TaxTMI 
TaxTMI 
2018 (10) TMI 1447
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....nd exclusively for the purpose of business. 3. The Ld.CIT (A) has erred in disregarding the merits of the present case in respect of business expenses, particularly when the assessee could not furnish the justification of claim and business contingency of incurring of these expenses. 4. That the appellant craves for the permission to add, delete or amend grounds of appeal before or at the time of hearing of appeal. 2. At the outset, we may like to mention that despite notifying, on the date of hearing neither anyone attended on behalf of the assessee nor any adjournment was filed. On the last occasion also none attended on behalf of the assessee. In view of the circumstances, the appeal is heard ex parte, qua the assessee. 3. Briefly stated facts of the case are that the assessee company was engaged in dealing structural steel fabrication and installation work. For the year under consideration, the assessee filed return of income on 29/09/2009, declaring nil income. The case of the assessee was selected for scrutiny and notice under section 143(2) of the Income-tax Act, 1961 (for short 'the Act') was issued and served upon the assessee. The Assessing Officer....
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....led detailed submission contesting the rejection on books of accounts and estimation of the net profit. The Ld. CIT(A) partly allowed the appeal of the assessee. Aggrieved with the finding on the issue of rejection of books of accounts and estimation of the profit, the Revenue is in appeal before the Tribunal raising the grounds as reproduced above. 4. The ground Nos. 1 to 3 of the appeal are in respect of issue of cancellation by the Ld CIT(A) of rejection of books of accounts invoking section 145(3) of the Act and estimation of the profit. 4.1 The Ld. DR submitted that books of accounts and vouchers have not been produced by the assessee before the Assessing Officer during the assessment proceeding despite numerous opportunities provided to the assessee and therefore the action of the Assessing Officer in rejecting the books of accounts invoking section 145(3) of the Act was justified. 4.2 We have heard the submission of the Ld. DR and perused the material on record including the impugned order passed by the Ld. CIT(A). We note that the Ld. CIT(A) has addressed the justification of increase in expenses, relying on which the Assessing Officer rejected books of accounts of....
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....by the appellant. In addition, the appellant submitted that the rent claimed during the immediately succeeding year was much higher at Rs. 88,95,424/- which was accepted by the A.O. in her order u/s 143(3) of the Income Tax Act. The full details of expenses on account of rent along with the precise purpose for hiring various premises are given in the following table:- LOCATION OWNER SITE FOR USED FOR MONTHS RENT AMOUNT F.Y. 2008-09 (IN RS.) BANGALORE KRISHVI PROJECTS PVT. LTD. PRODUCT SHOP 1.5 487,500 - - BANGALORE DSUNDAR PROJECT OFFICE - - BANGALORE J. MANJUNATHA PROJECT OFFICE 8.0 200,000 - - DELHI QUICK PORTFOLIO PRODUCT SHOP 10.0 2,250,000 DELHI AMIT BEDI OFFICE 10.3 160,310 DELHI JINDAL STAINLESS LIMITED GO DOWN 3.0 18,000 GURGAON SHASHI CREATIO MESS#SAP STAFF - - GURGAON ELECTRO VISION HEAD OFFICE 12.0 807,300 GURGAON THE HOMEMAKERS PRODUCT SHOP 6.0 600,000 HYDERABAD K. SARDA PROJECT OFFICE 5.0 45,357 KERALA BAIJU MESS#SITE STAFF - - MUMBAI BHASKAR DAMODAR CHOKER MESS#SIT....
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....sed in the meeting of the Board of Directors of the appellant company on 03.10.2008 as per which Smt. Deepika Jindal was to be entitled for remuneration of Rs. 7,41,666 per month for a period of 3 years w.e.f 01.09.2008 to 31.08.2011. In addition to this, the appellant submitted that Smt. Deepika Jindal, to whom the remuneration was paid, belongs to business family of O.P Jindal Group and has experience of more than 21 years in corporate and business management. She was managing complete affairs of the company during the period the remuneration was given to her. More importantly, the appellant also gave approval letter issued by the Ministry of Corporate Affairs, Government of India dated 30.07.2009 approving total remuneration of Rs. 7,41,666/- per month for a period of 3 years w.e.f 01.09.2008 to 31.08.2011. Since the appellant gave all details substantiating the aforesaid expenses, how could the A.O reject books of account on account of the fact that Director's remunerations was not properly supported by requisite evidences? The only issue which is relevant in case of Director's Remuneration is the allowability of such expenses, as per provisions of Section 40A(....
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.... Lastly, the A.O has submitted that the appellant has not maintained proper bill/vouchers because of which he rejected the books of account. However, the A.O has not given any specific expense in respect of which proper bills/vouchers had not been been maintained by the appellant. The appellant, during the course of appellate proceedings, stressed the point that all its expenses are properly vouched and the AO has not given any particular instance of any expense which could not be properly supported by requisite evidence. Accordingly, I hold that, the A.O's sweeping remark that proper bills/vouchers have not been maintained, without giving any instance, where this deficiency was detected by him, goes to prove that this observation of the A.O for rejecting books of account is without any basis and is thus rejected." 4.3 The Ld. CIT(A) has further analyzed the provisions of the section 145(3) of the Act and various judicial pronouncement on the issue of rejection of books of accounts. The relevant finding of the Ld. CIT(A) is reproduced as under: "4.6 On the basis of the reading of provisions of Secion 145(3) of the Income Tax Act, it is obvious that the A.O may rejec....
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....te of net profits. 4.9 In another judgment of the Hon'ble Jurisdictional High Court in the case of CIT vs. Om Overseas (2008) 173 taxmann 185 (P&H) the assessee firm declared G.P rate of 25.38% as against 29.5% declared in the immediately preceding year. The A.O rejected the books of account and estimated G.P rate at 27%. On appeal, Commissioner(Appeals) deleted addition, holding that A.O made addition without pointing out any specific defect in books of account. The Tribunal upheld finding of Commissioner(Appeals). It was held by the Hon'ble High Court that there was no perversity in the order of the Hon'ble Tribunal. 4.10 In a very recent judgment of Century Tiles Ltd. vs. JCIT (2014) 51 taxmann.com 515 (Ahmedabad) it was held that where assessee maintained regular books of account which were duly audited, decline in gross receipts and disproportionate increase in expenses in certain heads of account, by itself, cannot be a ground to reject book results. The same is the view of Hon'ble Jharkhand High Court which, in the case of CIT vs. Anand Kumar Modi (2014) 44 taxmann.com 21 (Jharkhand) held that addition made after rejecting books maintained b....
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....en put to the assessee and who could have offered valid explanation in this regard. In the circumstances, we do not find any valid reason to reject the book results so as to sustain the addition made by the AO." 11. The Tribunal while affirming the findings of CIT(A) had recorded that the assessee had- Droduced receipts issued in respect of each connection and the assessing officer had adopted the method of estimation without there being any rational basis to support the guess work. Further, no specific defect in the books of account had been pointed out warranting rejection thereof. Learned counsel for the Revenue was unable to demonstrate that the conclusions recorded by CIT(A) and the Tribunal are perverse in any manner. We find that the findings recorded by the CIT(A) and approved by the Tribunal being based on record do not call for any interference. The substantial question of law is, thus, answered against the Revenue." 4.4 We note that the Ld. CIT(A) has examined the rent paid of Rs. 62,51,809/- during the year under consideration. The Ld. CIT(A) has noted that during the assessment proceeding the assessee filed all the document in respect of rent agreement of t....