(Appellant) Ĥ×यथȸ/(Respondent) अपीलाथȸ ͩक और से/Appellant by: None Ĥ×यथȸ ͩक और से /Respondent by: Shri Sanjeev Krishna Sharma, Addl. CIT(DR) सुनवाई ͩक तारȣख / Date of hearing: 08 04 2025 घोषणा ͩक तारȣख/ Date of pronouncement: 17 04 2025 आदेश / O R D E R PER ANADEE NATH MISSHRA, A.M.: This appeal filed by the assessee, is directed against the order of the Learned Commissioner of Income-tax (Appeals)-2, Lucknow dated 11.06.2019, pertaining to the assessment year 2012-13. The assessee has raised the following grounds of appeal: - “1.Because the Ld. AO has reject the books of accounts u/s 145(3), of IT Act, 1961, on the basis of non confirmation notice u/s 133(3); less TDS deduction by the supplier or difference of Form-26AS and account books, a full and actual amounts not show, in the same reasons then the Ld. AO rejects the books of accounts u/s 145(3) of the I.T Act, 1961, is bad in law. 2. Because the ld. CIT(A)-2, Lucknow, has confirm the rejection of books by the Ld. AO u/s 145(3), of Income Tax Act, 1961, is bad in law. ITA No.576/LKW/2019 Page 2 of 10 3. Because the Ld. CIT(A) has failed to know about the facts and circumstances of the case, and has arbitrarily give the decision for addition of Rs.31,52,022/- therefore is bad in law and liable to deleted.” 2. The appeal is barred by limitation by 53 days. The assessee has filed an application seeking condonation of delay in filing of this appeal. The application for condonation of delay is supported by an affidavit of the assessee. The Ld. Sr. Departmental Representative for Revenue did not express any objection to the delay being condoned. Therefore, we condone the delay in filing of this appeal and admit the appeal for decision on merits. 3. In this case, assessment order dated 29/03/2015 was passed by the Assessing Officer (“AO”, for short), u/s 143(3) of the Income Tax Act, 1961 (“the Act”, for short) whereby the assessee’s total income was assessed at Rs.1,17,40,920/-. In the aforesaid assessment order, an addition amounting to Rs.31,52,022/- on account of net profit was made by the Assessing Officer. Further additions of Rs.24,91,996/- on account of undisclosed income in the bank account; addition of Rs.4,41,902/- on account of undisclosed TDS; addition of Rs.2,19,999/- on account of insurance premium amount; and addition of Rs.19,182/- on account of individual transaction statement of the assessee were also made in the aforesaid assessment order. The assessee’s appeal against the aforesaid assessment order was partly allowed by the Ld. CIT(A) vide impugned appellate order dated 11.06.2019. The present appeal has been filed by the assessee against the aforesaid impugned appellate order dated 11.06.2019 of the Ld. CIT(A). ITA No.576/LKW/2019 Page 3 of 10 4. At the time of hearing, no one attended the proceedings on behalf of the assessee. It is seen from the records that the Ld. Authorized Representative of the assessee attended the proceedings on 15.12.2021 and sought adjournment. Thereafter, subsequent hearings fixed on 25.01.2022, 08.01.2022, 05.04.2022, 17.05.2022, 01.06.2023, 16.05.2024, 20.06.2024 18.09.2024, 21.01.2025 and 12.03.2025 were adjourned on the request made from the assessee’s side, on one ground or the other. Thereafter, the matter was filed for hearing on 08.04.2025 but no one attended on behalf of the assessee. In the absence of any representation from the assessee’s side; this appeal is being disposed off after hearing the Ld Departmental Representative. 5. We have heard the Ld. Sr. Departmental Representative for Revenue. We have perused the materials on record. The relevant part of the impugned order of the Ld. CIT(A) is reproduced as under: - “6.3 The gist of additions/disallowances made by the AO is as under: a. The AO issued notices u/s 133(6) to 7 sundry creditors whose addresses were provided by the appellant. However no reply was received. Thus, the AO concluded that purchases and expenses are unverified. b. The AO noted that there is difference of TDS of Rs.1,85,961/- as per the 26AS statement vis-a-vis ITR filed by the appellant. The appellant contended that turnover shown by appellant is Rs.13.31 cr whereas the turnover as per AS-26 is Rs.2.31 cr i.e. less than the turnover shown in P & L account. It was contended that the return was filed on 29.09.2012 but some parties uploaded TDS on 04.12.2013. ‘Due to this fact the appellant contended that there is no difference in TDS. Appellant contended that there is no difference in turnover, so refund of Rs.1,85,962/- be allowed to him. The AO noted that this reply filed is without supporting documents, thus, receipts and expenses of appellant are unverifiable. Further, the AO contended that books of accounts and bills and vouchers were not produced during assessment proceedings. c. In view of these facts the AO rejected the books of accounts u/s 145(3) and estimated the Net Profit of appellant. Net Profit from supply of material was estimated @ 1.5% ie. Rs.16,48,414/- (1.5% of Rs.109894290). Net ITA No.576/LKW/2019 Page 4 of 10 Profit from contract work was estimated @ 5 % ie. Rs.66,59,426/- (5% of Rs.13,31,88,534/-). Thus, total business income of appellant was estimated at Rs.83,07,840/as against Rs.51,55,818/shown by the appellant. Accordingly, an addition of Rs.31,52,022/- was made to total income of appellant. d. AO noted that as per ITS statement the appellant has made three time deposits of Rs.12,00,000/- each with HDFC Bank Ltd. Interest on these time deposits is also shown in AS26. However, the appellant has shown only one time deposit of Rs.12,00,000/in Balance Sheet and Interest Income was not shown in the return filed. The appellant contended that only one time deposit of Rs.12,00,000/- has been made with HDFC Bank. The AO did not accept the contention of AO and treated two time deposits of Rs.24,00,000/- (2 * Rs.12,00,000/-) as made from undisclosed sources and Interest Income of Rs.91,996/- on these Time Deposits was added to total income. Accordingly, an addition of Rs.24,91,996/- was made to total income of appellant. e. The AO noted that there is undisclosed TDS of Rs.1,85,961/- in case of appellant out of which Rs,.9200 pertains to Interest Income (discussed in Para 6.3 b above). T e AO concluded that TDS of Rs.1,76,761/- relates to Contract receipts not shown by appellant by applying TCS rate @ 2% on Contract receipts, the AO calculated unaccounted contract receipts at Rs.88,38,050/-. The estimated NP rate @ 5% was applied on these contract receipts and addition of Rs.4,41,902/- was made to total income of the appellant. f, The AO noted that as per ITS, the appellant had purchased insurance policies of Rs.20,000/- on 15.06.2011 and of Rs.1,99,999/- on 13.01.2012 from HDFC Bank but same are not reflected in accounts of appellant. Thus, this amount of Rs.2,19,999/- was added to total income of the appellant. The AO noted that Interest u/s 244A on refund for AY 2010-11 amounting to Rs.19,182/- was not shown in ITR. Thus, an addition of Rs.19,182/- was made to total income of the appellant. g. The AO noted that Interest u/s 244A on refund for AY 2010-11 amounting to Rs.19,182/- was not shown in ITR. Thus, an addition of Rs.19,182/- was made to total income Ground of appeal no. 5 -Addition of Rs.19182/- b. This ground of appeal was not pressed by the appellant. Hence, this ground of appeal is dismissed. The addition of Rs.19,182/- is confirmed. 7.2 Ground of appeal no. 4 - Addition of Rs.2,19,999/-: a. The AO noted that as per ITS, the appellant had purchased insurance policies of Rs.20,000/- on 15.06.2011 and of Rs.1,99,999/- on 13.01.2012 from HDFC Bank but same are not reflected in accounts of appellant. Thus, this amount of Rs.2,19,999/- was added to total income of the appellant. b. The contentions of appellant in brief are as under: The HDFC policy no, 12912299 is running since 15.05.2009 and is till 20.05.2019 with annual premium of Rs.20,000/-. Appellant contended that being individual, this premium was paid from his Savings bank account and was not shown in P & L account an expense. ITA No.576/LKW/2019 Page 5 of 10 The HDFC policy no. 14869856 had Insurance premium of Rs.1,99,999/- p.a. and same was paid by appellant out of its Savings Bank account on 02.01.2014, This premium is not shown in P & L account as expense, C In view of the above facts that appellant had paid these Insurance premium from his savings bank account and not debited the same to P & L account, therefore, the addition of Rs.2,19,999/- is not sustainable and is hereby deleted. Ground of appeal no. 4 is allowed. 7.3 Ground of appeal no. 2 - Addition of Rs.24,91,996/-: a. AO noted that as per ITS statement the appellant has made three time deposits of Rs.12,00,000/- each with HDFC Bank Ltd. Interest on these time deposits is also shown in AS26. However, the appellant has shown only one time deposit of Rs.12,00,000/- in Balance Sheet and Interest Income was not shown in return filed. The appellant contended that only one time deposit of Rs.12,00,000/- has been made with HDFC Bank. The AO did not accept the contention of AO and treated two time deposits of Rs.24,00,000/- (2 * Rs.12,00,000/-) as made from undisclosed sources and Interest Income of Rs.91,996/- on these Time Deposits was added to total income. Accordingly, an addition of Rs.24,91,996/- was made to total income of appellant. b. Perusal of ITS dated 03.12.2014 shows three time deposits/TDRs in name of appellant of Rs.12,00,000/- each. All three time deposits are dated 02.01.2012 with maturity date of 18.01.2013. Perusal of HDFC bank account statement of appellant shows a single debit transaction dated 02.01.2012 for FDR of Rs.12,00,000/-. c. These facts clearly show that in ITS the single transaction of Rs.12,00,000/- for one FDR/Time Deposit has been wrongly reflected three times showing the same amount and same date Le. 02.01.2012. The actual fact is that this investment was made by appellant once but wrongly reflected thrice in the ITS. In view of these facts the addition of Rs.24,00,000/- is hereby deleted. d. The Interest on FDR in IDB] Bank to tune of Rs.91,996/- relevant to AY 2012-13 has not been shown by the appellant in the ITR in spite of TDS of Rs.9200/- being deducted on the same. Thus, the addition of Rs.91,996/- is upheld. e. In view of above facts, the addition of Rs.24,00,000/- is hereby deleted and addition of Rs.91,996/- is hereby confirmed/upheld. Ground of appeal no. 2 is partly allowed. 8.1 Ground of appeal no. 3 – Addition of Rs.4,41,902/-: a. The AO noted that there is undisclosed TDS of Rs.1,85,961/- incase appellant out of which Rs.9200 pertains to Interest Income (discussed in Para 6.3 b above). - AO concluded that TDS of Rs.1,76,761/- relates to Contract receipts not shown by appellant applying TCS rate @ 2% on Contract receipts, the AO calculated unaccounted contract receipts at Rs.88,38,050/-. The estimated NP rate @ 5% was applied on these contract receipts and addition of Rs.4,41,902/- was made to total income of the appellant. ITA No.576/LKW/2019 Page 6 of 10 b. The undersigned has examined the written submissions of the appellant and the assessment order passed. This ground of appeal is discussed and decided as under: i. As per AS-26 the Contract receipts of appellant are Rs.2,13,83,573/-. The Contract receipts shown by the appellant in ITR is Rs.13,31,88,508/-. Thus, the appellant has shown Contract receipts in ITR in excess of Rs.11,18,04,932/- than as shown in AS-26. ii. As per the appellant, the reason for this difference in TDS is mainly on account of delay in filing of TDS returns by the parties or revision of TDS return by the parties. The appellant claimed that it has shown TDS claimed of Rs.1,89,747/- in the ITR filed. However, after revision/ delay in filing of TDS returns by various parties the TDS as per From 26AS works out to Rs.3,26,069/from Contract receipts and Rs.11,929/- from FDR Interest. The difference of TDS of Rs.1,48,251/- as per AS-26 and not claimed by the appellant mainly relates to the contract receipts of Rs.11,18,04,932/- not reflected in AS-26 (Rs.13,31,88,508/- shown in ITR - Rs.2,13,83,573/- shown in AS-26). iii, Thus, the conclusion of AO that contract receipts of Rs.88,38,050/- have not been reflected by AO in ITER is not correct as these contract receipts are covered by the difference of contract receipts of Rs.11,18,04,932/- (As per ITR - As per 26AS). Thus, the addition of Rs.88,38,050/- to turnover of appellant would tantamount to double addition of contract receipts. Consequently, the addition of Net Profit of Rs.4,41,902/- would tantamount to double addition of income. c. In view of the facts outlined in Para 8.1 (b)(i) to 8.1 (b) (iii) above, the addition of Rs.4,41,902/is not sustainable and is hereby deleted. Ground of appeal no. 3 is allowed. 91 Ground of appeal no. 1 - Addition of Rs.31,52,002 -: a. The AO issued notices u/s 133(6) to 7 sundry creditors whose addresses were provided by the appellant. However no reply was received. Thus, the AO concluded that purchases and expenses are unverified. b. The AO noted that there is difference of TDS of Rs.1,85,961/- as per the 26AS statement vis-a-vis ITR filed by the appellant. The appellant contended that turnover own by appellant is Rs,13.31 cr whereas the turnover as per AS-26 is Rs2.31 cr i.e. less than t e turnover shown in P & L account. It was contended that the return was filed on 29.09.2012 some parties uploaded TDS on 04.12.2013. Due to this fact the appellant contended that there is no difference in TDS. Appellant contended that there is no difference in turnover, so refund of Rs.1,85,962/- be allowed to him. The AO noted that this reply filed is without supporting documents, thus, receipts and expenses of appellant are unverifiable. Further, the AO contended that books of accounts and bills and vouchers were not produced during assessment proceedings. C. In view of these facts the AO rejected the books of accounts u/s 145(3) and estimated the Net Profit of appellant. Net Profit from supply of material was estimated @ 1.5% te. Rs.16,48,414/- (1.5% of Rs.109894290). Net Profit from contract work was estimated @ 5 % ie. Rs.66,59,426/- (5% of ITA No.576/LKW/2019 Page 7 of 10 Rs.13,31,88,534/-). Thus, total business income of appellant was estimated at Rs.83,07,840/- as against Rs.51,55,818/- shown by the appellant. Accordingly, an addition of Rs.31,52,022/- was made to total income of appellant. 9.2 The AO has rejected the books of accounts for the following reasons: i. No reply was received in respect of notices u/s 133(6) issued to seven sundry creditors. Thus, the purchases and expenses are unverified. ii. There is difference in TDS of Rs.1,85,961/as per AS-26 statement vis-a- vis vs. ITR. iii. Books of accounts and bills and vouchers were not produced. Thus receipts and expenses are unverifiable. 9.3 The contentions of the appellant in respect of this ground of appeal are discussed in brief as under: a. The facts outlined in Paras 1 to 4 of the assessment order are contradictory. b. Reliance was placed on following case laws: i. DCIT Gurgaon vs. JSL Architecture of Han’ble ITAT, Delhi Bench. ii, GVDI vs. DCIT (2014) 43 taxmann.com 246 (Madras High Court) iii, CIT vs, Anand Kumar Modi (2014) 44 taxmann.com 21 (Jharkhand High Court) iv. Century Tiles Ltd. vs. JCIT (2014) 51 taxmann.com 515 (Ahmedabad). c. The market completion is very high due to which there is decline in Net Profit. d. Comparable figures of NP were given for AY 2009-10 till AY 2013-14. 9.4 Finding on ground of appeal no. 1; a. The AO in Para 2 of the assessment order has clearly oak hat “Neither the books of accounts nor any supporting bills/vouchers have been produce or verification. In absence of any of the documents to support the profit declared, the authenticity of book results is highly doubtful”, It is further mentioned in Para 3 that “the books of accounts may pave been audited but if not produced for examination, their authenticity cannot be verified”. In Para 4 the AO has mentioned that “Without any supporting documents, neither the receipts nor the expenses of the assessee are open to verification. In view of these facts I have no opinion but to reject the books of account of the assessee”. The above facts are self explanatory. The contention of the appellant that facts outlined by the AO in Para 1 to 4 of the assessment order are contradictory does not hold any ground and is not accepted. ITA No.576/LKW/2019 Page 8 of 10 b. The judgments relied upon by the appellant are not applicable to the facts of the present case. In all these judgments the books of accounts were produced by the assessee before the AO but same were rejected u/s 145(3). In the present case the books of accounts alongwith bills/ vouchers were not produced before the AO. In the judgement GVDI vs. DCIT the assessee explained the reasons for fall in GP and revenue did not verify it. In the present case the appellant explained the massive fall in NP rate by a general observation that “market competition is very high due to which there is decline in NP rate”. Thus, the said judgement is not applicable to facts of present case as a» appellant has not explained reasons for fall in NP rate with substantial evidence, In case of Century Tiles Ltd. it was held that decline in GP rate and disproportionate increase of expenses cannot be ground to reject book results. However, books of accounts were produced before the AO. Thus, these facts do not match with facts of appellant’s case. Thus, the judgments relied upon by the appellant are distinguishable from the facts of the appellants case and are not applicable in the present case. c. The AO has rejected the books of accounts of appellant by invoking section 145(3) of the Act for the reasons outlined in Para 9.2 above and estimated NP rate of the appellant. The Provisions of section 145(3) are reproduced as under: 145-(1) Income Chargeable under the head “Profits and gains of business of profession” or “Income from other sources” shall, subject to the provisions of subsection (2) be computed in accordance with earlier cash or mercantile system of accounting regularly employed by the assessee. (2) The Central Government may notify in the Official Gazette from time to time [Income Computation and disclosure standards] to be followed by any class of assessee or in respect of any class of income. (3) Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub section (1) [has not been regular) owed by the assessee, or income has not been computed in accordance with the standards notified under sub-section (2), the Assessing Officer may make an assessment in the manner provided in section 144] b. In the present case neither the books of accounts were produced nor the b. Bills/ vouchers were not produced before the AO. c. Reasons for fall in NP rate as compared to earlier and subsequent AY were not explained before the AO with supporting evidences. d. Sundry creditors could not be verified as notices u/s 133(6) were not complied with. It is hereby held that AO was not satisfied about the correctness and completeness of accounts of the appellant. In view of these facts the books of accounts were rightly rejected by the AO by invoking provisions of section 145(3) of the Act. The action of AO is hereby upheld. Further, the appellant had shown NP rate @ 2.12% for AY under consideration which is substantially lower than NP rate @ 5.02% shown in earlier and subsequent AY’s and the reasons for this substantial fall could not be explained satisfactorily with documentary evidences by the appellant. Therefore, the action of AO in estimating Net Profit at Rs.83,07,840/- as against ITA No.576/LKW/2019 Page 9 of 10 Rs.57,55,818/- shown by the appellant is upheld. The addition of Rs.31,52,022/- is hereby confirmed. Ground of appeal no. 1 is dismissed.” 6. On perusal of the records, it is found that the order of the Ld. CIT(A) is in accordance with law; having regard to the specific facts and circumstances of the present case. The relevant portion of the impugned order of the Ld. CIT(A) has already been reproduced in foregoing paragraph no. 5 of this order. No material has been brought for our consideration to make a case for any interference with the impugned order of the Ld. CIT(A). Therefore, it is held that the impugned order of the Ld. CIT(A) does not warrant any interference, having regard to the specific facts and circumstances of the present case and applicable law. Accordingly, the impugned order of the Ld. CIT(A) is upheld and grounds of appeal of the assessee are dismissed. 7. In the result, the appeal of the assessee is dismissed. Order pronounced in the open Court on 17/04/2025. Sd/- [क ुल भारत, उपाÚय¢] Sd/- [अनाǑद नाथ ͧमèĮा] [KUL BHARAT] [ANADEE NATH MISSHRA] उपाÚय¢/VICE PRESIDENT लेखा सदèय/ACCOUNTANT MEMBER Ǒदनांक/DATED: 17/04/2025 Vijay Pal Singh, (Sr. PS) ITA No.576/LKW/2019 Page 10 of 10 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. DR 5. Guard File By order // True Copy// Assistant Registrar "