TaxTMI 
TaxTMI 
2016 (12) TMI 448
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....facts and circumstances of the case and in law the ld. CIT (A) has erred in confirming the action of the ld. AO in disallowing a sum of Rs. 74,50,155/- out of material and labour expenses. The action of the ld. CIT (A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the said disallowance of Rs. 74,50,155/-. 3. In the facts and circumstances of the case and in law the ld. CIT (A) has erred in confirming the action of the ld. AO regarding addition of a sum of Rs. 48,34,995/- u/s 68 of the IT Act, 1961. The action of the ld. CIT (A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of Rs. 48,34,995/-. 2. Briefly stated the facts of the case are that the case of the assessee was picked up for scrutiny assessment and the assessment under section 143(3) of the I.T. Act, 1961 (hereinafter referred to as the Act) was framed vide order dated 25th July, 2011. While framing the assessment, the AO rejected the books of account and estimated the profit by applying Net Profit rate at 12.88% thus making an addition of Rs. 74,50,155/-. The AO also made....
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.... far off locations without much administrative support. The ld. Counsel submitted that non maintenance of vouchers and labour register was one of the reasons why books of accounts of the assessee were rejected by the ld. AO and which was also upheld by the ld. CIT (A). The ld. Counsel submitted that when books of accounts are rejected, the AO is required to make best judgment assessment. The ld. Counsel submitted that reason for making trading addition was the fact that the GP percentage declared by the assessee for the relevant previous year was lower than the GP percentage declared for the immediately preceding year. The ld. Counsel submitted that even if the GP percentage submitted by the assessee for the relevant previous year is replaced by the GP percentage declared for the immediately preceding year, it would, at worst, result into trading additions of Rs. 4,95,301/- only. Whereas the ld. AO has made addition of Rs. 74,50,155/-. He submitted that the declared trading results may be accepted. 4.2. On the contrary, the ld. D/R has supported the orders of the authorities below and submitted that the AO has brought on record that the assessee has all kinds of plant and machin....
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....h the termination of his management or the modification of the terms and conditions relating thereto; (b) any person, by whatever name called, managing the whole or substantially the whole of the affairs in India of any other company, at or in connection with the termination of his office or the modification of the terms and conditions relating thereto ; (c) any person, by whatever name called, holding an agency in India for any part of the activities relating to the business of any other person, at or in connection with the termination of the agency or the modification of the terms and conditions relating thereto ; ^22[(d) any person, for or in connection with the vesting in the Government, or in any corporation owned or controlled by the Government, under any law for the time being in force, of the management of any property or business ;] (iii) income derived by a trade, professional or similar23 association from specific services^23 performed for its members ; ^24 [(iiia) profits on sale of a licence granted under the Imports (Control) Order, 1955, made under the Imports and Exports (Control) Act, 1947 (18 of 1947) ;] ^25 [(iiib) cash assistance (by whatever n....
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....ment of India. Explanation.-For the purposes of this clause,- (i) "agreement" includes any arrangement or understanding or action in concert,- (A) whether or not such arrangement, understanding or action is formal or in writing; or (B) whether or not such arrangement, understanding or action is intended to be enforceable by legal proceedings; (ii) "service" means service of any description which is made available to potential users and includes the provision of services in connection with business of any industrial or commercial nature such as accounting, banking, communication, conveying of news or information, advertising, entertainment, amusement, education, financing, insurance, chit funds, real estate, construction, transport, storage, processing, supply of electrical or other energy, boarding and lodging;] ^32 [(vi) any sum received under a Keyman insurance policy including the sum allocated by way of bonus on such policy. Explanation.-For the purposes of this clause, the expression "Keyman insurance policy" shall have the meaning assigned to it in clause (10D) of section 10.] Explanation 1.-[Omitted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f.....
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....ject the same. Account books once rejected, are ruled out of consideration and cannot be pressed into service whether by the assessee or the revenue. Thus, when account books are rejected, it would follow, as a necessary corrolary, that entries in the account books whether suspicious or not cannot be relied by the revenue or the assessee. To hold otherwise, would, in essence, render account books valid for certain purposes and invalid for others, a course impermissible in law...." 4.3. Further reliance is also placed on the following judicial pronouncements, the extracts of which have been set out for the sake of convenience:- 4.3.1. CIT vs. Dhiraj R Rungta [2013] 40 taxmann.com 284 (Gujarat) (Case Law Page 32) "....Head Notes - Section 145, of the Income-tax Act, 1961 - Method of accounting - Rejection of accounts [Additions to income based on rejected books of account] - Assessment year 2007-08 - Assessee engaged in trading of dress materials filed his return of income declaring certain income - Assessing Officer finding number of glaring mistakes, rejected books of account - He, however, made some additions by relying upon same books of account which had been reje....
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....o.[2005] 274 ITR 534/144 Taxman 210 has held that once the addition has been made by increasing the gross profit rate then there is no further scope of making separate addition under different heads. The ITAT Jaipur Bench in the case of Choudhary Bros in ITA No. 1177/JP/2010 vide order dated 31-05-2010 has also taken a view that composite addition by way of application of gross profit rate and net profit rate would be sufficient to take care of such discrepancies. Similar view has also been taken by Hon'ble Allahabad High Court in the case of CIT v. Banwari Lal Banshidhar[1998] 229 ITR 229 wherein it was held that when income of the assessee was computed by applying the gross profit rate, there was no need to look into the provision of Section 40A(3) of the Act..." 4.5. Finally, Hon'ble Jurisdictional High Court in the case of G.K. CONTRACTOR (2009) 19 DTR (Raj) 305 (Case Law Page 24) held that "...It is true that on being asked, the assessee was not able to explain these entries by producing the adequate proof to the satisfaction of the AO. However, in our considered opinion, even if the assessee has failed to discharge his onus of proof in explaining the cash credits shown....
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....ons [1984] 19 Taxman 533 (Mad.) (Case Law Page 42-43) has distinguished, on the above lines, the judgment of the Hon'ble Supreme Court in the case of Devi Prasad Vishwanath (Supra) and observed that"....We are, therefore, of the opinion that this decision also does not apply to the facts of this case. This decision will apply only if there has been an addition towards the bogus cash credit alone. But in this case, in addition to the bogus cash credits there is an addition towards the suppression of profits. In such a case as this when there are two additions, it is always open to the assessee to explain that the suppressed profits during the year has been brought in as cash credits and, therefore, one has to be telescoped into the other and there can be only one addition. The position that the assessee is entitled to claim that both the additions should be telescoped into one in such a situation is clear from the decision of the Supreme Court in CIT v. Devi Prasad Vishwanath Prasad [1969] 72 ITR 194 . The facts in that case are more or less similar to the facts in this case. In the case before the Supreme Court, there were two additions, namely, one towards the suppressed business ....
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....the adequate proof to the satisfaction of the AO. However, in our considered opinion, even if the assessee has failed to discharge his onus of proof in explaining the cash credits shown in the books of account as "market outstanding", the AO having estimated the higher profit rate on total contract receipts after rejection of the books of account invoking the provisions of s. 145(3), no separate additions can be made on account of unexplained cash credit under s. 68 of the Act of 1961. We are in complete agreement with the view taken by the CIT(A), confirmed by the Tribunal. Thus, no substantial question of law arises for consideration of this Court in this appeal ". The ld. Counsel also placed reliance on the decision of the Coordinate Bench rendered in the case of CIT vs. Nardev Kumar Gupta (2013) 32 taxmann.com 38 (Jaipur-Trib.) in ITA No.829/JP/2012 dated 23rd January, 2013. We find that while dealing with the issue, the Coordinate Bench of the Tribunal has taken into consideration the judgment of Hon'ble Jurisdictional High Court rendered in the case of CIT vs. G.K. Contractor (supra), judgment of Hon'ble Gujarat High Court rendered in the case of CIT vs. Pravin & Co. (2005....