Income Tax Appellate Tribunal - Ahmedabad
Shakti Cargo Movers Pvt.Ltd.,, Surat vs Department Of Income Tax on 20 October, 2011
आयकर अपीलीय अिधकरण, अहमदाबाद Ûयायपीठ 'बी', अहमदाबाद
सव[ौी ौी डȣ.
डȣ.के.×यागी,
×यागी, Ûयाियक सदःय एवं ौी ए.
ए.मोहन अलंकामोनी,
ामोनी लेखा सदःय के सम¢
IN THE INCOME TAX APPELLATE TRIBUNAL : 'B' BENCH : AHMEDABAD
Before Hon'ble Shri D.K.Tyagi, J.M. & Hon'ble Shri A.Mohan Alankamony, A.M.)
आयकर अपील सं. ITA No. 2372/Ahd./2004 : िनधा[रण वष[ः- 2001-2002
A.C.I.T., Circle-4, Surat -Vs-M/s. Shakti Cargo Movers Pvt. Ltd., Surat
(PAN : AADCS 3976R)
(अपीलाथȸ/Appellant) (ू×यथȸ/Respondent)
अपीलाथȸ कȧ ओर से/ Appellant By : Shri Samir Tekriwal, Sr.D.R.
ू×यथȸ कȧ ओर से / Respondent By : Shri S.N.Soparkar, Sr.Adv. with
Shri Jaimin Gandhi
सुनवाई कȧ तारȣख / Date of Hearing : 20/10/2011
घोषणा कȧ तारȣख / Date of Pronouncement : 29/12/2011
आदे श / Order
Per Shri A.Mohan Alankamony, Accountant Member :
This appeal is filed by the Revenue, aggrieved by the order of the Learned Commissioner of Income Tax(Appeals)-III, Surat in Appeal No.CAS-III-48/03-04 dated 27.05.2004 for the assessment year 2001- 2002 passed under section 250(6) r.w.s. 143(3) of the I.T. Act, 1961.
2. Though the Revenue has raised three grounds, the crux of the issue is that the ld. CIT (A) had erred in deleting the addition of Rs.20,53,076/- made on account of low net profit by rejecting the books of accounts u/s 145(1) of the Act.
3. Before taking up the Revenue's appeal for adjudication, we would like to record the sequence of events which took place during the intervening period that the Ld. AO, for the reasons recorded in his impugned order, rejected the books of accounts of the assessee u/s ITA No. 2372-Ahd-04 145(1) of the Act for non-maintenance of log book in respect of Cars and non-maintenance of records relating to lorry hire expenses and estimated the assessee's net profit at 4.57% and difference of Rs.20,53,076/- was added to the assessee's total income. When the assessee took up the issue, among others, with the Ld. CIT (A) for relief, the Ld. CIT (A), for the reasons set-out in his findings, held that the rejection of books of account was not justifiable in the eyes of law and as a result of which the addition of Rs.20.53 lakhs was deleted.
3.1. Aggrieved by the order of the ld. CIT (A), the Revenue had approached the Hon'ble Tribunal for reversal of the Ld. CIT (A)'s stand. The earlier Bench, in its order in ITA Nos.2371 & 2372/Ahd/2004 dated:
7.11.2008, after due consideration of rival submissions, had observed thus:
"16. On overall consideration of the materials brought on record, we are of the view that the expenses claimed by the assessee are not open to verification in the absence of independent and third party vouchers. In this view of the matter, the order of the AO rejecting the book results is confirmed. The net profit rate estimated by the AO, according to us, is on higher side. We, therefore, restrict the net profit rate to 4% after taking into all the submissions made by the assessee. The AO shall work out the net profit accordingly."
4. Aggrieved with the finding of the earlier Bench, the assessee carried the issue through an appeal u/s 260A of the Act before the Hon'ble Jurisdictional High Court with the following substantial questions of law:
"(i) Whether in the facts and circumstances of the case the Income-tax Appellate Tribunal was right in law in reversing the order of the CIT (A) without in any way discussing the findings reached by the said authority and finding the same to be erroneous as 'it was a duty of the Tribunal to ascertain the reasons which were given by the Commissioner (Appeals) in 2 ITA No. 2372-Ahd-04 whose order, the order of the assessing officer had merged' before reversing the same? [(257 ITR 297 (Gujarat)]
(ii) Whether, in the facts and circumstances of the case, the Income-tax Appellate Tribunal was right in law in arbitrarily fixing the net profit rate at 4%?
(iii) Whether, in the facts and circumstances of the case, the Income-tax Appellate Tribunal was right in law in rejecting the books of account of the appellant u/s 145(1) of the Act?"
4.1. After hearing the rival parties, the Hon'ble Court has, in its order in Tax Appeal No.2324 of 2009 dated 19.1.2010, observed that:
"6. The Tribunal has not at all discussed about the findings recorded by the CIT (Appeals) and why the said finding is not sustainable. If the Tribunal were not agreeable with the finding recorded by the CIT (Appeals), in that case, the Tribunal supposed to deal with the finding recorded by the CIT (Appeals) and to give its own reasons as to why the said finding is not sustainable either on facts or in law. In absence of this exercise, the order passed by the Tribunal is not sustainable and hence the same is hereby quashed and set aside and the matter is restored back to the Tribunal to decide it denovo. The Tribunal is hereby directed to pass a speaking order dealing with the findings arrived at by the CIT (Appeals) and if the Tribunal is not in agreement with the finding recorded by the CIT (Appeals), the reasons for such disagreement should specifically be reflected in the order that may be passed."
4.2. Thus, the Revenue's appeal against the impugned order of ld. CIT(A) has come up before this Bench for consideration in consequent upon the ruling of the Hon'ble jurisdictional High Court referred supra.
5. The facts of the issue, in brief, are that the assessee company ['the assessee' henceforth] engaged in the business of transportation of goods, furnished its return of income, admitting a total income of Rs.40,77,950/- on 24.10.2001 which was, initially, processed u/s 143(1) of the Act and, subsequently, taken up for scrutiny. During the course of 3 ITA No. 2372-Ahd-04 hearing, in compliance to queries raised, according to the AO, the assessee had responded that (i) maintenance and usage of Cars - no logbook was maintained; (ii) details of gross profit per truck - it was not possible to give such details; and further submitted that the assessee had paid cash to truck drivers as per trips in different amounts and no reasonable explanation or any proof was forth-coming. In view of the above, the assessee's books of account and profit and loss statement were not accepted and, hence, books of accounts of the assessee were rejected u/s 145(1) of the Act. For arriving at the conclusion that the assessee had shown net profit of 3.81% lesser which came to Rs.20,53,076/-, the ld. AO had reasoned that:
"[Para 6 of the asst. order] I am not satisfied with the reply given by the authorized representative of the assessee, because it was submitted by the assessee that due to decrease in rate of booking income total income is reduced which is not appropriate. As mentioned above, assessee is unable to give challan-wise details of income and expense. So, in this regard, right to have an excess to the basic supporting evidences has been defeated. This has to be taken note of. In addition to that assessee had to reduce rate of booking income from Hyderabad to Surat from Rs.1.80 per kg. to Rs.1.50 per kg. This reduction is of only of Re.30 paise which is around 17% reduction and also for the period 9.10.2000 to 31.3.2001 assessee had charged Rs.1.60 per kg. The net profit ratio of the assessee which was 5.31% in the last AY i.e., 2000-01 is reduced to 0.76%. Considering the facts and situation this effects reduction is beyond imagination. In this way assessee has shown net profit 4.55% lower than as compared to previous year, when the actual reduction in booking income was 14% (as mentioned above), and if 14% reduced from the net profit of previous year i.e., from 5.31%, it will come to 4.57%. And this must be the profit of the assessee whereas the assessee has shown only 0.76%. In this way, assessee has shown net profit 3.81% lesser which comes to around Rs.20,53,076/-, and thereby it is added to the total income of the assessee."4
ITA No. 2372-Ahd-04
6. The assessee then carried the matter before the ld. ClT (A). The ld. AR had made the following submission during the appellate proceedings:
"[Para 17 of CIT(A)'s order] As far as records relating to lorry hire are concerned, the ld. AO has failed to understand and appreciate ground realities of transport business. The lorry hire expenses are paid to the truck drivers who do not have bank accounts, moreover, they are not known to the appellant. The trucks are not owned by the appellant; therefore, the outsider truck drivers cannot be expected to receive the payment by cheque. Moreover, the payment is made to the truck drivers on behalf of the truck owners who are different from the truck drivers and also not known to the assessee. When all the vouchers are signed by the persons receiving the payment of lorry hire are available, this cannot lead to the rejection of books of accounts and cannot be termed as defect in books of accounts. Mere payment by cash is not a ground for rejecting books. If the said payment is proved to be bogus or in violation of section 40A(3), the disallowance can be made according to the said expenses, but, it cannot be termed as defect in books of accounts.
The ld. AO has wrongly stated in para 6 on page 7 of the assessment order that the total turnover cannot decrease due to decrease in the booking rate. This is quite illogical in the sense that the total booking income is the sum total of the freight received per consignment during the year. The freight is the amount of total weight multiplied by rate of booking per kg. It is hard to understand now the reduction in booking rate does not affect the booking income. During the year under consideration, the booking rate between Surat - Hyderabad route was decreased which affected the freight booking income and resultantly, it reduced to some extent. The reasons for decrease in booking rate and freight booking income were submitted to him in our office letter dt. 22.12.2003 which is reproduced by the ld. Assessing officer on pages 4 & 5 of the asst. order. Thus, the said query was also explained with facts and figures through the above letter of submission.
Moreover, the ld. AO has failed to consider that the freight income of AY 2000-01 also included fleet freight of excavator machines, which had no relation with the lorry hire expenses. Therefore, the comparison of freight booking income directly with 5 ITA No. 2372-Ahd-04 the lorry hire expenses is not proper. This fact was left out of the mind of the ld. Assessing officer as he has never tried to look into the calculation of the said ratio and grouping of the income and expenses. Please find enclosed the statement showing the comparative percentage of lorry hire expenses with freight income of last two years in Annexure - E. on verification of the said statement your honour can very well verify that the lorry hire expenses have increased by only 1% which is not a material increase as the expenses cannot remain same. Moreover, if the effect of decrease in freight rates is given, the appearing increase of 1% will be converted into decrease.
The ld. AO has erred in relying upon case law cited by him on page 3 para 4 of the asst. order is irrelevant as proviso to sub-section 1 of s. 145 has been omitted w.e.f. 1.4.1997 and the judgment relied upon is of AY 1984-85. Moreover, the appellant's case is much different and has no connection with the facts of this case. There are no such infirmities in the books of accounts from which correct income cannot be deduced. Therefore, the book result has been wrongly rejected.
18. The AR of the appellant Co. besides making above submissions had also tried to differentiate the fact of the case of the appellant co., with that of Keshrichand Jaisukhlal v. CIT 248 ITR 47 as quoted by the AO. In this regard he said that in the above referred case, the assessee was engaged in the business of grooms and had claimed shortage which was on higher side and its purchases was not supported by vouchers. He pointed out further that in the above referred case, the assessee could not produce records and details about parties from which purchases were made, and thus assessee was not in a position to prove the identity of the parties from whom such purchases were made. Again, he mentioned that in the above referred case, there was found wide difference between the market value of the product on the stock valuation date and the valuation of closing stock for which no explanation was provided. According to him (A.R), it was on the basis of these facts that the Hon'ble Court decided the case of the assessee. Regarding rejection of books of accounts of appellant co., he very categorically stated that the facts of the case of the appellant co. were comparable to that of Keshrichand Jaisukhlal v. CIT (supra). According to him, the appellant co. maintained all books of accounts and all required slips and vouchers were properly reflected in the books 6 ITA No. 2372-Ahd-04 of accounts and maintained and the action of the AO by relying on the above referred case of rejecting its (appellant co.) books of accounts was not justifiable at all. He relied on following decisions in support of his contention that the rejection of books of accounts made by the AO. In the case of the appellant co., under consideration was not valid:(1) Shankar Rice Co v. ITO (2000) 72 ITD 139/ 110
Taxman (2) Gurlal Singh Tuli v. ACIT (2000) 73 ITR 375 (Nagpur) (3) Ajanta Construction Pvt. Ltd v. ACIT (2001) 116 Taxman 220 (Jaipur) (4) Cibatul Ltd v. DCIT (2001) 118 Taxman 28 (Ahd)
19. Again the AR had stated that even non-maintenance of day-to-day stock register or production register was also not considered as defect in the books of accounts and for this he relied on following decisions:
(1) Manoharlal v. ITO (2000) 68 TTJ (Jodh) 27 (2) Ganesh Foundry v. ITO (2000) 67 TTJ (Jodh) 434 (3) ACIT v. Khambhata Family Trust (1998)67 ITD 411 (Ahd) 6.1 After taking into account the various submissions made by the ld.
AR, the ld. CIT (A) has recorded findings thus:
"20. After the perusal of the findings of the AO in the assessment order and also after going through the detailed submissions made by the AR of the appellant co., and the case laws cited by him, I am of the view that the rejection of books of accounts as made by the AO and comparing the NP ratio without taking into accounts the factors which had affected the earning of the appellant co., in the form of fleet freight receipts and also certain major expenses which had been incurred during the year but not incurred in earlier year (such as ken man policy premium of Rs.5,77,320/- and donation of Rs.3,50,000/-) along with enhanced expenditure of Rs.4,32,453/- under the head finance charges is found illegal in the eyes of law. Few case laws relied upon by the AO are not found applicable vis-à-vis the facts and issues involved in the case of the appellant co. The AR has very categorically stated about the factors responsible for decline in freight receipts and at the same time it could not reduce its lorry 7 ITA No. 2372-Ahd-04 expenses (as referred above) and the same has been found fully supported with facts and figures as reflected in the books of accounts. The AR had filed copies of Circulars as were approved by its major clients such as the 'Hyderabad Wholesale Art Silk Cloth Merchants Association', wherein the reduction in rate of freight charges had been clearly shown. The AR had also discussed about the nature of major expenses the appellant co., incurred during the year.
21. Based on these facts, the A.R had prepared a chart showing the N.P worked out for the year under consideration and compared the same with that of the earlier year and after going through the details, it is found that the difference is very nominal and the same is acceptable considering the ups and down in the business. I, therefore, in view of the above discussed facts hold that the rejection of books of accounts by the AO was not justifiable in the eyes of law and as a result the addition made by the AO of Rs.20,53,076/- is also deleted as the same was made on unsound findings and illogical workings."
7. Dissatisfied with the stand of the ld. CIT (A) on the issue, the Revenue has come up with the present appeal.
8. During the course of hearing, the ld. D R had drawn the attention of this Bench to the fact that the Ld. CIT (A) in his impugned order in paragraph 14 had stated that "......During the appellate proceedings, the A R had submitted a detailed chart showing details of expenses and receipts per truck per trip along with other details such as the weight of goods transported, truck Nos., and the total lorry hire charges received etc., and these were examined...." However, it was argued by the ld. D R that the ld. CIT (A) had failed to seek comments or remand report on those details from the AO. He had, further, quoted the ld. AR's claim that "[Para 14 on page 8 of the CIT(A)'s order]..... Notwithstanding anything stated herein above, impossibility to produce statements showing per truck profit can also not be termed as incorrect and incomplete accounts where all 8 ITA No. 2372-Ahd-04 the vouchers, supporting evidences in respect of each journey of trucks are available. Moreover, it is not impossible but very difficult to prepare such records in the format given by the learned assessing officer....." and disputed that no vouchers, supporting evidences in each journey of trucks were given to the AO. With regard to the assertion of the Ld. A.R before the Ld. CIT (A) (Quote) "[Para 14 on page 9 of the CIT(A)'s order]....Moreover, the learned assessing officer has asked to produce a statement of per trip details in a particular format designed by him. It is not possible to produce any such statements which the assessing officer asks and which is not possible to be prepared practically......" the Ld. D.R argued that if the details were available with the assessee, then it was not impossible to produce such a statement as required by the assessing officer. It was also vehemently urged that the addition made by the Ld. AO is in order and as such, he passionately urged this Bench to follow the finding of the earlier Bench on this point. In conclusion, the D.R. had placed strong reliance on the ruling of the Hon'ble High Court of Punjab & Haryana reported in (2009) 311 ITR 317 (P & H) to drive home his point.
9. On the other hand, the ld. Counsel for the assessee had reiterated more or less what was represented before the first appellate authority. It was, further, submitted that the issue has since been extensively analyzed and comprehensively deliberated by the ld. CIT (A) in a judicious manner by concluding that the ld. AO was not justified in rejecting the books of accounts of the assessee, as a result of which, addition of Rs.20.53 lakhs made being difference in net profit. He had strongly opposed the Ld. D R's plea to follow the finding of the earlier Bench on this point since, according to him, the Hon'ble High Court in its ruling (supra) had emphatically asserted that the order passed by the 9 ITA No. 2372-Ahd-04 Tribunal was not sustainable and the same was quashed and set-aside and to pass a speaking order dealing with the findings arrived at by the CIT (A) and, if the Tribunal is not in agreement with the finding recorded by the CIT(A), the reasons for such disagreement should specifically be reflected in its order. It was, therefore, argued that the earlier order of the Tribunal doesn't survive and, thus, it cannot be followed. The ld. Counsel has placed strong reliance in the case of (i) JCIT v. Suresh Scrap Industries Ltd. [in ITA No.855/Ahd/1999 dated: 2.5.2008] and (ii) CIT v. Suresh Scrap Industries Ltd [In Tax Appeal No.1878 of 2008 dated 2.3.2010 - Hon'ble Gujarat High Court].
8. We have carefully considered the rival submissions and perused the relevant case records and the documentary evidences produced by the ld. Counsel during the course of hearing in the shape of paper books, besides the case laws on with the respective parties have placed their confidence.
8.1. The main thrust in the stand of the ld. AO was that the assessee had not maintained log book for the usage of Cars, no details of gross profit per truck and also no reasonable or explanation or proof was adduced for having paid cash to truck drivers per trip which had resulted in rejecting the books of account and also the P & L account of the assessee u/s 145(1) of the Act.
8.2. However, the assessee's forceful contention was that the lorry hire expenses were paid to the truck drivers who insisted for cash payments since they did not have any banking facilities and normally they were not known to the assessee as they were not the employees of the assessee and as such they could not be thrusted upon to accept the cheques in lieu cash payments. The hire charges in cash will be received by the 10 ITA No. 2372-Ahd-04 drivers on behalf of truck owners who are also not known to the assessee. The hire charges will be paid to the drivers after obtaining their signatures in the vouchers which are available with the assessee. Thus, this cannot be a sound reason to reject the books of account of the assessee branding that there are defects in the books. .As rightly highlighted by the Ld. Counsel, the assessee being a Limited Company governed by its directors, mere payments in cash in a given circumstances cannot be construed as a solid ground to reject its books of account . If such payments in cash were to be proved to be a bogus claim, then the provisions of s. 40A (3) will come into fore, but, it cannot be categorized to be a major defect warranting rejection of its books of account itself. Another reasoning of the ld. AO was that the total income cannot decrease if there were to be decrease in the booking rate. The total booking income is the sum total of the freight received per consignment during the year. During the year under dispute, the booking rate between Surat - Hyderabad route was reduced which resulted in decrease in income. As highlighted by the ld. Counsel, due to decrease in rate of booking income which has a bearing in arriving at the total income. Moreover, in the preceding year, the freight income was included also of the fleet freight of Excavator machines of Rs.18.33 lakhs which had no relation to lorry hire expenses. Thus, the comparison of freight booking income directly with lorry hire expenses is not proper. To illustrate further, we shall look at the working of percentage of lorry-hire expenses with freight booking income as under:
A.Y 2001-02 A.Y. 2000-01
Freight booking (excluding
Delivery clearing and (A) Rs.5,21,93,913 Rs.4,95,68,366
Lorry hire expenses (B) Rs.3,53,02,571 Rs.3,30,26,513
Percentage (A)/(B) x 100 67.64% 66.63%
(Courtesy: P 26 of PB)
11
ITA No. 2372-Ahd-04
On verification of Statement showing comparative percentage of lorry hire expenses with freight income of preceding year which clearly attributes that the hire expenses have increased by hardly 1%.
8.3. Taking into account the reasons adduced by the ld. AO supra, the ld. CIT (A) was of the considered view that (at the cost of repetition) "(Para 20)..........I am of the view that the rejection of books of accounts as made by the AO and comparing the NP ratio without taking into accounts the factors which had affected the earning of the appellant co., in the form of fleet freight receipts and also certain major expenses which had been incurred during the year but not incurred in earlier year (such as ken man policy premium of Rs.5,77,320/- and donation of Rs.3,50,000/-) along with enhanced expenditure of Rs.4,32,453/- under the head finance charges is found illegal..........."
8.4. Moreover, the Ld. Counsel was categorical in his affirmation that the facts responsible for decline in freight receipts, but, at the same time, it could not reduce its lorry hire expenses which are fully supported with facts and figures as reflected in the books of accounts.
8.5 Considering the difference being nominal and also possibility of upward and downward trend in the transportation business, the Ld. CIT (A) viewed that the rejection of books of accounts by the AO was not justifiable in the eyes of law and as a result of which the addition made by the AO of Rs.20,53,076/- was also deleted as the same was made on unsound findings and illogical workings.
Let us now have a glimpse at the judicial views on the issue:
(a) Brij Mohan Bansal v. ITO (2009) 311 ITR 317 (P & H):
The issue, in brief, was that the AO rejected the assessee's books of account in view of steep decline in GP rate and absence of complete records and, thus, estimated the profit by applying GP rate of 10% on trading turnover. On appeal, the CIT (A) allowed 12 ITA No. 2372-Ahd-04 part relief to the assessee by reducing the GP rate which was upheld by the Tribunal in view of non-maintenance of record of purchases, non-verifiability of sales, absence of stock register and low profit/GP rate. On further appeal, the Hon'ble Court held that the view taken by the authorities below was a possible view and no substantial question of law arises and the order of the Tribunal does not warrant any interference.
With due regards, we would like to reiterate that the ruling of the Hon'ble Court is on the different footing which has no relevance to the issue on hand in the sense that in that case the assessee's books were rejected in view of steep decline in GP rate and also absence of complete records whereas in the present case books of accounts were maintained, but, according to the AO, the assessee had not furnished certain details and thus, the AO resorted to reject it books of account which, in our considered view, cannot be categorized as absence of complete records. Therefore, the Revenue cannot take refuge in this case law to support its case.
(b) JCIT v. Suresh Scrap Industries Ltd. - ITA No.855/Ahd/1999 dt: 2.5.2008:
The facts of the case, briefly, are that the AO rejected the books of accounts of the assessee and made an addition in the GP of the assessee. When the issue was before the Ld. CIT (A) who accepted the ground of the assessee taken against the rejection of books of accounts and held that the AO was not justified in rejecting the books of accounts and, accordingly, the addition made in GP was also deleted.
The Revenue, selectively, took up the issue which relates to the addition in the GP was concerned and argued that the AO had 13 ITA No. 2372-Ahd-04 considered and discussed certain aspects such as comparative profit/loss power consumption tariff rates and taxes etc., which were neither property appreciated by the CIT (A) nor the AO was given an opportunity to put forward his views on the arguments advanced by the assessee while deciding the appeal. Since the order of the CIT (A) cannot be termed as speaking order and it suffers from this limitation, it is required to be set aside.
It was contended on behalf of the assessee before the Tribunal that the books of accounts were duly audited and also maintained with quantitative details in respect of stock and also stock records were subjected to verification by the Excise authorities. It was further contended that the CIT (A) had given a finding that the rejection of books of accounts was not correct and even no basis of estimating the GP at 18%. The Revenue had not taken any ground against the finding of the CIT (A) in rejection of books to be justified by the AO and that without rejection of books of accounts no addition in the trading account can be made.
Considering the rival submissions, the Tribunal had observed thus:
"5...We find that the AO has rejected the books of accounts and estimated the gross profit of the assessee. The assessee went in appeal before the CIT (A) challenging the action of the AO of rejecting the books of accounts and also estimation of gross profit. The CIT (A) found the action of the AO about rejection of the books of accounts to be unjustified and directed the AO not to reject the books of accounts u/s 145 of the Act. Even he held that it is not open to the AO to make estimate without the basis when the books of accounts represent correct and true picture. The Revenue has although challenged the deletion of the addition on account of fall in the gross profit but did not take any ground against the direction of the CIT (A) not to reject the books of accounts u/s 145. In view of these facts, we do not find any illegality or infirmity in the 14 ITA No. 2372-Ahd-04 order of the CIT (A) as in the absence of rejection of books of accounts, the AO, in our opinion, cannot make any addition in the gross profit shown by the assessee."
On a reference application u/s 260A of the Act before the Hon'ble jurisdictional High Court, the Revenue had raised the following question:
"Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT (A) and thereby deleting the addition of Rs.54,38,457/- by adopting ad hoc GP of 5% though the assessing officer has discounted GP rate @ 5% as against comparable GP rate of 7.8% considering increase in various costs relied upon by the CIT (A)?
After hearing both the parties, the Hon'ble Court has ruled thus:
"6. The entire appeal proceeds on a misconception. Exercise of powers under section 145 of the Act cannot be an aspect of Gross Profit addition but it is the other way round. Only after books of accounts have been rejected for any of the reasons provided by section 145 of the Act would the assessing officer be able to make estimate of profits. Even on facts, when one considers the submissions made by the departmental representative before Tribunal, as recorded in paragraph No.3 of the impugned order dated 02nd May, 2008, it becomes clear that at no stage was it ever urged that Commissioner (Appeals) had wrongly cancelled rejection of books of accounts.
7. In the circumstances, in absence of any error in the impugned order of Tribunal, no question of law, much less a substantial question of law arises from the impugned order of Tribunal."
In essence, the stand of the Ld. CIT (A) in not justifying the AO's action in rejecting the books of accounts and making addition in GP gets vindicated.
8.5. In overall consideration of the facts and circumstances of the issue as discussed in the fore-going paragraphs and also in conformity with the judicial views in a similar matter referred supra, we are of the considered view that the ld. CIT (A) was justified in holding that (i) the ld. AO was 15 ITA No. 2372-Ahd-04 not justified in rejecting the books of account and (ii) increasing in net profit by means of Rs.20,53,076/-. Accordingly, the order of the Ld. CIT (A) is sustained.
9. In the result, the Revenue's appeal is dismissed.
इस आदे श कȧ घोषणा Ǒदनांकः 29/12/2011 को Ûयायालय मɅ कȧ गई ।
Sd/- Sd/-
(D.K.Tyagi) (A.Mohan Alankamony)
Judicial Member Accountant Member
DATED : 29/12/2011
आदे श कȧ ूितिलǒप अमेǒषतः-
षतः
1. अपीलाथȸ
2. ू×यथȸ
3. संबंिधत आयकर आयुƠ
4. आयकर आयुƠ- अपील-
5. ǒवभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद ।
6. गाड[ फाइल आदे श से, उप/सहायक पंजीकार आयकर अपीलीय अिधकरण, अहमदाबाद।
Talukdar/ Sr. P.S. 16