TaxTMI 
TaxTMI 
2022 (11) TMI 1475
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....ance of Rs.26,095/- for delay in deposit of employees contribution for PF and ESI.'' 2.1 In Ground of Appeal No.1 of the assessee, the Addition of Rs.2,26,41,521/- is under challenge. 2.2 Brief facts of the case are that during the assessment proceedings, the AO alleged that the assessee is engaged in the practice of delayed invoicing and under invoicing of sales in its books of accounts. The assessee is taking advance from customers against the sale of vehicles. In most of the cases the delivery of goods has been given to the customers, the vehicles are also registered with RTO, delivery memo have been issued for the year under consideration. However, the sales bills are prepared in the subsequent years and recorded the sale in its books of account in the subsequent years but not in the subjected year. The AO alleged that there is a difference of Rs.43,35,138/- in the sale amount as appeared in the delivery memo / sale bill issued by the assessee of Rs.3,56,72,909/- and purchase amount Rs.4,00,08,047/- stated by the customers in reply to notices issued u/s 133(6). Such difference in term of percentage was of 12.15%. Therefore, he inferred that the assessee might have suppres....
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.... the AO. The assessee has contended that since it has already declared the sales of the vehicle sold in the previous year relevant to A.Y. 2009-10 (the assessment year under consideration) in the subsequent years, therefore, the same cannot be taken into account in the A.Y. 2009-10. I do not find this argument of the appellant acceptable. The assessee cannot choose the year in which he wants to show the sale. The sale has to be shown in the year in which the vehicles have been sold by the assessee. As the vehicles have been sold by the assessee in the previous year relevant to A.Y. 2009-10, hence, the assessee was required to show the entire sale in the previous year relevant to A.Y. 2009-10 only. Therefore, the action of the AO estimating the turnover at Rs. 69,99,20,191/- as against the sale of Rs. 40,48,20,629/- shown by the appellant in the books of accounts, is held to be fully justified and in accordance with the provisions of law. The AO has estimated the GP @3.25%, citing the comparative case of Relan Motors Pvt. Ltd., who was also engaged in the same line of business and dealer of Maruti Car. The GP rate shown by M/s Relan Motors Pvt. Ltd. Ltd. was 3.92%. Hence, I am of th....
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....ted here itself. B. On merit: Alternatively, on merits also, there was no case with the AO to have made this addition, as submitted herein below: 1. Fair estimation required - Legal Position:1.1In these circumstances a pertinent question arise whether after the rejection of account and invoking of S.145(3) of the Act, is there any scope of again referring to the same books of account finding various deficiencies, defects and faults and then to estimate the income on that basis. Although after rejecting the account it is not disputed that what is all required is a fair estimation. However, invoking of S.145 of the Act does not confer blind powers upon the AO and he is not at liberty to assess the income at whatever figure he wants. He is bound to make an honest estimation of income, keeping in view of the material available on record, past history of the case, local knowledge and repute of the assessee. He is also supposed to collect necessary material for the purpose, if so required. The law is settled that in making fair estimation, one needs some cogent material to justify estimations. An arbitrary, capricious and wild estimation, as done in the present....
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.....P. rate of 5 years. The Hon'ble Rajasthan High Court had already been considering average of 5 years as a benchmark in the cases of estimation. Kindly refer the following chart: S.N. F.Y A.Y Sale Turnover (Rs.) Net Profit (Rs.) N.P. Rate % 1. 2007-08 2008-09 16,28,99,694/- 19,21,477/- 1.18 2. 2008-09 2009-10 40,48,20,629/- 16,62,771/- 0.41 3. 2009-10 2010-11 58,60,77,936/- 21,64,150/- 0.37 4. 2010-11 2011-12 1,14,86,38,878/- 18,56,947/- 0.16 5. 2011-12 2012-13 95,78,71,977/- 19,76,245/- 0.21 2.3 other comparable case: It is further submitted that a better comparable case could be of one M/s Ajmer Auto Agencies Pvt. Ltd. for F.Y. 2009-10 (A.Y. 2010-11) which is also engaged in the same line of business and the G.P./ N.P. declared by the said concern stood at (-) 3.66% as against 4.20% as above declared by the assessee as per re-casted trading account (PB-58). It was cited before the AO also (CIT (A) order pg. 6-7). 2.4 A.Y. 2008-09 not comparable:It is submitted that the law is well settled that the like has to be compared with a like therefore, the facts an....
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....njustified. More particularly when the material so gathered was never confronted and hence such material i.e the so called comparable cases, could not be considered even. Kindly refer Vimal Chandra Golecha v/s ITO & Anr. (1982) 134 ITR 119 (Raj.), ITO & Anr. v/s Gargidin Jawla Prasad Maholi & Ors. (1980) 124 ITR 203 (All). 3.2 Justifiable reason behind non-considering comparable case: The comparison so made with the G.P. declared three years later by a third party, is not a good basis for making addition. It is a matter of common knowledge that in three years the scenario has changed altogether. Therefore, the comparison made by the AO is arbitrary. The justification behind the trading results of the current year are always to be examined in the light of the facts and circumstances of the present case. 3.3 The reasons of low G.P. (if compared with M/s Relan Motors (P) Ltd.) and reason behind non-considering the said case, were submitted before the lower authorities in great detail. The relevant extract from the submission of the ld. CIT(A), reproduced at Pg-4 & 5 are reproduced hereunder: "2. That he also made an addition of Rs.7,58,27,287/- on suppressed....
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....been passed containing huge additions, such an action has to be considered as having been done without jurisdiction and vitiating the entire order which, results into as nullity and is not case of mere irregularity. Kindly refer Colonisers vs. ACIT [1992] 41 ITD 57 (Hyderabad) (SB)/[1993] 45 TTJ 114 (Hyderabad) (SB) (DPB-17-30) holding that: "In the preceding paragraphs it has been indicated why the assessee's version cannot be rejected as regards the credits appearing in his books. Perhaps the only justification, if at all it can be called a justification, for the ITO to reject the credits as not genuine is the failure of the assessee to produce the creditors when called upon to do so by the ITO. At this stage it is but necessary to state the circumstances in which the assessee was unable to produce the creditors. We are concerned with the asst. yr. 1985- 86. For the first time the ITO called upon the assessee to produce the creditors by his letter dt. 7th March, 1988 which was served on the assessee on 9th March, 1988. The rules of natural justice operate as implied mandatory requirement, non-observance of which amounts to arbitrariness and discrimination. T....
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....ch. This has been explained by way of the following chart w.r.t the illustrations given below. To explain, in case of Akshay Jain (Kapoor Chand Jain)who purchased Wagonr Lxi (PB-88 A.Y. 2010-11), as per Customer total amount shown is Rs.3,14,702/- as against the ledger account showing 3,01,442/- (PB 97-98) with a difference of Rs. 13,260/-. However, if the amounts of RTO expenses, insurance and other accessories Rs. 39,296/- are also added, the total comes Rs. 3,40,738/- which was more than the amount given by the customer. (The excess amount of 26,036/- received by the assessee from the customer in cash / Finance Company) (PB 97-98), leaving no differenceas alleged. Similar is the position w.r.t. other cases also. In some cases, there may be still some meagre difference but negligible and may be because of various reasons beyond control. At the same time however, in some cases the assessee has shown more amount than the alleged difference. Thus, factually there was no difference between the total amount as accounted for by the assessee and those paid by the customer there is no suppression at all. S. N o Customer Name Sales Amt As Per Assessee [Rs.] Purchase Amt As Per....
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....n of sale. It is only w.r.t. some minor variation of negligible amounts due to cash discount, less recovery or mistakes in the mathematical calculations that some difference may be there however, it cannot be admission of suppression. 6. Declared Sales accepted by the Commercial Tax Department: It cannot be denied that the Commercial Tax Authorities (Value Added Tax) are directly concerned with the determination of the correct amount of the sale in as much as, VAT is collected only withy reference to the amount of sale and therefore, stack of the Commercial Tax Department are much, much more than of the Income Tax Department, which is concerned only the income element, coming out of the sales. Therefore, once the VAT Authorities have accepted and assessed the sale (PB 29-30-38) the authenticity of the assessed figures of the sale cannot be doubted under normal circumstances. Pertinently, the sales as declared by the assessee was duly accepted by the VAT / Commercial Tax Department. Unfortunately, the lower authorities did not pay any attention to this vital facts going to the root of the issue and therefore, Income Tax Authorities could not have made any addition on this a....
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....ld have rendered the best judgment assessment, a fair proceeding and the resultant assessment order would have been a most rational one." 6.2 Moreover sale already assessed & enhanced in AY 2010-11 & 2011-12. 7. Contradictory approach of the AO w.r.t. the Advances from customers: 7.1 At the outset it is submitted that a bare perusal of the assessment orders of three years i.e. A.Y. 2009-10, 2010-11 and the current year A.Y. 2011-12, the AO has looked upon the things in an altogether different & contradictory manners even though the facts & circumstances are the same and the method & manner of the receipts of the sale proceeds and accounting thereof, are same being consistently followed by the assessee. The same is being explained hereunder: 7.1.1 The assessment for A.Y. 2010-11 was completed first, wherein the entire amount of the advances received in that year of Rs.20,28,74,955/-, were added as unexplained credits disbelieving the genuineness of such credits, vide the assessment order dated 28.03.2013 passed u/s 143(3) (the same is under challenge vide ITA No. 929/JP/2016 before the Hon'ble ITAT). 7.1.2 In the current year i.e. A.Y. 20....
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....the resultant trading addition of Rs.2,06,46,689/-. vide assessment order passed u/s 143(3) / 147 dated 30.03.2015. Thus, the AO himself adopted three altogether different approaches in respect of same very aspect of the amount of advances received from the customers in three different assessment years viz (i) considering the entire advances as unexplained cash credit u/s 68, (ii) considering a part of the advances as the case of deferred sale but not disbelieving such advances as unexplained credits, (iii) considering the entire amount of advances as a part of turnover. Therefore, the prime question arises as to which approach of the AO should be believed. If the approach adopted in the later two years is considered fully or partly acceptable then his case of disbelieving the entire amount of the advances u/s 68 in A.Y. 2010-11 completely goes away. If his approach of considering the advances as deferred sale is accepted as good, his case of considering the entire amount of the advances as a case of deferred sale also goes away. It is not the caves of the revenue that the facts and the circumstances are altogether different in three years and there was new material and so....
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....not be at all appropriate to allow the position to be changed in a subsequent year". 8.2 Not a case of deferred sale: It is submitted that the assessee is a Pvt. Ltd. Company and has been consistently following the same method and manner of accounting the sale proceeds. The revenue is being recognize in accordance with the applicable Accounting Standards issued by ICAI. Moreover, in some cases proper documentation was lacking and in some cases total finance value was not available. Kindly refer Dutta Automobiles P. Ltd vs. ACIT (2016) 180 TTJ (Kol) 128 (DPB 65-69) [and ACIT vs. Dow Agrosciences India P. Ltd. (2016) 53 ITR_TRIB 590 (Mum) (DPB 54-61)]. No working provided how figure of Rs. 21.93Cr. has been worked by AO. 9. Case of multiple additions: From a bare reading of the orders of the authorities below the fact cannot be denied and easily ascertainable that it is case of multiple addition in as much as firstly, the AO while considering the outstanding advances of Rs.30.46 Crores as on 31.03.2011 (A.Y. 2011- 12) considered a part of it (i.e. 60.97% thereof) as a sale which has not been disclosed by the assessee this yearthough it has beendeferred and shown in ....
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....her purpose. It is also not denied that if not in the current year, in the later year/s, part of these advances stood considered as sale. The very term deferred sale implies though the sale accounted for but not in the relevant year however in the later year. In other words, in view of the authorities below, though the assessee has declared the sale out of these advances, but instead of declaring such sale in the relevant year, the same were deferred to the later years. Hence, the very fact of recording the income arising from the sale stood accepted by the authorities below. The only dispute remained is the correct year of declaration and taxing of the income. On the other hand it is not disputed that the tax rate in block period of three years i.e. A.Y. 2009-10, 2010-11 and 2011-12 was the same therefore, even if an item of sale which remained to be declared in A.Y. 2010-11 but declared in A.Y. 2011-12 or remained to be declared in A.Y. 2009-10 but same declared in later years, the revenue was not going to lose any tax. Hence, the assessee has declared the sale in the current year as well as in subsequent year/s with respect to the advances received from customers. Thus,....
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....ifference found in all invoices might have been due to charging for registration & other Exp. from customers. However in the interest of justice the maximum enhancement of sale could have been made as per actual difference found in all invoices checked by him but no more as assessed by AO to the tune of Rs.7,58,27,287/- as against Rs.43,35,138/- thus the increase sales for Rs.7,14,92,149/- is quite wrong & unjustified. There is no provision to enhance sales on estimation basis as against found in excess actual sale of Rs. 43,35,138/- only. As decided by Higher Courts, no multiplication can be made for whole years on the basis of suppression of sale for 10-15 days observed &/or found if any and as per definition of sale there must be consideration which is to be proved by AO for determination of such higher sales for assumption of sale, there must be sale consideration to be proved and as decided in following cases no enhancement of sale can be made without proving actual sale: (2013) 49 page 105 (RHC) CIT vs Mohan Marble (P) LTD. It is unlawful to make increase in sales without bringing cogent material to prove sales out of books of accounts. Further held GP Companies m....
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....gh Court as shown below. In view of above the actual sale Rs. 40,48,20,629/- only should have been taxed as against Rs. 69920191/- as assessed against the audit reports. The addition of sale of Rs. 21,92,72,275/- and presumed suppression sales of Rs.7,58,27,287/- is quite wrong and without any basis and the same should have been reduced from total turnover assessed by AO against the books &/or records shown. The subsequent sale has been fully assessed as shown by us as per records and audited balance sheet and profit and loss account and nothing was reduced. It was also tallied as per returns and assessed two times i.e. in AY 2009-10 and also in AY 2010-11 as cleared from assessment orders of income tax for AY 2009-10 and 10-11. It is therefore requested to kindly reduce the turnover i.e. sale of Rs.21,92,72,275/- and subsequent addition of Rs. 35,56,581/- being 12.15% on account of suppression added on hypothetical assumptions for subsequent year also. As per definition of sale as per vat act there must be consideration for such sale for which AO failed to prove. The burden to establish and/or prove the sale and consideration obtained from such sale lies on deptt. i.e. AO....
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....ata provided, we have further submit as under:- That it is true fact that our annual turnover is on increasing trend since last year i.e. F.Y. 2007-08 to subsequent years. We give below details of turnover as under:- n. view the increasing trend in sales & also of other income as compared to other traders of similar business i.e. M/s Ajmer Auto Agencies Pvt. Lid. Our results should have been accepted as per G.P. rate declared by us. However, in view of your objection for showing sales in subsequent period out of advances taken from customers, we have to submit that during this year no such sales shifted & we have shown sale of Rs. 404820629 as against last year turnover of Rs. 162899694/- which give rise percentage of 250% on last year turnover & hence our other income also increased accordingly. As you know there is no addition in G.P during the asstt. Year 2010-11 made u/s 143(3) of IT Act & books results accepted by AO & accordingly also the result can be accepted by AO & accordingly also the result can be accepted as per our own history of case shown by us on such increased turnover. However we give recasted trading account as considered by AO in F.Y. 2010-11 ....
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.... insufficient so as to draw a justifiable inference to be applied on all the cases. The basic contention of the assessee was that there was no suppression of sale because Performa/VAT invoice and the RC referred to/mentioned the consolidated amount i.e. sale consideration, Road Tax, Registration & Insurance expenses whereas in the ledger account seen by the AO contained separate details of the sale consideration, Road Tax, Registration & Insurance expenses. Hence, if all the debit items are added to the sale consideration, there will be no difference as such. We have carefully pursued the chart submitted before us and also the related material and find that except a minor variation, there is no case successfully made out by the AO of suppression of sale. Behind the minor variations there may be various reasons however, merely based on some small cases, without anything more, the AO was not justified in enhancing the sale to a huge Rs. 7.58 cr. During the course of hearing, our attention was drawn towards a chart in the written submission explaining the above contention by way of various examples. This has been explained by way of the w.r.t the illustrations given therein. We have c....
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....013-14 which is later to the year under consideration. Needless to say that the result of the subsequent year cannot be applied in the preceding year. Otherwise also the case of Rellan Motors could not be used against the assessee because a perusal of the orders does not show that the assessee was ever confronted with the material used against him hence no reliance can be placed on the so called comparable case. Secondly, we find force in the contention of the ld. AR that the correct and revised GP rate stood at 4.20% and not mere 0.05% because the assessee has been consistently considering the target incentives, turnovers, cash discounts, warranty etc. as a part of the receipts directly related to the trading activities and accordingly such direct income credited to the P/L account should have been considered with the declared turnover resulting into the revised gross profit of Rs.1,70,55,357/- and 4.20% in terms of percentage to Sales. A chart to this effect was provided in the written submission. We find that that such claim of the revised GP rate of 3.25% was made before the AO also vide letter dated 11.03.2015 refer pg 6-7 of CIT(A) order but no adverse comments were made ther....
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.... the assessee submitted that the advances from these customers were taken for sale of vehicles however, the deal was cancelled by the buyers and advances were returned back to the customers as they were not intending to purchase. However, rejecting assessee`s contention the AO held that the onus is on the assessee to prove the identity, credit worthiness and genuineness of amount credited in its Books of Account. Finally, the AO added the same to the total income of the assessee as unexplained income. 3.3 In the first appeal the ld. CIT(A) also confirmed the action of the AO vide order dated 22.08.2016 in appeal no. 29/2015-16 holding as under: "I have gone through the assessment order, statement of facts, grounds of appeal and written submission carefully. It is seen that either during the course of assessment proceedings or appellate proceedings, the assessee has not able to furnish even the confirmatory letter from the persons from whom the credit of Rs.3,03,000/- was shown to have been received by it. Therefore, the addition of Rs.3,03,000/- made by the AO in respect of the unexplained credit is hereby confirmed." 3.4 During the course of hearing, the ld. AR of t....
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....count of all these accounts are enclosed herewith for the year ended 31.03.09." 2. In fact and in law, if the AO doubted he was bound to have enquired from such customers once he was having complete name and address, failing which he could not make addition. The same deserves complete deletion." On the other hand, the ld. DR strongly relied upon the findings recorded by the authorities below and justified the additions made and confirmed by the ld. CIT(A) and prayed to uphold the addition/disallowance. 3.5 We have carefully considered the finding recorded in the impugned orders, the rival contentions raised by both the parties as also the material placed on record and have also gone through the judicial pronouncements cited by the parties. The facts are not undisputed that the amount received from 7 persons of Rs.3,03,000/- was credited in the accounts as advance from customers towards the sale of vehicles. Admittedly vide letter dated 11.03.2015, the assessee had furnished the complete name and address of all the 7 persons. However, as stated, no sale of vehicle could be effected to these customers and ultimately the amount had to be refunded back. It is not uncommo....
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....: A bare reading of the order of lower authority shall reveal that in almost all the cases the disallowances have been made on ad hoc basis, simply on mere suspicion, surmises and conjectures. No specific instance of any nature whatsoever has been given by the AO in the impugned order to support his contention with the documentary evidence that the expenditures were incurred for non-business purposes, element of personal user was there. An allegation remains a mere allegation unless proved. Suspicion can-not take the place of reality, are the settled principleskindly refer Dhakeshwari cotton Mills 26 ITR 775 (SC). 1.2 Businessman is the best judge: It is settled that a businessman is the best judge to take care of its own interest & to take decisions and the AO is not supposed to intervene therein nor he can replace the assessee. Here, whatever decisions were taken by the assessee, has to be understood as taken out of commercial expediency. Kindly refer T.T. (P) Ltd. v/s CIT (1980) 121 ITR 551 (Kar), CIT v/s Udhoji Shrikrishnadas (1983) 139 ITR 827 (MP) JK Woolen Manufacturers 72 ITR 612 (SC). 1.3 No basis at all: It is further submitted that the ld. AO has not at....