IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI "D" BENCH, MUMBAI
BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL
MEMBER,
AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER.
ITA. No. 5986/Mum/2013
(Assessment Year:2009-10)
Asstt. Commissioner of Income tax 16(3),
Matru Mandir, Tardeo Road,
Mumbai 400 007 Appellant
Vs.
Shri Rahul J. Jain,
154/156, 3rd Khetwadi Lane,
Mumbai 400 004 Respondent
PAN: AEMPJ8236K
/By Appellant : Shri Jeetendra Kumar,
D.R.
/By Respondent :Shri Rajkumar Singh, A.R.
/Date of Hearing
: 21.09.2015
/Date of
Pronouncement : 28.09.2015
ORDER
PER ASHWANI TANEJA, A.M:
This appeal has been filed by the Revenue against the order
of learned Commissioner of Income-Tax (Appeals)-27, Mumbai,
dated 15.07.2013 for A.Y. 2009-10 passed against the
assessment order u/s.143(3) dated 30.12.2011.
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2. Following grounds raised by the Revenue along with the
appeal memo:
"1. Whether on the facts and circumstances of the case and in law,
the Ld.CIT(A) has erred in allowing the appeal of the assessee
and loss of Rs.18,74,33,043/- incurred during the year even
though Books of Accounts were not produced?
2. Whether on the facts and circumstances of the case and in law,
the Ld.CIT(A) has erred in not giving credence to the method
adopted by Assessing Officer of evaluating G.P. on the basis of
G.P. ratio of the previous two years which was most logical
method in absence of Books of Account mandatory for assessee
to be maintained and preserved?
3. The appellant craves leave to amend or alter any ground or add
a new ground which may be necessary."
3. The solitary issue raised in both the grounds is that
whether the Assessing Officer was justified in rejecting the return
of income filed by the assessee and disregarding the book result
shown therein and estimating the income under the head
`business' at Rs.57,95,266/- as against the loss of
Rs.18,74,33,043/- as shown by the assessee in the return of
income filed. During course of hearing, ld. Sr. D.R. appearing on
behalf of Revenue has argued that during course of assessment
proceeding, the assessee failed to produce the books of account
and therefore, the Assessing Officer consulted the past history of
the assessee and estimated the GP at Rs.1,40,57,727/-, after
deducting the expenditure shown by the assessee in its books of
accounts at Rs.82,62,461/-, the net profit of assessee was
estimated at Rs.57,95,266/-. The books of accounts were not
produced by the assessee, therefore, the Assessing Officer had no
option but to estimate the profit. It was argued by the ld. D.R.
that CIT(A) has erred in reversing the order of the Assessing
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Officer and therefore, the addition made by Assessing Officer
should be upheld and action of ld. CIT(A) should be reversed.
4. On the other hand, ld. Counsel for the assessee submitted
that Assessing Officer was highly unjustified in estimating the
income of the assessee. It was submitted by the ld. Counsel that
due to heavy rains in Mumbai, there was flooding in the office of
the assessee, which is located in the basement. As a result
thereof, various records were destroyed including some of the
records pertaining to the current year. But the data was saved in
the computers and the assessee took another print out of these
books of accounts from the computer. These were produced to
the Assessing Officer for his verification. The assessee also
arranged confirmations and other subsidiary records before the
Assessing Officer. It was requested to the Assessing Officer
during the assessment proceeding that direct verification could
be made by the Assessing Officer with the suppliers and
customers of the assessee. But the Assessing Officer did not
agree with the request of the assessee and books results shown
by the assessee were rejected. It was further submitted by the ld.
Counsel for the assessee that the Assessing Officer was not
justified in estimating the income at GP rate of past years
because there has been drastic decline in the prices of the
material in which assessee was dealing. The assessee had
submitted all the evidences before the Assessing Officer in
support of his claim. However, the Assessing Officer disregarded
all the submissions and evidences brought on record by the
assessee and resorted to estimation of income. It was finally
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submitted that the CIT(A) has taken into consideration all the
facts and circumstances of the case and taking a judicious view
in the matter, the ld. CIT(A) has deleted the addition made by the
Assessing Officer. It was requested that the order of ld. CIT(A),
being in accordance with law and facts, deserves to be upheld.
Ld. Counsel took us through various pages of the paper book
showing various evidences filed before the lower authorities in
support of the claim of the assessee.
5. We have heard both the sides and gone through the
material placed before us in the form of paper book. The brief
facts of the case are that the assessee is an individual and was
engaged in the trading business of ferrous and non ferrous
metals in the name of his proprietary concern i.e. M/s. Sun
Impex. The assessee had filed his return showing business loss
of Rs.18,74,33,043/-. During course of assessment proceedings,
the Assessing Officer observed that in absence of physical books
of accounts, evidences for sales, purchases and expenses
claimed, verification of the figures reported by the assessee in
P&L account could not be done. Therefore, the Assessing Officer
estimated net profit of the assessee based upon GP rate of
previous two years. It has been noted by us that books of
accounts of the assessee are audited by the tax auditors. These
audited accounts along with tax audit report was available before
the Assessing Officer. The assessee submitted before the
Assessing Officer that due to flooding caused by heavy rains,
various records were destroyed and therefore, with a view to
enable the Assessing Officer to make verification of the return
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filed by the assessee, the assessee collected various evidences
from its suppliers and submitted the same to the Assessing
Officer along with various accounts generated on the computer
systems. It is noted from the records shown to us that assessee
had submitted following details and documentary evidences
before the Assessing Officer:
Sr. No. Particulars of Documents enclosed Page No.
1. Copy of letter dated 26th December 2011 1 to 2
filed before ld. A.O. with the following
documents:-
i) Affidavit of assessee dated
16/07/2009 for destruction of
physical accounting records due to
heavy rains on 08/07/2009.
3 to 4
ii) Copy of Police Complaint dated
16/07/2009.
5
2. Copy of letter dated 23rd December 2011 6 to 8
filed before ld. A.O. with following
documents.
i) Duly confirmed ledger A/c of M/s.
Domet Trading Pvt. Ltd. in respect
of sales made by assessee
appellant during the assessment
9 to 12
year under appeal.
ii) Duly confirmed ledger A/c of M/s.
Domet Trading Pvt. Ltd. in respect
of purchases made by assessee
appellant during the assessment
13 to 16
year under appeal.
iii) Itemwise purchases & sales of
goods made during the year with
description of material, quantity & 17 to 18
value.
iv) Extract of Itemwise goods of Stock
Register of entire year.
19 to 33
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v) Details of Payments made to old 34
Sundry Creditors.
vi) Price graph of Nickel quoted on
London Metal - Exchange for the
35
entire year from 01/04/2008 to
31/03/2009.
3. Copy of letter dated 16/11/2011flled
before ld. A.O. alongwith confirmation
letter of sales parties & following other
documents. 36 to 40
i) Partywise Sales with address &
value. 41 to 43
ii) Partywise Purchase with address
& value. 44
iii) Partywise list of loans & advances
given & interest received & Ledger
extract of Interest Income.
45 to 51
iv) Copy of 11 Nos. of TDS Certificate
of Rs. 4,14,427/-
51 to 62
4. Copy of letter dated 17th October 2012 filed
before ld. A.O. alongwith following
63
documents :-
i) Copy of acknowledgement of ITR
64 to 65
ii) Computation of Total Income &
Tax Calculation Statement 66
iii) Copy of Tax Audit Report with all
67 to 84
Exhibits
iv) Copy of audited Balance Sheet &
Profit & Loss A/c with all
85 to 94
Schedules.
It has been further brought to our notice that the assessee also
produced books of accounts including stock records maintained
and generated on the computer system, which was verified by the
Assessing Officer as well. Details of party-wise sales and
purchases made during the assessment year were also filed.
Some confirmations of sales and purchases were also filed
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containing requisite particulars of the parties concerned i.e.
name, complete address, PAN etc. The assessee also filed
detailed note of justification for the loss suffered in business by
the assessee during the year under appeal along with
corroborative evidences and also citing the comparable case of
other assessees having similar business and having suffered
similar losses in the same year. In support of its claim of
destruction of records due to water loging in the business
premises caused by heavy rains on 8th July, 2009, the assessee
filed affidavits and police complaint and copy of newspaper
report. The Assessing Officer did not make verification of any of
these documents, but disbelieved the same without bringing
anything contrary on record. With regard to justification of the
loss, the assessee had submitted evidences showing that the rate
of Nickel (the main ingredient of non ferrous metal traded by the
assessee), crashed consistently throughout the year and came
down from Rs.30,000/-per M.T. in April 2008 to Rs.9,000/- per
M.T. in March 2009, registering steep fall of more than 70%. The
assessee had filed evidences in the form of quotations from
London Metal Exchange, in support of his assertion. It was
submitted that most of the sales have been shown by assessee
out of the opening stock held, and all the purchases were made
in the earlier years at higher rate prevailing at that time. Due to
the aforesaid steep fall of more than 70% in the rate of goods
traded by the assessee, gross loss was incurred by the assessee.
6. We have considered all these facts and circumstances very
carefully. It is noted that due to the reasons beyond the control
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of the assessee, the main documents in the form of purchase bills
and sale bills could not be submitted by the assessee to the
Assessing Officer. The assessee made efforts and submitted
ample evidences, as an alternative measure to substantiate the
return and the final accounts submitted by the assessee. The
documentary evidences and details submitted by the assessee
contained sufficient information on the basis of which the
Assessing Officer could have done requisite verification from any
party, wherever the Assessing Officer had any doubt. The
documentary evidences submitted, the details of which have been
reproduced in this order above, would show that on the basis of
these documentary evidences, the Assessing Officer could have
very well satisfied himself to clear any doubts. During course of
hearing, ld. D.R. could not bring anything contrary on record to
controvert these facts, he could not point out anything wrong in
the aforesaid documentary evidences submitted by the assessee
before the Assessing Officer as well as before the CIT(A). In
addition to that, assessee has also given justification for
incurring loss during the year due to the reasons which were
beyond his control i.e. a drastic crash in the global market, world
over. None of these facts have been controverted by the
Assessing Officer in the assessment proceedings or by Learned
Departmental Representative at this stage. We notice that the ld.
Assessing Officer chose to make a best judgment assessment.
We can very well appreciate that at times, the Assessing Officer
has no choice but to make a best judgment assessment. But in
our considered view, the fairness of justice demands that `best
judgment assessment' should not be made as a `best punishment
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assessment'. We have further noted that ld. CIT(A) after
considering all facts and circumstances and the documentary
evidences placed by the assessee before the Assessing Officer as
well as before the ld. CIT(A) has deleted the addition made by the
Assessing Officer. The findings given by the ld. CIT(A) are quite
detailed and judicious. Nothing wrong could be pointed out by
the ld. D.R. in the finding of ld. CIT(A). Therefore, keeping in view
all the facts and circumstances and evidences placed before us,
we find that no interference is called for in the order of ld. CIT(A).
Same is upheld.
7. As a result, the appeal filed by the Revenue is dismissed.
Pronounced in the open Court on this the 28th day of
September, 2015.
Sd/- Sd/-
(SHAILENDRA KUMAR YADAV) (ASHWANI TANEJA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai: Dated 28/09/2015
True Copy
S.K.SINHA
/ Copy of Order Forwarded to:-
1. / Revenue
2. / Assessee
3. / Concerned CIT
4. - / CIT (A)
5. , , /
DR, ITAT, Mumbai
6. / Guard file.
By order/ ,
/ ,
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