Income Tax Appellate Tribunal - Kolkata
Madhav Solvextracts (P) Ltd., Paschim ... vs Assessee on 8 December, 2011
आयकर अपीलीय अधीकरण, Ûयायपीठ - "B", कोलकाता,
IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH- B, KOLKATA
[सम¢ ौी एन ǒवजयकुमारन,
मारन Ûयायीक सदःय एवं ौी सी.
सी. डȣ.
डȣ. राव,
राव, लेखा सदःय ]
Before Sri N.Vijayakumaran, Judicial Member & Sri C.D. Rao, Accountant Member
आयकर अपील संÉया / ITA No. 1405 (Kol) of 2009
िनधॉरण वषॅ/Assessment Year 2005-06
Shree Madhav Solvextracts (P) -वनाम- Asstt.Commissioner of I.T.,
Ltd., (PAN-AACHS6367G) -Versus- Circle-I, Paschim Medinipore.
(अपीलाथȸ/APPELLANT) (ू×यथȸ/RESPONDENT)
अपीलाथȸ कȧ ओर से/ For the Appellant: ौी/Sri Subash Agarwal
ू×यथȸ कȧ ओर से/For the Respondent: ौी/Sri S.K. Roy
सुनवाई कȧ तारȣख/Date ofHearing : 08/12/2011
घोषणा कȧ तारȣख/Date of Pronouncement : 29/12/2011
आदे श/ORDER
(एन ǒवजयकुमारन), Ûयायीक सदःय (N. Vijayakumaran), Judicial Member :
This appeal by the assessee is directed against the order of the ld. C.I.T.(A)-
XXXVII, Kolkata dated 17/06/2009. The assessment year involved is 2005-06. The assessee along with the memorandum of appeal has filed the following grounds :-
"1. For that on the facts and in the circumstances of the case the Ld. CIT(A) erred in confirming the addition of Rs.42,59,860/- rejecting the books of accounts which were maintained in the regular course of business and accordingly Audited u/s. 44AB of the I.T.Act, 1961. The application of section 145(3) of the I.T.Act, 1961 does not apply in the case of the appellant.
2. For that the Ld. CIT(A) erred in confirming the estimate of profit @ 1% of the turnover and the basis of the application has not stated any reason.
3. For that the Ld. Authorities below erred in rejecting the books of account which are duly audited."
Subsequently, the assessee filed revised grounds, which are also on the issue of original grounds and the same read as under :-
1
"1. For that, on the facts and in the circumstances of the case the Ld. CIT(A) was not justified in confirming the action of the A.O. of rejecting the book results of the assessee by invoking the provisions of sec. 145.
2. For that the Ld. CIT(A) erred in confirming the action of the A.O. of estimating the income from business at 1 percent of the total turnover."
2. The facts relevant are that the assessee-company is engaged in the business of manufacturing and trading of Edible & non-edible oils and oil cakes. The assessee filed return of income for the assessment year under consideration at negative figure of Rs. 39,08,480/-. The assessee's accounts are audited u/s. 44AB of the Act. The return was processed u/s. 143(1) of the Act and subsequently on scrutiny proceedings the ld. A.O. issued notice u/s. 143(2)/142(1) of the Act, in response to which the assessee produced books of accounts, bills, vouchers etc. On verification of the books of account and details furnished by the assessee, the ld. A.O. observed that the production reported to the bank differed from the production shown in the audited accounts. He also found error in the audit report accompanying the return. The ld. A.O. pointed out several errors/defects in the accounts and thus rejected the books of account u/s. 145 of the Act and estimated the assessee's income @ 1% of the total turnover at Rs.3,51,380/-in the assessment framed u/s.143(3) of the Act.
3. The action of the ld. A.O. was contested by the assessee before the ld. C.I.T.(A) and submitted that the ld. A.O. did not consider the explanation of the assessee and arbitrarily rejected the books of account u/s. 145 of the Act. The ld. C.I.T.(A), however, upheld the action of the ld. A.O. by observing as under :-
"The appellant disclosed loss from business. The AO examined the appellant's books of account, the statement of sales and audit report. The AO noticed that there is substantial increase of expenses though the turnover has decreased. Further, the AO noticed various discrepancies in the audit report accompanying the return. Further, the stock, quantity of production reported to the bank differed from the quantity adopted in the books of account. In view of the various discrepancies discussed by the AO at pages 2, 3 & 4 of the assessment order, the AO rejected the books of account of the appellant. The AO is correct as per law in invoking the provisions of Sec. 145 and rejecting the books of account of the appellant since they are defective. The AO's action is correct as per law and is upheld.2
The AO noticed that the appellant disclosed net profit of 0.61% during the earlier year. Considering the facts of the appellant's case, the AO determined the business income of the appellant at 1% of the turnover. The quantum of income determined by the AO is fair and reasonable. The AO's action is upheld"
Hence this appeal by the assessee.
4. At the time of hearing before us, the learned counsel assailed the orders of the authorities below and submitted that during the year under consideration there was decrease in turnover and increase in salary & wages and the explanation thereof was not considered by the ld. A.O. in proper perspective although supporting documents were produced. He further pointed out that the alleged discrepancy in the production as well as sales, as pointed out by the authorities below, is not correct, because the ld. A.O. in the chart annexed to the assessment order has wrongly taken the total production as submitted to the bank at 481.850 MT instead of actual quantity of 489.450 MT duly reflected in the audit report. He further pointed out auditor's remark for the points raised by the ld. A.O., although filed before the ld. C.I.T.(A), was not considered by the ld. C.I.T.(A) while upholding the ld. A.O.'s action in rejecting the books of account u/s. 145 of the Act. The ld. counsel further submitted that the ld. A.O. without issuing any show cause notice to explain the alleged discrepancies noted in the assessment order rejected the books of account and estimated the income @ 1% of the total turnover, which is uncalled for and bad in law.
5. On the other hand, the ld. Departmental Representative relied on the orders of the authorities below.
6. We have heard the rival submissions and perused the material placed on record. Before us, the assessee has filed a paper book which, inter alia, contains audited final accounts for assessment years 2004-05 & 2005-06, auditor's remark for the points raised by the ld. A.O. and production report filed in the bank. On perusal of the order of the ld. C.I.T.(A) we observe that although the assessee has filed auditor's remark on the points raised by the ld. A.O., but there is no discussion on such report of the auditor. Further we observe that this auditor's remark, which the assessee claims to be an appropriate explanation for the discrepancies alleged by the ld. A.O., has not been filed 3 before the ld. A.O. and it was for the first time filed before the ld. C.I.T.(A). In view of the above, we deem it proper to remit the issue back to the file of the ld. A.O. by setting aside the order of ld. C.I.T.(A) and direct the ld. A.O. to consider the matter afresh after taking into consideration the auditor's remark on the points raised by him and any other documents that may be filed by the assessee during set aside proceeding. Needless to mention that the ld. A.O. shall provide reasonable opportunity of being heard to the assessee before passing the fresh assessment order in accordance with law.
7. In the result, the assessee's appeal is treated as allowed for statistical purposes.
यह आदे श खुले Ûयायालय मɅ सुनाया गया है
This order is pronounced in the Court on 29/12/2011
Sd/- Sd/-
सी.
सी.डȣ.
(सी डȣ.राव)
राव लेखा सदःय ौी एन ǒवजयकुमारन)
(ौी मारन Ûयायीक सदःय
(C.D. Rao), Accountant Member (N.Vijayakumaran) Judicial Member
(तारȣख)
तारȣख) Date: 29-12-2011
आदे श कȧ ूितिलǒप अमेǒषतः-
Copy of the order forwarded to:
1. अपीलाथȸ / The Appellant :Shree Madhav Solvextracts (P) Ltd., Tantigeria, PO-
Vidyasagar University, Paschim Medinipur-721 102.
2. ू×यथȸ / The Respondent : A.C.I.T., Circle-I, Paschim Medinipur.
3. आयकर किमशनर (अपील) : The CIT(A)-XXXVII, Kolkata.
4. आयकर किमशनर/The C.I.T., Kol - , Kolkata.
5. वभािगय ूितनीधी / DR, ITAT, Kolkata Benches, Kolkata
6. Guard file.
स×याǒपत ूित/True Copy, आदे शानुसार/ By order,
(dkp)
उप पंजीकार/Dy/Asstt. Registrar.
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