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2023 (8) TMI 1020
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....d circumstances of the case, the CIT(A) has erred in holding that absence of actual transaction cannot be made basis for rejecting books of account, if the assessee has furnished bills and vouchers. 5. On the facts and circumstances of the case, the CIT(A) has erred in deleting the estimation of income @ 3 % of gross non- CWG receipts. 6. On the facts and circumstances of the case, the CIT(A) has erred in deleting the addition of unexplained cash amounting to Rs. 6,25,000/-." 3. Facts of the case are that the assessee engaged in the business of manufacturing of Readymade Sportswear garments and laying of synthetic tracks at various stadiums during Common Wealth Games. Search & Seizure action took place u/s 132 of the Income Tax Act, 1961 (herein after called as "the Act") on 28.10.2010 at the business premises and residential premises of the Directors. Consequent upon this action u/s 132 of the Act and vide order u/s 127 of the Act, the assessee's case was Centralized with Central Circle-5, New Delhi and notice u/s 142(1) of the Act was issued to assessee on 25.04.2012 requiring the assessee to file a return of income, for which assessee replied that return fil....
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....ports of agencies. Further A.O. referred to the investigation of Cement suppliers, Labour contractors, Sub-contractor, vehicle hirers. In this regard, AO alleged that there is no proper correlation between purchase of cement, transportation and storage of the cement. The assessee could not produce any confirmation from the CWG authorities. The assessee has not been able to produce parties for verification. The notice u/s 133(6) of the Act to the parties were returned un-served. A.O. referred to payment by assessee to M/s Belhasa Projects and Deduction by CWG Authorities. A.O has also alleged that assessee has not maintained complete books of accounts, no information/details/evidences including supporting bills and vouchers were furnished by the assessee. The assessee has not produced stock registers for many of the consumables. The ld. A.R. made submission on each issue raised by AO in the Assessment order which are as follows: Issue No. 1 - With regard to Cement Consumption:- 8. The ld. A.R. submitted that assessee has purchased cement during FYs 2009-10 and 2010-11 of Rs. 1,48,26,267/- and Rs. 12,53,86,414/- respectively, totaling to Rs. 14,02,12,681/- from 26 suppliers loc....
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....show that the parties have been produced before the AO. In investigation, all cement suppliers confirmed and owned up their transactions with the assessee. They were reputed cement dealers having sizeable cement turnover. They submitted original invoice, proof of receipt and payment by way of account payee cheque/RTGS and their books of account. No fault has been found with the purchase bills of the assessee by the AO. They explained the process from placing of order till delivery through transport from railway siding and payment. They confirmed that they purchased cement directly from C&F agent of reputed cement manufacturer companies like ACC, Ultra Tech, Gujarat Ambuja etc. who deliver cement at railway siding to the transporter irrespective of the fact that the freight is paid by the dealer or assessee-buyer. Thus, they gave delivery to the assessee at Railway site, Shakurbasti. Delivery challans are not allowed by VAT Deptt. The depositions/evidences received from the parties are in support of the assessee rather than the AO. * No incriminating document or material or books of account indicating any cash received by the assessee from any cement supplier, or cash paid ....
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....pliers except 3 suppliers, and this is supported by evidence in assessee's own books as well as evidence furnished by the suppliers * AO has placed too much reliance on the initial statement of Sh. S.P. Singh dated 05.01.2011, and has ignored the subsequent clarification in his own statement dated 21.03.2013 before the AO himself and also evidence available on the assessment record in the form of books of account of the assessee and the uncontroverted evidence furnished by the parties. * The assessee had brought the aspect that the actual amount of cement purchased in FY 2010-11 is Rs. 12,53,86,414 (6,17,289 bags) of which closing unsold stock as at 31.03.2011 was Rs. 9,22,77,9181 (5,24,216 bags) and, therefore, assessee had only declared cement consumption of Rs. 3,31,08,496 (93,073 bags), while AO had alleged consumption of Rs. 14,02,12,681. The assessee had brought closing stock to notice of AO in its letters dated 12.02.2013 and 28.03.2013. The tax audit report submitted by assessee to AO also shows the stock of cement. The closing stock of cement as at 31.03.2011 was sold in the succeeding financial year and accordingly, sale revenue realized there from was c....
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....ies have produced work orders received by them from the assessee, which has not been disputed by the A.O. Regarding the ESIC/PF, these parties have produced the copies of their ES1C and EPF returns before the A.O." The ld. A.R. submitted that above findings of the ld. CIT(A) to be upheld as the AO overlooked the above facts observed by the ld. CIT(A). 15. The Ld. Departmental Representative relied on the findings and observations of the A.O. and sought for dismissal of the above ground. Issue No. 3: M/s Inderjit Mehta Construction Pvt. Ltd. (IJMCPL) 16. The ld. A.R. submitted that M/s Inderjit Mehta Construction Pvt. Ltd. (IJMCPL) is the sub-contractor of the assessee of the CWG work, had also bid for the CWG contracts from DDA/CPWD, but lost to the assessee. Subsequently, the assessee sub-contracted part of the total work to the said party after mutual negotiations for Rs. 3.47 crore against which assessee deducted Rs. 57.98 Lakhs due to non-execution of awarded work by IJMCPL and eventually paid Rs. 2.89 crore to IJMCPL 17. The ld. AO alleged that - IJMCPL did not apparently produce its books and bills and thus he disbelieved the transaction of the assessee with IJ....
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..... Similarly, Rajan Gandhi also confirmed the hiring of vehicles to assessee. The parties in order to prove their statement have also submitted copies of their return of income, details of vehicle no., and driver, bills raised, TDS certificate and some log books. The fact that assessee has paid a sum of Rs. 21,84,012/- to Sh. Alok Gandhi and Rajan Gandhi for hiring of vehicles is undisputed. The AO never informed to the assessee that he intended to draw adverse inference on account of these parties; therefore, assessee did not have the opportunity to submit the objections. It is not necessary that a written agreement has to be entered into between parties for every transaction. The supporting documents in support of the transaction were provided by the assessee and the persons who hired vehicles. In any case, these parties have less than the limit of 10 vehicles laid down in Sec. 44AE of the Income Tax Act. 1961 and are therefore not required to maintain books of accounts. Therefore, if indeed the books of accounts were not produced by these parties before the AO, this solely cannot cause prejudice to the assessee." The ld. A.R. submitted that above findings of the ld. CIT(A) to ....
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....by sum of Rs. 7.62 Crores. The assessee has not contested this reduction with the principal-agencies. The assessee has written it off as irrecoverable, even before taking it into its books of accounts. The assessee has simply reduced the gross receivables by this amount and credited the balance amount to the Profit and Loss A/c. Such accounting practice is neither illegal nor irregular. At most, technically the assessee could have credited the entire contractual amount to the P & L. account and then claimed deduction in the same year itself as a bad debt, since there is no requirement under section 36(i)(vii) that the bad debt has to be claimed in a year subsequent to the year in which it was offered to tax. The assessee has not claimed the deduction twice. Thus, the allegation of the AO was untenable." On the above reasons, he submitted that order of ld. CIT(A) to be upheld. The Ld. Departmental Representative relied on the orders of the A.O. and sought for reversal of the finding of the CIT(A). Issue No. 7 - Non-production of books of accounts and Stock Register and Details 27. The ld. AO made allegation that the assessee has not maintained complete books of accounts. No....
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....imation of income. 29. The ld. A.R. further submitted that the ld. CIT(A) in his order has nowhere held that the once the assessee has produced books of accounts and bills/vouchers, the books of accounts cannot be rejected. Nor has the ld. CIT(A) in his order observed that absence of actual transaction cannot be made basis for rejection of books of account, if the assessee has furnished bills and vouchers. In fact, ld. CIT(A) in his order has observed that no transaction of the assessee is bogus; complete books of accounts were produced by assessee; complete details as called for by the AO were submitted. Therefore, the ld. CIT(A) held that rejection of accounts is illegal. 30. The ld. A.R. submitted that the assessee had not only produced before AO complete books of accounts in soft and physical forms but also had replied to all the questionnaires and SCN issued by the AO through its letters submitted during assessment proceedings. The ld. AO was time and again informed that all the details sought by him had been duly furnished. * The Assessing Officer had asked the assessee to produce 16 parties/creditors who supplied goods or services to assessee, out of which 11 ....
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....er contract with CWG authorities (BOQ) and expense incurred on account of cement, labour contractors sub-contractor. AO has not doubted about the correctness of the detail. Thus, on one hand, AO has accepted the revenue declared by the assessee on account of BOQ, but has unfairly disallowed the corresponding expense incurred. * The assessee has been maintaining regular books of account, which were duly audited by independent statutory auditor under the Companies Act, 1956 and by tax auditor u/s 44AB of the IT Act, 1961 who had not found any fault and, therefore, had not expressed any qualification in the accounts of the assessee. 31. The ld. D.R. submitted that from the books of accounts of the assessee the true income of the assessee cannot be deduced, as such after careful examination of the facts and circumstances of the case, the ld. AO rejected the books of accounts and Ld. Departmental Representative relied on the observation of the ld. AO in his order. 32. We have heard both the parties and perused the materials available on record. The assessing officer, while framing the assessment could reject the books of accounts by invoking the provisions of section 145(....
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....dopting such other basis as determined by him. The power vested with the ld. AO u/s 145(3) of the Act are not arbitrary. On the other hand, the A.O. should exercise the same with the utmost care and judicially. A.O. has to give clear findings for invoking the provisions of section 145(3) of the Act by bringing reliable material on record on the basis of which he has arrived at the conclusion with regard to correctness or completeness of accounts of the assessee or the method of accounting employed by the assessee. We have carefully gone through the reasons advanced by AO for rejecting the books of accounts to hold that accounts are not complete or correct from which correct profit cannot be deduced. The reasons advanced by assessing officer as discussed above cannot be said that valid reason to reject the books of accounts as the assessee's books of accounts duly audited under relevant Act and it is certified by qualified Chartered Accountants. The ld. AO not commented anything on the duly certified audit report furnished by the qualified Chartered Accountants when it has been certified that books of accounts are reflects true profit of the assessee's firm for the relevant assessme....
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.... could not have exceeded Rs. 25 to 30 lacs is completely unsubstantiated and without any evidentiary basis. o The net profit declared by the Assessee is 15.26%, which Assessing Officer has not found faulted with viz.-a-viz. in other comparative cases or even the assessee's own case for the preceding years. o Hence, according to the ratio laid down by the Hon'ble Delhi High Court in the case of CIT v. Poonam Rani (2010) 326 ITR 223 (Del), it is clearly evident and therefore, held that the AO was not justified in rejecting the books of the accounts of the assessee. Accordingly, there would be no case for estimation. 38. During the course of hearing before us, ld. DR relied upon AO's order and reiterated the contents of Assessment Order in support of estimation of income. 39. The ld. AR for the assessee, besides relying upon the CIT(A)'s order, made further submissions against estimation of income at the aforesaid rates as under: o The assessee had repeatedly requested AO to provide the 'agency reports' or any other document or material which are contemplated to be used against him, but never provided by AO. o Keeping in view the CPWD Work....
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.... hot and cold in the same stream, which cannot be appreciated. In our opinion, once the books of accounts of the assessee are rejected, then income of the assessee to be estimated on the basis of proper material available on record. In the present case, though ld. AO has mentioned that he has rejected the books of accounts, he relied on the figures in the same books of accounts to make additions on various counts, which cannot be appreciable. In our opinion, the assessing officer on mere suspicion has rejected the books of accounts though there must be something more than mere suspicion to support the assessment order passed u/s 143(3) of the Act, the rule of law on this subject has been fairly and rightly stated by Hon'ble Supreme Court in the case of Dhakeswari Cotton Mills Ltd. Vs. CIT reported in 26 ITR 775 (SC). In our opinion, there is no valid reason to reject the books of accounts of the assessee and we do not find any infirmity in the order of ld. CIT(A) in accepting the books of accounts of the assessee. As we already held in earlier ground Nos.3 & 4 that the rejection of books of accounts is not justified, consequently, there is no question of estimation of income of the....