Birender Singh , New Delhi vs Department Of Income Tax

PER H.S. SIDHU : JM The Revenue has filed the present appeal against the impugned order dated 14/8/2013 passed by the Ld. Commissioner of Income Tax (Appeals)-XXVIII, New Delhi on the following grounds:-

"On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in:

(I) The Ld. CIT(A) has erred in deleting the addition of Rs. 43,01,460/- made by the A.O. by adopting net profit rate of 8% on gross turnover, after rejection of books of accounts of the asseessee.

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(II) The CIT(A) has failed to appreciate that the books of accounts have been rejected considering various discrepancies, such as non-maintenance of stock re-register/purchase register/complete books of accounts, unverifiable purchases/ creditors, unverifiable labour charges and other expenses, three different cash books etc. The CIT(A) has also failed to appreciate that sufficient opportunity was provided to the Assessee during assessment proceeding. As the assessee failed to substantiate his claim, AO was justified in rejection the books and applying net profit @8% on gross turnover.

(iii) The Ld. CIT(A) has erred in deleting the addition of Rs. 13,10,100/- on the ground that there was preceding cash withdrawals of Rs. 13,10,100/- While doing so, the CIT(A) failed to appreciate that the assessee had submitted before the AO that the deposits in the said bank account is against the withdrawal from current account/getting pay orders against earnest money. The Ld. CIT(A) also failed to appreciate that neither such credit entries were found in cash book nor the assessee could substantiate the source of funds.

(iv) That the grounds of appeal are without prejudice to each other.

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(v) The appellant craves leave to add, amend or modify any/all the Grounds of appeal before or during the course of the appeal."

2. The facts narrated by the revenue authorities are not disputed by both parties, therefore, no need to repeat the same for the sake of convenience. The AO completed the assessment u/s 143(3) r.w.s. 145(3) of the Income Tax Act, 1961 on 23.12.2011 and made the various additions.

3. Against the order of the AO dated 23/12/2011 assessee filed an appeal before the Id. First Appellate Authority who vide impugned order dated 14/8/2012 partly allowed the appeal of the assessee.

4. Now the Revenue is aggrieved against the impugned order and filed the present appeal before the Tribunal.

5. Ld. Counsel of the assessee has filed two Paper Books one is containing pages 1 to 78 having the assessee's contention in brief and copy of the correspondence made with the AO and some copy of Tribunal's decisions. The second Paper Book containing pages 123 to 151 having the reply filed by the assessee to the AO, copy of acknw. Of return of income and copy of sale deed.

6. At the time of hearing Ld. DR relied upon the order of the AO and reiterated the contentions raised by the Revenue in the grounds of appeal.

7. We have heard both the parties, perused and considered the relevant record available with us specially the impugned orders passed by the Revenue Authorities; Paper Books filed by the assessee's counsel. We find that Ld. First Appellate Authority has elaborately discussed the issues in dispute by considering the

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submissions of the Ld. Counsel of the assessee and adjudicated the issues in Ground No. 1 vide Para No. 38 Page NO. 22 of the impugned order which reads as under:-

"38. I have carefully perused the assessment order and the detailed submissions of the appellant. The AO has not considered the substantial improvement in the contract receipts and the net profit shown by the appellant for this year as compared with the contract receipts and the net profit for each of the preceding two years. The AO has not referred to any comparable case. The application of adhoc net profit rate of 8% applied by the AO is without any valid basis. The addition of Rs. 43,01,460/- made by the AO is without any proper basis. The impugned addition made by the AO in the net profit of Rs. 77,27,853/- shown by the appellant is not sustainable. The same is therefore deleted.

Similarly, Ld. CIT(A) has also adjudicated the issue in Ground No. 2 vide Para No. 43 Page 25 of the impugned order which reads as under:-

43. I have considered the submission of the appellant on this account. The same are supported by the orders of the CIT(A), Income Tax Tribunal, High Court and Supreme Court judgments. The preceding Bank cash withdrawal of Rs. 13,10,000/-

have to be taken into account in the subsequent bank cash deposits. Similarly, the addition of Rs. 1,97,710/- made for the assessment year 2008-09 has to be taken into account in respect of the said

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bank cash deposits. On doing this, the unexplained cash deposits stands explained to the extent of Rs. 15,07,710/- and the balance amount of Rs. 11,97,790/- is unexplained. The appellant gets relief of Rs. 15,07,710/- and the addition will be sustained of Rs. 11,97,790/-."

8. After going through the above said relevant order on the issues in dispute, we find that CIT(A) has decided the issues in dispute in favor of the assessee after appreciating the evidence filed by the assessee as well as decision rendered by the Hon'ble Supreme Courts, Hon'ble High Courts and the Tribunal.

8.1 With regard to ground No. I & II is concerned, we find that Ld. CIT(A) has observed that the method of accounting has been accepted for several years on same set of facts and placed reliance on 294 ITR 655 (Gauhati) MKB (Asia) P Ltd. Vs. Commissioner of Income Tax. Ld. CIT(A) He further observed that non maintenance of stock register cannot be a ground for rejection of account in every case and it depends upon the nature of business. He relied upon the decision of the Delhi High Court in the case of Commissioner of Income Tax. Vs. Jas Jack Elegance Exports 324 ITR 95 (Delhi) and Commissioner of Income Tax. Vs. Poonam Rani 192 Taxman 167 (Delhi). The onus was on the revenue to show that accounts were incomplete or incorrect and true profits could not be deducted from the books of accounts maintained and true profits could not be deduced from the books of accounts maintained by the assessee which were also duly audited and no adverse inference was drawn by the Auditor. If expenses claimed, remained unexplained, the AO could have disallowed the same without rejecting the books of accounts. He relied upon the Hon'ble High Court of Delhi decision in the case of CIT vs. Paradis Holidays 325 ITR 13 (Delhi). Ld. CIT(A)

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has further observed that the Revenue has not provided the details of comparable cases relied upon 68 ITR 796 (Kerala) and 210 ITR 103 (Calcutta) CIT vs. Eastern Commercial Enterprisses (relied upon 125 ITR 713 SC) Kishinchand Chellaram vs. CIT, Bombay City-II. Ld. CIT(A) further observed that the assessee should have been provided with an opportunity to rebut before rejecting the books of accounts and estimating the profits, he further relied upon the other judgments viz. 64 ITR 175 (AP) S. Sarabhaiah Setty and Sons. Vs. CIT, AP and 62 ITR 528 (AP) Yakub Versey Lalijee and Anr. Vs. CIT, AP. Lastly Ld. CIT(A) and has observed that estimate should be based on some evidence and material, he relied upon the Hon'ble Supreme Court of India judgment in the case of Raghubar Mandal 8 STC 770 (SC) assessment to be made (estimation shall have a rational nexus to the available materials and the circumstances of the case) relied upon the Hon'ble Apex Court decision reported in 60 ITR 239 (SC) State of Kerala vs. C. Velukutty. We find that Ld. CIT(A) in view of the has observed that the AO has not considered the substantial improvement in the contract receipts and the net profit shown by the assessee for this year as compared with the contract receipts and the net profit for each of the preceding two years. He further observed that the AO has not referred to any comparable case. The application of adhoc net profit rate of 8% applied by the AO is without any valid basis. The addition of Rs. 43,01,460/- made by the AO is without any proper basis. Therefore, the Ld. CIT(A) has rightly concluded that the impugned addition made by the AO in the net profit of Rs. 77,27,853/- shown by the assessee is not sustainable and he deleted the same. In view of the above, we are of the view that no interference is called for in the well reasoned order passed by the Ld. CIT(A), hence, we uphold the same.

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8.2 With regard to ground no. III is concerned, we find that Ld. CIT(A) has considered the submission of the assessee on this account. He observed that the same are supported by the orders of the CIT(A), Income Tax Tribunal, High Court and Supreme Court judgments. The preceding Bank cash withdrawal of Rs. 13,10,000/- have to be taken into account in the subsequent bank cash deposits. Ld. CIT(A) further observed that similarly, the addition of Rs. 1,97,710/- made for the assessment year 2008-09 has to be taken into account in respect of the said bank cash deposits. On doing this, the unexplained cash deposits stands explained to the extent of Rs. 15,07,710/- and the balance amount of Rs. 11,97,790/- is unexplained. In view of the above, we are of the view that no interference is called for in the well reasoned order passed by the Ld. CIT(A), hence, we uphold the same.

9. In the result, the appeal of the Revenue is dismissed.

Order pronounced in the Open Court on 02/02/2015.

Sd/- Sd/-

[G.D. AGRAWAL] [H.S. SIDHU] VICE PRESIDENT JUDICIAL MEMBER

Date 02/02/2015 "SRBHATNAGAR" Copy forwarded to: - 1. Appellant - 2. Respondent - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY By Order,

Assistant Registrar, ITAT, Delhi Benches

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