M/S Laxmi Automobiles Agencies, Kanpur vs Assessee

M/s Laxmi Automobiles Agencies, Vs Income Tax Officer-1(2), 16/103, The Mall, Kanpur. Kanpur. PAN:AABFL6839P (Appellant) (Respondent)

Appellant by Shri Rakesh Garg, Advocate Respondent by Shri Puneet Kumar, D. R. Date of hearing 23/02/2015 Date of pronouncement 23/03/2015

ORDER PER A. K. GARODIA, A.M.

This is assessee's appeal directed against the order passed by learned CIT(A)-II, Kanpur dated 22/08/2014 for the assessment year 2010-11.

2. In this appeal, the assessee has raised the following grounds:

"1. Because the CIT (Appeals) has erred on facts and in law in upholding the rejection of books of accounts and upholding the addition of Rs.6,13,161/- made to the trading results which addition is contrary to facts, bad in law and be deleted.

2. Because the method of accounting employed by the assessee being consistently the same over several years, duly accepted by the Department tax audit, no defects or discrepancies being pointed out in the same, the CIT(Appeals) failed to appreciate and arbitrarily upheld the rejection of books off accounts and also the addition of Rs.6,13,161/- which is contrary to facts and be deleted.

2 3. Because the books of accounts being maintained in regular course of business incorporating therein complete details of purchase and sales which have been duly accepted by the AO as well as the CIT(Appeals), the question of rejection of books of accounts applying the provisions of Section 145 of the l.T. Act is totally misplaced. The addition be deleted.

4. Because on a proper consideration of the facts and circumstances of the case, there being no notice/satisfaction as contemplated in Section 145(3) of the l.T. Act, the authorities below have erred on facts and bad in law in rejecting the books of accounts and thereby making an addition of Rs.6,13,161/-.

5. Because complete details of purchase and sales having been furnished before the AO as well as before the CIT(Appeals), wherein it was demonstrated that due to competitive market, the sales having been made at lower margin of profit, such explanation having been found to be false or the operative delay were not justifying under provisions of Section 143(3). The said addition is contrary to the provisions of law and be deleted.

6. Because the CIT(Appeals) has erred on facts and in law in upholding the addition of Rs.6,991/- out of telephone expenses, Rs.7,382/- out of vehicle expenses and Rs.12,804/- out of depreciation amount which expenditure have been incurred for the purpose of business, the authorities below were justified in upholding the amount."

3. Learned A.R. of the assessee reiterated the same contentions, which were raised before the CIT(A) whereas Learned D.R. of the Revenue supported the orders of the authorities below.

4. We have considered the rival submissions. We find that the rejection of books has been upheld by CIT(A) on the basis that reduction in gross profit rate still remains unexplained and non-maintenance of stock register also remains beyond comprehension. He has also noted that the verification and reconciliation of cash sales made have also not been made. Based on 3

this, CIT(A) has given a finding that the non-verifiable cash sales still remains. By making these observations, he has upheld the action of the Assessing Officer. The CIT(A) has followed the judgment of Hon'ble Bombay High Court rendered in the case of National Plastic Industries 23 DTR 359 wherein it was held that on account of non-maintenance of stock register, rejection of books of account is justified. The CIT(A) has also followed the judgment of Hon'ble Apex Court rendered in the case of S. N. Nama Savayam Chettiar vs. CIT 38 ITR 579 (SC) wherein it was held that the rejection of books of account on account of non-maintenance of stock register is justified. Under these facts, we do not find any reason to interfere in the order of CIT(A) on the issue about rejection of books of account.

5. Now regarding the estimation of gross profit rate by the Assessing Officer at 3.56%, this finding has been given by CIT(A) that the Assessing Officer has adopted this gross profit rate by taking average gross profit rate from assessment year 2008-09 to 2010-11 and after adjustment of credit note etc. On this aspect also, it is noted by CIT(A) that such decision of Assessing Officer is supported by the decision reached by the Hon'ble Supreme Court in the case of CIT vs. British Paints India Limited 188 ITR 44 (SC). Since the gross profit rate adopted by Assessing Officer and confirmed by CIT(A) is arrived at on the basis of average gross profit rate from assessment year 2008-09 to 2010-11, we are of the considered opinion that there is no infirmity in the order of CIT(A) on this aspect also. Ground No. 1 to 5 are rejected.

6. Regarding ground No. 6, we find that disallowance of Rs.7,382/- out of vehicle expenses and Rs.12,804/- out of depreciation has been made by the Assessing Officer by alleging that the use of vehicles for non business purposes cannot be ruled out. The disallowance was made by the Assessing 4

Officer to the extent of 15% of the expenses. Since it is not shown by the assessee that the partners of the assessee firm were having their car separately, personal use of the car by the them cannot be ruled out and estimation of such expenses at 15% of total expenses is reasonable and hence, on this aspect also, we do not find any reason to interfere in the order of CIT(A).

7. There is disallowance of Rs,6,991/- out of telephone expenses also, which is about 15% of the total telephone expenses. Since the assessee has not shown that the partners of the firm were having their separate telephone lines, this disallowance is also justified and hence confirmed.

8. In the result, the appeal of the assessee stands dismissed.

(Order was pronounced in the open court on the date mentioned on the caption page)

Sd/. Sd/.

(SUNIL KUMAR YADAV) ( A. K. GARODIA ) Judicial Member Accountant Member

Dated:23/03/2015 *C.L.Singh

Copy of the order forwarded to : 1.The Appellant 2.The Respondent. 3.Concerned CIT 4.The CIT(A) 5.D.R., I.T.A.T., Lucknow Asstt. Registrar