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2012 (1) TMI 327
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.... 287 (Raj.)." 2 "That under the facts and circumstances of the case the learned CIT(A) further erred in not annulling order of the learned AO which was framed by him beyond time provided in section 153(2) of the IT Act 1961 which was extended by learned AO by appointing Special Auditors u/s 142(2A) and extending their time again and again thus taking benefit of proviso to sec.153(4)." 2.2 Ground of Appeal 1 by assessee for Assessment year 2005-06 to 2008-09 reads as under:- "That under the facts and circumstances of the case the learned CIT(A) erred in not annulling the order of the learned AO which was based on report of the learned Special Auditors who were appointed for the assignments beyond the provisions of sec.142(2A) of the Income Tax Act, 1961. Reliance in this regard is made on decision of Hon'ble Jurisdictional High Court in CIT vs. Bajrang Textiles 205 CTR 287 (Raj.)." 2.3 The facts in this case are similar to the facts in the case of Shri Ritesh Somani. While deciding the appeal in the case of Shri Ritesh Somani in ITA No. 592 to 597 JP/2011 and 618 to 623/JP /2011 vide order dated 30-12-2011, we have held that reference for special audit ....
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....er general provisions. Reliance in this regard was made to Rakesh Kumar Mundra Vs. ITO (2009) XLI Taxworld 59 (Jd.). As after computation of income u/s 44AE income from gitti business is 5.14%, which being reasonable it should not be interfered. 3.5 In further alternate, the assessee submitted that income from vehicles subject to depreciation and interest was 14.81% whereas in case of Orient Mail Speed Transport Service Vs.ITO (2008) XL TW 138(JP) Hon'ble ITAT Jaipur Bench approved NP rate of 6.76%. . The assessee therefore requested that profit being fairly well addition be deleted. 3.6 The ld CIT(A) considered submissions but finally applied submission made by assessee in para 3.5 above partly. As the profit in relation to income from gitti supply was worked out in this process at 5.14%, he considered it low, applied NP rate of 10% and made addition of Rs. 232318/-. Relevant part of ld. CIT(A)'s order is reproduced as under:- "As mentioned by appellant, he has declared net profit of Rs. 289773/- in his Profit & Loss Account which includes income from Gitti Supply as well as transportation business. In the absence of correct and complete books of accounts, it will b....
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....te on gitti supply the Hon'ble CIT(A) did not considered followings:- (i) That our vehicles are being used in our gitti supply business also whereas income from plying of vehicles considered separately inconsonance to provision of sec.44AE. (ii) That assessee being a supplier to Railways where there is cut throat competition, margin of profit is comparatively less. We therefore request your honour that rate applied by Hon'ble CIT(A) is too high and our disclosed Profit rate @ 5.14 being very reasonable the same be accepted in view of decisions of this Hon'ble Bench. In alternate we request that a reasonable rate be applied.'' 3.8 We have heard both the parties. The chart of receipt other details as filed by the ld. AR is as under:- Particulars A.Y.2004-05 A.Y. 2005-06 A.Y.2006-07 A.Y.2007-08 A.Y.2008-09 DISCLOSED INCOME 1. net profit A 289773 272298 259479 490986 484386 Truck 224651 303779 136699 47845 81337 Dumper 99867 59920 26964 65117 222060 JCB Machine 24485 18363 16526 26960 474746 B 349003 382062 180189 382642 778143 Add. Depreciatio....
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....fund Rs. 5200 Intt from bank Rs. 285 Rs. 11628. A.Y. 2007-08 Intt. On I.T. Refund Rs. 4479 A.Y. 2008-09 Intt. On I.T. Refund Rs. 1540 Intt. on FDR Rs. 46702 Rs. 48,242 3.9 In this case, the above credit entries as appearing in the profit and loss account are reduced from net profit. The net profit of different assessment years and the percentage of net profit over total receipts will be as under:- Assessment year Amount Net profit rate 2004-05 2,80,105 3.33% 2005-06 2,66,298 3.22% 2006-07 2,47,851 8.04% 2007-08 4,86,507 5.54% 2008-09 4,36,144 4.56% 3.10 The depreciation in assessment year 2006-07 is only Rs. 2.40 lacs as against Rs. 4.90 lacs of earlier year. In the assessment year 2007-08 and 2008-09, there are lime stone sales in addition to grit sales. Such lime stones were not existing in earlier years. In the assessment year 2006-07, the turnover is only around Rs. 30.00 lacs as against around Rs. 85.00 to 90.00 lacs in other years. The....
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.... submitted as under :- "During the assessment proceedings the learned AO vide his letter dated 26.05.2010 required me to explain unrecorded purchases Rs. 3173477/-,(para 3 of letter), Rs. 247551/-(para 4 of letter) and Rs. 94S676/- (para 6(ii) of letter) thus totaling to Rs. 4369704/-. As my ledger book was not available therefore I could not get it verified, however, I submitted that of these purchases, purchases to the extent of Rs. 1439800/- were from my son's firm M/s Swastik Stone Crusher which is being reported by my auditors also in their report inform 3 CD in para 18 and therefore the same be reduced from it. Besides I also stated that payment of purchase of Rs. 134940/- to Choudhary Crushers is verifiable from my accounts and the said firm has also confirmed it which is evident from para 2 of the learned AO's letter also therefore the same also be reduced. Besides my request was that purchase of Rs. 948676/- is overlapping which is evident from page 48 & 49 of Annexure 20 also. I had therefore requested that purchases of Rs. 4369704/- be reduced by Rs.l439800/-(purchases from my son's firm Swastik Stone Crushers as per report of auditors inform 3CD), R....
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....to application of rate of 10% as against 5.14% disclosed rate. The assessee request that so far as reduction of purchases from Rs. 4369704/- to Rs. 1846288/- is concern there in no case of deptt. because this is purchases which is either duly incorporated or it is already appearing in accounts which is verifiable from the records lying with learned AO. The assessee also submit that deptt. has not agitated it in remand letter also. In view of this fact it is simply a case of application of profit rate on balance purchases of Rs. 1846288/- and therefore deptts appeal deserve to be dismissed. There are plethora of judgments wherein this Hon'ble Bench has held that in case of undisclosed sales disclosed profit rate should be applied. In view of this factual and legal position, the assessee requested to direct AO to apply the disclosed rate on unverifiable purchase of Rs. 1846288/-. 4.7 On the other hand, the ld. DR supported the orders of the AO. 4.8 We have heard both the parties. In the cases of Ritesh Somani and Smt. Meena Somani, we have held that profit is to be added to the income in respect of undisclosed sales. Following our findings in the case of Shri Ritesh Somani and ....
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....CIT(A) decided issue as under:- "AO has estimated the entire receipts of appellant as income which is not justified. Even in the absence of regular books of accounts, income has to be estimated in a reasonable manner. It will be fair and reasonable to apply N.P. rate of 7.5% on total sales of Rs. 2710000/- estimated by AO. This will give figure of Rs. 203250/-. Thus addition under this head restricted to Rs. 203250/- as against Rs. 2710000/- made by AO. Ground No. 4(ii) is thus partly allowed." 5.5 The deptt is in appeal in relation to relief of Rs. 2506750/- (2710000-203250) and assessee is in appeal before us for application of normal NP rate of 5% in this line of business on undisclosed sales Rs. 2710000/-. The assessee submitted that the appeal of Deptt.is not maintainable because AO has estimated 100% profit on undisclosed sales which is unjudicious because while estimating profit on undisclosed sales AO's approach should be honest and reasonable. The assessee therefore submitted that departmental appeal on this ground deserves to be dismissed. So far as assesses's ground of appeal is concerned, the assessee submitted that in the case of Smt. Meena Somani in the si....
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....irmed by undersigned in respect of unrecorded lime business of appellant as per Ground No. 4(ii) of this appeal. I therefore hold that separate addition of Rs. 104284/- is not justified and the same is directed to be deleted. Ground No. 4(iv) is thus allowed." 6.5 Being aggrieved deptt is in appeal. The assessee submitted that these two persons are labour contractors engaged for Lime Stone Mines Jharai to whom payment of Rs. 89900/- is made on 11 occasions. As unrecorded Lime Stone Business income has been taxed separately, hence this addition is uncalled for. It is therefore submitted by the assessee that this ground of appeal of deptt. be dismissed. 6.6 After hearing both the parties, we feel that the ld. CIT(A) was justified in deleting the addition on account of advance of Rs. 1,04,284/- 7.1 The ground of appeal no.(v) of Deptt. reads as under:- "The learned CIT(A) erred in deleting addition on account of unrecorded advances at Rs. 320000/-." 7.2 During hearing of the group case, it was argued by the assessee that in Annexure- 24 contains financial activities of Smt.Meena Somani from assessment year 2002-03 to 2009-10 were appearing. It was also submi....
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....hus totaling to Rs. 320000/-. The learned AO did not appreciate this fact that investment was already disclosed by Smt.Meena Somani in her books of accounts Smt. Meena Somani during assessment proceedings had submitted that Annexure-24 pertains to her business activities and myself and my son Ritesh Somani were also telling the same thing. The learned AO has accepted the interest Rs. 861287- disclosed by Smt. Meena Somani in her assessment. One income is to be taxed at one place only. I may also submit that while completing assessment u/s 143(3) for Ass.Year 2008-09 in case of Smt. Meena Somani the learned AO has accepted the returned figures of loans and interest on loans and did not made any additions like earlier years. Copy of order is enclosed vide Annexure-H to this letter. In view of these facts I submit additions in my hands are uncalled for and it may be deleted. " 7.4 The ld CIT(A) also verified these advances and interest from Smt.Meena Somani's records and he deleted the addition with following observations- "From the perusal of records it is found that it was claimed by appellant during the course of survey proceedings as well as assessment proceedings that....
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....back to learned AO by Hon'ble CIT(A). The learned AO verified all entries from Ass. Year 2002-03 to 2008-09 and did not found any wrong therein (PB 241 to 250). 7.8 In view of aforesaid facts, the assessee submitted that order of ld CIT(A) does not call for any interference and this ground of appeal of Deptt. be dismissed. 7.9 We have heard both the parties. This issue has been considered in the case of Smt. Meena Somani and Shri Ritesh Somani. In that cases, we have confirmed the findings of the ld. CIT(A). Following our findings, we hold that the ld. CIT(A) was justified in deleting the addition on account of unrecorded advance of Rs. 3.20 lacs. 8.1 The ground of appeal no.(vi) of Deptt. reads as under:- "The learned CIT(A) has erred in deleting addition on account of protective investment at Rs. 300000/-." 8.2 The facts are similar to the facts as per ground of appeal No. (v) of Department and submissions of the assessee are also the same. 8.3 The Hon'ble CIT(A) also verified it from Smt.Meena Somani's records and he deleted the addition with following observations- "As mentioned earlier, transactions recorded in annexure-24 were claimed to be be....
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....ies that depreciation is a statutory allowance out of which no disallowance is justified for element of personal use. The .disallowance of Rs. 19962/-out of depreciation is directed to be deleted." "The very nature of telephone expenses and vehicle expenses are such that element of personal use is invariably present. However the disallowance made by AO is on the higher side. AO is directed to restrict disallowance out of telephone expense to Rs. 5000/- and disallowance out of vehicle expenses to Rs. 20000/-. Ground No.5 is thus partly allowed." 9.5 Being aggrieved, the Deptt.is in appeal before us 9.6 The ld. DR relied upon the order of the AO.. 9.7 The assessee submitted that ld CIT(A) has deleted disallowance of depreciation which is based on decision of this Hon'ble Bench in case of ITO Vs. Awadesh Katta (2010) XLVI Taxworld 85 (JP). The assessee therefore submitted that there is no case of deptt in relation to ground no.(viii) So far as other 2 grounds are concerned the ld CIT(A) has given relief taking disallowance from telephone expenses at Rs. 400/- per month and on Car Maintenance at Rs. 1600/- per month on account of personal use. The assessee is of 70 ye....
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....in this case provisions are not applicable and (c) as in case of regular books also once books are rejected whether specifically or impliedly NP rate is to be applied and provision of sec.194 read with sec.40a(i)(a), are not applicable. Reliance in this regard is made on Choudhary & Bros.vs.ITO (2011) 135 TTJ 55 (JP) (UO). We therefore request your honour to delete the addition." 11.4 The ld CIT(A) decided this issue vide para 5.3 of his order which reads as under:- "As mentioned by AO himself in the assessment order, freight expenses of Rs. 530714/- in respect of unaccounted business of appellant. These expenses have not been claimed by the appellant in his books of accounts and therefore the same cannot be disallowed. Even otherwise books of accounts of appellant have been rejected by AO and income has been estimated by applying profit rate. In such a situation also, no further disallowance is justified u/s 40(a)(ia). Addition of Rs. 530714/- is directed to be deleted. Ground No. 5(i) is thus allowed." 11.5 Being aggrieved Deptt.is in appeal before us. 11.6 The ld. DR relied upon the order of the AO 11.7 The assessee in this regard submitted as under:- ....
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....mation of Lime Stone Sales made by learned AO unscientifically at Rs. 1122000/- and applying NP rate of 7.5% thereon as against normal rate applied in other comparable cases." GOA no.5 of Deptt.- "The learned CIT(A) erred in deleting addition of unrecorded Lime Stone business at Rs. 1037850/-" 14.2 We have heard both the parties. These issues have been decided by us while disposing of the appeal of the assessee for the assessment year 2004-05. We have directed to apply net profit rate of 5%. Accordingly the ground of appeal no 2(ii) of the assessee is partly allowed and ground of appeal no. 5 of the Department is dismissed. 15.1 The ground of appeal no. 3 of the deptt. reads as under:- "The learned CIT(A) erred in deleting addition on account of unrecorded payment at Rs. 626524/-" 15.2 The AO has dealt these addition in para 5 of assessment order which has been reproduced by Hon'ble CIT(A) in his order and which reads as under:- "In para 4 of questionnaire it is asked to the assessee to explain the payment made to Shri Allanur of Rs. 778724/-, in his reply the assessee has explain that the amount is struck of before survey as the a/c did....
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....ary record (cash book) also. In view of these facts it is submitted additions are uncalled for and it may kindly be deleted. " 15.4 The Hon'ble CIT(A) decided this ground in para 7.3 of his order as under:- "Regarding these entries special auditors mentioned in their report that these are transfer entries from one account to another. Appellant explained that these expenses were not claimed by him in the books of accounts and therefore no disallowance u/s 40(a)(ia) is justified. AO has not bothered to examine this claim of appellant even during appellate proceedings and mechanically repeated his observations of the assessment order in the remand report as well. Since the books of accounts have been rejected by AO, no disallowance u/s 40(a)(ia) is justified. Addition of Rs. 626524/- is directed to be deleted. Ground No. 5(iii) is thus allowed." 15.5 Before us, the ld. DR supported the order of the AO. 15.6 Before us, the ld. AR has submitted as under:- ''The assessee submit that additions are made by learned AO without understanding the effect of the entries. If some entries are wrongly debited in one account which is rectified latter by way of debiting oth....
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....ition of Rs. 174464/-. 18.3 During the course of appeal proceedings, the assessee submitted as under:- "The learned AO has taken unrecorded purchases at Rs. 150400/- as discussed by him in para 6 of assessment order. He further added profit element of Rs. 24064/-thereon thus totaling to Rs. 174464/- and taxed it at 100% NP rate and made addition of Rs. 1J4464/-. I admitt that there is deficiency in my book keeping. I am a man of more than 70 years of age and therefore to purchase peace I accept the purchases but submit a reasonable rate of say 8%, being at par to sec.44AD be applied, which shall gross up sales to Rs. 163478/- and NP thereon to Rs. 13078/- I therefore submit addition may be reduced to Rs. 13078/- with relief at Rs. 161386/- " 18.4 The Hon'ble CIT(A) decided this ground vide para 7.3 of his order as under:- "Appellant has not furnished any satisfactory reply regarding difference hi purchases of Gitti. AO is therefore justified in making addition of Rs. 150400/-and the same is confirmed. However there is no justification for further addition of Rs. 24064/- and the same is directed to be deleted. Thus addition under this head is restric....
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...." 20.2 During the course of assessment proceedings, the AO founded unrecorded business of marble Rs. 210336/- and therefore he made addition of Rs. 210336/-. 21.1 During appeal proceedings, the assessee submitted as under:- "Vide para JO of his order and inconsonance to Annexure 15 of the impounded material the learned AO has worked out unaccounted marble sales at Rs. 210336/-. He has taxed it @ 100% NP rate. It shall not to be inappropriate to mention at this stage that during Ass. Year 2005-06 there was unrecorded marble purchases of Rs. 188738/- (grounds no.5(ivj of the appeal). Though there was no sale either in regular books or impounded records but it was gross up and taxed, we submit this sale should be taken related to aforesaid purchase and therefore its corresponding telescopy benefit should be provided to us and whatever residue shall remain a reasonable NP rate at par to sec. 44AD be applied thereon and relief be provided to us. " 21.2 The ld CIT(A) decided this issue vide para 9.3 of his order which reads as under:- "During assessment year 2005-06 it was found by AO that appellant has made unrecorded purchases of Rs. 188738/-. It will be ther....
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....ed sales and transportation receipts subject to depreciation and bank interest in Ass.Year 2004-05,2005- 06,2006-07,2007-08 & 2008-09 was at 9.31%, 9.80%, 17.78%, 12.76% & 15.84% respectively which being fairly well additions being uncalled for the same be deleted. 22.4 In alternate, the assessee requested the ld CIT(A) that assessee plys trucks /dumpers and JCB's which in total being less than 10 in number and therefore he is being covered within the provisions of sec.44AE. It was submitted that when specific provisions are there for computation of income it will prevail over general provisions. Reliance in this regard was made to Rakesh Kumar Mundra Vs. ITO (2009) XLI Taxworld 59 (Jd.). As after computation of income u/s 44AE income from gitti business is 13.63%, which being reasonable it should not be interfered. 22.5 In further alternate, the assessee submitted that income from vehicles subject to depreciation and interest was 19.43% whereas in case of Orient Mail Speed Transport Service Vs.ITO (2008) XL TW 138(JP) the ITAT Jaipur Bench approved NP rate of 6.76%. The assessee therefore requested that his profit is fairly well and addition be deleted. 22.6 The ld CIT(A)....
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....und of appeal no.5 of Deptt. reads as under:- "The learned CIT(A) erred in deleting addition on account of unrecorded advances at Rs. 2854918/-." 23.2 We have heard both the parties. The above issue is decided in favour of the assessee while disposing off the appeal for the assessment year 2004-05. Hence, we feel that the ld. CIT(A) was justified in deleting the addition. 24.1 The ground of appeal no.7 of Deptt. reads as under:- "The learned CIT(A) erred in restricting the addition on account of disallowance of telephone expenses at Rs. 2500/-." 24.2 We have heard both the parties. In the immediately preceding year, such disallowance was confirmed by the ld. CIT(A) to the extent of Rs. 5,000/- and the same has been upheld. Accordingly we hold that it should be restricted to Rs. 5,000/-. Hence, this ground of appeal of the Department is partly allowed. 25.1 The ground of appeal no.8 of Deptt. reads as under:- "The learned CIT(A) erred in deleting the addition on account of depreciation on vehicle at Rs. 6,334/- 25.2 We have heard both the parties. Following our findings for the assessment year 2004-05, we hold that depreciation to the extent....
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....ee and ground of appeal no.2 of the Deptt. reads as under:- GOA no.2(iii) of the assessee "That under the facts and circumstances of the case the learned CIT(A) erred in applying NP rate of 10% on disclosed sales Rs. 3605514/- as against disclosed NP rate as per Trading A/c attached with original ROI at 7.82% wherein no defect was find out by the learned AO" GOA no.6 of Deptt.- "The learned CIT(A) erred in deleting addition on account of unrecorded transportation receipts of Rs. 1501728 30.2 We have heard both the parties. This issue has been considered by while deciding the appeal for the assessment year 2004-05. Following our findings while disposing off the appeal for the assessment year 2004-05, we hold that the Ground No. 2(iii) is partly allowed and Ground No. 6 of the revenue is dismissed. 31.1 The ground of appeal no.4 of Deptt. reads as under:- "The learned CIT(A) erred in deleting addition on account of unrecorded advances at Rs. 2311000/-." 31.2 The ground of appeal no.6 of Deptt. reads as under:- "The learned CIT(A) has erred in deleting addition on account of protective investment at Rs. 1220000/-." 31.3....
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.... Books of accounts are treated as rejected by implication also. The relied upon the decision in the case of Choudhary & Brothers vs. ITO 45 TW Page 99 (JP)). Once books are rejected disallowance u/s 40A(3) should not be made. The further relied upon the case laws in the case of CIT vs. G.K.Contractor (2009) 19 DTR 305 (Raj) followed in ITO vs. Sadhwani Bros. 58 DTR 368 (JP) also Rajendra Kumar Kedia 22 TW 506 & Kiran Udhyog 34 TW 80. 32.7 We have heard both the parties. We are taking consistent stand when the books of accounts are rejected then no disallowance u/s 40A(3) is to be made. This issue has been considered in the case of Shri Ritesh Somani. Following our findings given in the case of Shri Ritesh Somani, we hold that the ld. CIT(A) was justified in deleting the addition of Rs. 2.00 lacs u/s 40A(3) of the Act. 33.1 Ground No. 7 of the revenue is that the ld. CIT(A) has erred in restricting the addition on account of disallowance of telephone expenses at Rs. 4,000/-. 33.2 We have heard both the parties. We feel that the disallowance should be restricted to Rs. 5,000/-. 34.1 Ground No. 8 of the revenue is that the ld. CIT(A) has erred in deleting the addition on a....
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....as against 5.58% disclosed by the appellant as per Trading account appended with original ROI filed" GOA no.2 of Deptt.- "The learned CIT(A) has erred in restricting addition on account of unrecorded marble sales to Rs. 5107684/-" 38.2 This issue has been considered by us while disposing off the appeal for the assessment year 2004-05. Following our findings for the assessment year, 2004-05, we direct the AO to apply the net profit rate of 8% on undisclosed sales. 38.3 The ground of appeal no.4 of Deptt. reads as under:- "The learned CIT(A) erred in deleting addition on account of unrecorded advances at Rs. 1102000/-." 38.4 The ground of appeal no.6 of Deptt. reads as under:- "The learned CIT(A) has erred in deleting addition on account of protective investment at Rs. 250000/-." 38.5 The above referred issues have been decided in favour of the assessee while disposing off the appeal for the assessment year 2004-05. Hence, we hold that the ld. CIT(A) was justified in deleting the additions 39.1 The ground of appeal no.5 of the Deptt reads as under:- GOA no.5 of Deptt.- "The learned CIT(A) erred in deleting add....