IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: `F' NEW DELHI
BEFORE SMT DIVA SINGH, JUDICIAL MEMBER
AND
SHRI T.S.KAPOOR, ACCOUNTANT MEMBER
I.T.A .No.-3269/Del/2013
(ASSESSMENT YEAR-2009-10)
ACIT, vs M/s Ramesh Kumar Siwach
Circle-38(1), R.No.-2202, Contractor, 6/602, Sunder Vihar,
22nd Floor, E-2 Block, Paschim Vihar, New Delhi-110063.
Civic Centre, Minto Road, PAN-AAEFR7304Q
New Delhi-110002.
(APPELLANT) (RESPONDENT)
Appellant by Sh. Neehar Ranjan Pandey, Sr. DR
Respondent by None
ORDER
PER DIVA SINGH, JM
This is an appeal filed by the Revenue against the order dated 01.02.2013
of CIT(A)-XXVIII, New Delhi pertaining to 2009-10 assessment year on the
following grounds :-
1. "On the facts and circumstances of the case the Ld. CIT(A) erred in
deleting the addition made by the AO mounting to Rs.22,64,348/- estimating
the Net Profit rate of the assessee at 5% of Gross Turnover after rejecting
the books of accounts of the assessee without appreciating the fact that the
assessee has not maintained any Stock Register and also did not produce
original books of accounts along with bills and vouchers during the course
of Assessment Proceedings and also that the assessee has shown very less
G.P. and most of its expenses remained unverifiable.
2. The appellant craves leave to add, amend or modify the ground of
appeal before or during the course of the appeal."
2. No one was present on behalf of the assessee at the time of hearing
however on consideration of material available on record. It was considered
appropriate to proceed with the present appeal ex-parte qua the assessee
responded on merit after hearing the Ld. Sr. DR.
2 I.T.A .No.-3269/Del/2013
3. The relevant facts of the case are that the assessee who is a firm engaged
in the business of contractor filed a return declaring an income of
Rs.20,54,380/- which was processed u/s 143(1), Assessment order u/s 143(3)
r.w.s 144 of the Act was passed. On the said return being selected for scrutiny
under CASS by way of issuance notice u/s 143(2) etc. The record shows that
the assessee was required to provide comparative chart of G.P and N.P ratio for
the last three years including the financial year. In response thereto the assessee
placed the following figures before the AO:-
"ASSTT. YEARS G.P. N.P.
2007-2008 12632292.00 =15.83 405896.00 =0.51%
79783904.00 79783904.00
2008-09 14690189.00 =18.47 412614.00 = 0.52%
79551681.00 7951681.00
2009-2010 13927787.99 = 12.26% 2016189.40 =1.92%
105075317.00 105075317.00
The G.P. ratio had decline but N.P. ratio had increased 1.40% from the last
year."
3.1. The assessee was further required to explain the expenses from the
parties from whom purchases were made in the year of more than Rs. 5 lac and
also furnish details of sundry creditors having opening or closing balance of
more than Rs. 3 lac. The assessee provided certain details which were found
not to be in the format asked for. Various adjournments were granted to the
assessee on its request. Accordingly, the AO made an addition of
Rs.32,37,576/- in the following manner:-
5.6. "Thus, in the light of facts and judicial pronouncements mentioned
above, the books of account of the assessee are hereby rejected by
invoking the provisions of section 145(3) of the act and the income of
the assessee is assessed by applying net profit rate of 5% on the
gross turnover of Rs.10,50,75,317/- which comes to Rs.52,53,576/-.
Assessee has already shown a net profit of Rs.2016,189/-. Thus,
Rs.32,37,576/- is added back to the income of the assessee."
4. Aggrieved by this the assessee came in appeal before the First Appellate
Authority. Before the CIT(A) various arguments on facts and law were
3 I.T.A .No.-3269/Del/2013
advanced. Apart from that reliance was placed upon the comparative chart filed
before the AO in support of the claim that no interference was warranted or the
net profit of the assessee had increased from 0.52% in 2008-09 assessment year
to 1.92% in 2009-10 assessment year.
4.1. Considering the same, the CIT(A) came to the following conclusion:-
5. "I have considered the grounds raised in appeal and the submission of
the AR of the appellant.
I have carefully considered the reasons given by the Assessing Officer in the
assessment order in support of rejection of books of accounts and estimation of
trading results and also written submission of the appellant.
The Assessing Officer has made only general observation regarding rejection of
accounts u/s 145(3) such as :
(i) Non maintenance of stock register
(ii) Low profit rate
(iii) Other comparable cases.
At the outset, it may be observed that the Assessing Officer made addition in
the original assessment order u/s 143(3) to the extent of Rs.32,37,576/-,
which was subsequently reduced to Rs.22,64,348/- vide order u/s 154 dtd.
9/5/12 and as such dispute is confined to addition of Rs.22,64,348/-.
It was submitted by the appellant that the appellant is a regular assessee for last
many years and there is no change in the system of accounting as compared to
preceding years. It was further, clarified that looking to nature of the business,
it was not possible to maintain day to day stock record, but, the stock inventory
is prepared at the end of the year on the basis of available closing stock. It was
further submitted that on the basis of same system of accounting, trading results
were accepted by the Assessing Officer in the preceding years u/s 143(3) and in
support of above position, copy of the assessment order and tax audit report
were placed on record.
Regarding allegation of low profit rate, it was clarified that the Assessing
Officer has not properly appreciated the facts. In fact, there is substantial
increase in net profit rate as compared to preceding year and factual position to
this effect is supported from relevant details given at page 2 of the assessment
order itself. It was further clarified that even though the Assessing Officer
made observation about other comparable cases, but no details or opportunity
to this effect was provided for clarification by the appellant.
Regarding various judgements referred to by the Assessing Officer, it was
clarified that all those judgements have no relevance or being to the case of the
appellant as finding of judicial authorities was based on defects and deficiency
in the books of accounts and not on the ground non maintenance of stock
register and low profit rate. The appellant further clarified the legal position by
making reference to various case laws of jurisdictional High Court referred to
in the written submission as per which non maintenance of stock registrar and
low profit rate could be not valid ground for rejection of books of accounts u/s
145(3).
4 I.T.A .No.-3269/Del/2013
After going through facts of the case and relevant case laws, there is merit in
the contention of the appellant that the Assessing Officer is not justified to apply
sec. 145(3) merely on the ground of non maintenance of stock register or on the
ground of low profit rate.
In fact, it is not the case of the Assessing Officer that there is any change in the
system of accounting during the year as compared to past history and as such
general observation of the Assessing Officer cannot be a basis for rejection of
books of accounts particularly when no defect or irregularity was found in the
books of accounts.
Further, trading results of the assessee were accepted in the preceding two
years u/s 143(3) and in the year under reference, there is substantial increase in
net profit rate as compared to preceding years. Further, in the absence of any
details brought out in the assessment order or confronted to the assessee, the
observation of the Assessing Officer regarding other comparable case is of no
relevance.
Regarding case laws referred to by the Assessing Officer and appellant, the
case of the appellant is supported by the decision of Jurisdictional High Court
referred to above. The case laws referred to by the Assessing Officer are on the
basis of specific defects and deficiencies in the account and those judgements
have no relevance and bearing to the facts of the case.
In the light of above discussion, there is no justification for rejection of
trading results u/s 145(3) and estimation of net profit rate and accordingly
adhoc trading addition made by Assessing Officer is not sustainable and
same is hereby deleted. Appeal is allowed.
In the result, appeal is allowed."
(highlighted for emphasis)
5. Aggrieved by the order the Revenue is in appeal before the Tribunal.
The Ld. Sr. DR placed reliance upon the assessment order, however the facts
available on record, namely that the AO herself reduced the addition from
Rs.32,37,576/- to Rs.22,64,348/- vide her order u/s 154 dated 09.05.2012 was
not disputed. Similarly, the fact the assessee was regular assessee for the last so
many years who had been following the same system of accounting which has
been accepted by the department in the earlier years by way of scrutiny
assessment u/s 143(3) relied upon by the CIT(A) was not assailed by the
Revenue. Similarly the factum that the net profit had increased qua the earlier
years also was not assailed. It is seen that no effort was made in the absence of
any discussion in the Assessment order to assail the finding arrived at that no
comparative case in support of the conclusion of the AO that a higher
5 I.T.A .No.-3269/Del/2013
percentage of profit should have been earned was referred to by the AO or
confronted to the assessee. Nor has the department considered it necessary to
place any such material before the Bench to upset the finding under challenge.
Accordingly in the light of the above-mentioned facts and circumstances where
past history has been taken into consideration, we find ourselves unable to come
to a contrary finding in the absence of any argument by the department. The
departmental ground in the afore-mentioned peculiar facts and circumstances
does not have any merit and the same accordingly is dismissed.
6. In the result, the departmental appeal is dismissed as per the
pronouncement made in the open Court at the time of hearing.
The order is pronounced in the open court on 03rd of January 2014.
Sd/- Sd/-
(T.S.KAPOOR) (DIVA SINGH)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated:-03/01/2014
*Amit Kumar*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
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