TaxTMI 
TaxTMI 
2025 (5) TMI 1066
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....acts in invoking/sustaining rejection of books of Accounts u/s 145(3) of the Act. 3. That both the lower authorities have erred in law as well in facts in making/sustaining addition of Rs. 1,29,91,430/- by estimating Income by applying unprecedented GP rate of 8%, divorced from past history, comparable case & nature of business and thereby made/sustain addition of Rs. 1,29,91,430/-. 4. That Ld. CIT(A) erred in law as well in facts in not holding that AO travelled beyond the scope of limited scrutiny in violation of CBDT guideline. 5. That the appellant reserves his right to add, amend, alter or withdraw any ground of appeal on or before hearing of this appeal. 3. Succinctly, the fact as culled out from the records is that the assessee is the proprietor of M/s Shivcharanlal Satyanarayan and is a General Commission Agent at Navin Mandi, Nadbai, Bharatpur. The assessee has filed his return of income showing Rs. 4,94,540/- as his taxable income on a total turnover of Rs. 19,56,03,558/-. The case was selected for scrutiny through CASS for the following reason: Assessee has made substantial purchases from such suppliers who are either non filers or ....
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....lo cart but the assessee did not provide any details like date of transportation, Name, Address, Vehicle No. the amount paid etc. It was also noted by the ld. AO from the Balance Sheet that the assessee does not possess any godown and he does not pay any godown rent as no such expenses was debited in the profit and loss account. 3.4 In the light of that observation ld. AO asked the assessee to show cause as to why the books of account should not be rejected u/s. 145(3) as the correctness and completeness of the account of the assessee are not satisfactory and it was proposed that the gross profit @ 8 % of sales computed at Rs. 1,56,46,709/-. As the assessee has already disclosed, a gross profit of Rs. 26,55,274/- thus the difference of Rs. 1,29,91,435/- was proposed to be added to back to the total income of the assessee. The assessee submitted a reply objecting to the rejection of the books of account and thereby estimating profit. 3.5 The assessee in response submitted that the books of accounts of the assessee are maintained in accordance with the law and are audited by an independent Chartered Accountant. The books results declared by the assessee were accepted in AY 2020....
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....rked out and deliberated a detailed exercise and pointed out all such reason and defects due to which the assessing officer is unable to rely on the books of accounts maintained and accordingly to deduce actual net profit earned by the assessee. Under the circumstances, the Ld AO has correctly rejected the books of account and estimated the gross profit of the appellant @ 8% of the turnover. 7.5 Another plea of the appellant is that the assessment is void ab initio as the AO has invoked provisions of sub section (3) of section 145 of the Act but failed to pass the order u/s 144 of the Act. However, in the submission filed the appellant has not elaborated on this issue. I find that the appellant in the grounds of appeal contends that the impugned order passed under section 143(3) r.w.s. 144B of the Act is bad in law as the said order was required to be passed u/s 143(3) r.w.s. 144B r.w.s 144 of the Act. 7.6 I have considered the assessment order and perused the material on record and also the legal position on the issues at hand. I am of the view that mere omission of section 144 of the Act in the order passed does not invalidate the assessment order. I also note t....
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....eason of omission of "section 144" in the assessment order. If this mistake is not allowed to be cured, the very purpose and object of enacting the provisions of section 292B is defeated. Accordingly, I do not agree with the plea of the appellant that the assessment is void ab initio and should be deleted and accordingly these grounds of appeal are dismissed. 8.0 Ground no 10 of the appellant is that the Ld. A.O. has erred in law and on facts in charging interest u/s 2344/2348/234C of the Act. This ground is consequential in nature. The AO is directed to verify and charge the correct amount of interest u/s 234A/234B/234C as per law. 9.0 In result, the appeal is dismissed." 5. As the assessee did not find any favour, from the appeal so filed before the ld. CIT(A)/NFAC, the assessee has preferred the present appeal before this Tribunal on the ground as reproduced hereinabove. The assessee's AR has submitted written arguments for the various grounds raised, as follows: "The Appellant is an individual and is engaged in business of general commission agent under the trade name of M/s Shiv Charan Lal Satya Narayan at Navin Mandi, Nadbai, District Bharatp....
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....55,274.82 & 4,94,508.26 respectively and the books of accounts were audited by the chartered accountant as per provision of section 44AB of the Income Tax Act. With this background, the facts & submission, to this ground of appeal is encapsulated as under: - 1. Brief Facts: - 1.1 The appellant claimed Purchases of Rs. 19,54,55,321.26 in the audited financial statements (Kindly refer Pg 56 of PB). The Trading Account is reproduced as under: - (F.Y. 2020-21) SHIV CHARAN LAL SATYA NARAYAN NAVIN MANDI YARD, NADBAI, BHARATPUR, BHARATPUR Trading Account for the year Ending 31st March 2021 Particulars Sch Amount Particulars Sch Amount To Opening Stock 11 37,32,480.00 By Sales of goods 14 19.55,83,865.46 To Purchases 12 19,54,55,321.26 By Closing Stock 16 63,05,968.00 To Direct Expenses 13 66,450.79 By Other operating revenue 15 19,693.41 To Gross Profit 26,55,274.82 Total 20,19,09,526.87 Total 20,19,09,526.87 The accompanying notes are an integral part of the financial statements. As per our re....
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....on which GST is charged by the supplier. 1.5 That in fact there was no difference in Purchase reflected on system/ IT portal vis-a- vis declared by the appellant in financial statement, in as much, the purchase depicted on system includes, besides Material cost, charges like Mandi Tax, KUMS, Freight, Tulai & etc., where as in books the assessee has posted material cost to purchase GST @5% and charges have been debited to the respective head. The appellant filed copy of ledgers of all constituents of purchases to buttress the contention that in fact purchases claimed in books of accounts were over & above what is shown on IT portal as there were exempt & nontaxable purchases not depicted on IT portal. 1.6 Thus, the crux of the contention of the assessee appellant was that, the booking of purchase invoice was done under various constituents i.e. Purchase - Instate GST, Purchase (GST Exempted), Purchase (URD), Mandi Tax, KUMS, freight & Muddat & etc. as per description in bill and whereas IT portal contained the consolidated figure of the bill inclusive of material cost and charges on which GST have been charged. 2. As per Assessing Officer ....
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....tter. [AO Order Pg 6 Para 1] On receipt of reply of the assessee in response to the SCN, the same was verified from the information available on systems and it is seen that the assessee had failed to explain the difference of Rs. 33,17,981/- as pointed out in the SCN dated 08.12.2022. It was specifically asked to explain the difference between the GST purchases shown by the assessee and the corresponding purchases available on systems. The assessee had merely filed ledgers of some of the parties as mentioned above, but this doesn't explain the big difference of Rs. 33,17,981/-. As far as transportation expenses are concerned the assessee reiterated that goods are transported by tractors trolleys, camel cart and buffalo carts and the purchasers pay for freight expenses. However, the assessee had not shown any expenses on transportation on his own purchases. Even there is no clear reply on the issue of godown and shop rent. The assessee sought personal hearing through VC for making oral submissions. As the assessee failed to explain the specific issues raised in the SCN through written submission as discussed above, despite having sufficient time to explain....
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....conjectures & surmises the rejection of audited financials have been done on very casual & light hearted basis. The documents & evidences put forth by the appellant were self-sufficient to echo that the entire purchase reflected on system were duly incorporated in books of accounts and there was no occasion for rejection of books of accounts, for the reasons, encapsulated point wise as under: - 4.1 Your good self will appreciate on bare glance over the AO order as well as the order of worthy Appellate commissioner that the sole or major ground which triggered the rejection of books of accounts, was the alleged failure of the appellant to explain the difference of Rs. 33,17,981/- i.e. purchases recorded in books of accounts at Rs. 18,17,30,0,89/- and purchases depicted on system at Rs. 18,50,48,070/-. 4.2 That both the lower authorities have failed to appreciate that the alleged purchased of Rs. 18,50,48,070/- as depicted on the system was completely accounted for in the books of accounts, but under different subheads of purchases. 4.3 That the total Purchases of Rs. 19,54,55,321.26 was claimed in the Audited Trading account & same was bifurcated among var....
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....only material cost ledger as the appellant charged freight, Mandi Tax & etc. to different sub heads of purchasing. The relevant extract from tabulated sheet (Kindly refer Pg No. 59- 85 of PB) will clear the entire air over the matter and prove to your kind satisfaction that entire purchase as evident on system was duly incorporated in books of accounts and there was no rationale of rejection of books of account by invoking section 145(3) of the Act: - Purchases Tulai 5% Mandi Tax 1% Wages Freight KUMS 5% Muddat 5% Tulai Mustaree Total Purchases 181730089.09 2882911.17 1275882.17 12671.00 2480.98 923727.86 162076.44 1089.68 186990936.20 Your honor will appreciate that infect the total of purchase stood at Rs. 186990936.20 as against Rs. 181730089.09 depicted on IT portal and therefore there was no occasion for the AO to make observation of less booking of purchase by the appellant. 4.7 That to leave no stone unturned in clearing the air over the matter, the copy of sample invoice from M/s. Brijmohan Dinesh Chand is reproduced (Kindly Refer Pg No. 152-153 of PB): - The same is Bill No. 42 dated 23.06.202....
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.... 4.9.1 Rajat Agarwal Prop. Sita Ram Gyan Prasad (- Purchase on System stood at Rs. 610000/- vis-à-vis purchase in Books of Rs. 6,10,000/- [Kindly Refer Pg No. 137M (Ledger), 143 (AIS), 195 (2A) of PB] That regarding the difference, it is submitted that extra Invoice was loaded by the appellant on GST portal which resulted in higher purchase on system of the appellant. However, when this fact came to the knowledge of the appellant, it was requested to the vendor to rectify the same and in turn same was rectified but since amendment was done in succeeding year, the corresponding change not undertaken in AIS/TIS. The extract from GST portal to that effect is reproduced as under, to buttress the contention that the purchase from the dealer stood at Rs. 305000/- and not Rs. 610000/-. 1. Brij Mohan Dinesh Chand (Purchase on System stood at Rs. 43, 32,675 /- vis-à-vis purchase in Books of Rs. 42, 18,983 /- [Kindly Refer Pg No. 132-133 Excel, 150-153 (133_6) 141 AIS /178-179 2A of PB] That the Id AO observed difference of Rs. 113692/- in purchase as per system and as per books. The difference was due to posting of mandi tax, freight & etc. charged ....
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....2.00 153212.43 68054.43 614.50 54711.17 391.77 128.17 4.80 105.70 10991016.63 Your good self will appreciate that even in this vendor, there were charges in bill & there were some bills posted to account of different vendors. However, all the invoices were accounted for. Thus, in concluding part of our submission to Ground No. 2, it is reiterated that entire purchase depicted on system (AIS/TIS) was duly incorporated in the books of accounts and there was no occasion for rejection of books of accounts. The ld AO without understanding the manner of accounting reached to conclusion that books does not depict true & fair view of the probability which is non-existent & unfounded for the reasons submitted in forgoing part of our submission. GOA 3: -That both the lower authorities have erred in law as well in facts in making/sustaining addition of Rs. 1,29,91,430/- by estimating Income by applying unprecedented GP rate of 8%, divorced from past history, comparable case & nature of business and thereby made/sustain addition of Rs. 1,29,91,430/- Submission: - It is submitted that invoking section 145 does not confer bl....
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.... make an arbitrary order. The power to levy assessment on the basis of best judgment is not an arbitrary power, it is an assessment on the basis of best judgment. In other words, that assessment must be based on some relevant material. It is not a power that can be exercised under the sweet will and pleasure of the concerned authorities. The scope of that power has been explained over and over again by this court." 3.1 Past History of the appellant The ld A.O. arbitrarily enhanced declared GP Rate to 8 % without appreciating past history of the appellant & putting comparable cases on record. It has been held in various judgments that assessee's past History is best guide for making estimation. Kindly refer CIT v/s Popular Electric Co.(P) Ltd. 203 ITR 630(Ker.) and M.A. Rauf v/s CIT 33 ITR 843(Pat.). The past history of the appellant is tabulated as under, which will depict that the GP Rate of 1.36 % declared by the appellant was reasonable & robust and backed by the maintenance of proper books of accounts: - Asst. yr Sales Gross Profit G.P.Rate (%) Remarks 2019-20 12,90,96,193.08 21,67,182.28 1.68% 2020-21 19,70,....
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.... the AO finally reached to the conclusion that the appellant has booked lesser purchases vis-à-vis reflected on GST portal and moreover no bogus claim of expense /purchase was found. 4. That the action of AO in making whopping addition of Rs. 1,29,91,435/- was unwarranted, even when the quantum of alleged difference observed was merely Rs. 33,17,981/-. It was not permissible for the AO to exceed the jurisdiction conferred by the notice and to invoke rejection of books of accounts and estimate the Income by applying unprecedented and massive GP rate of 8 %. 5. It is settled law that, unless the limited scrutiny assessment is converted into full scrutiny assessment, after taking due approval as mandated under the Act, such assessment order has to be restricted in scope to the issues on which the notice was issued/assessment was initiated. Thus, the finalization of assessment by the AO on the issues which were not subject matter for scrutiny under CASS has rendered this proceeding to be invalid, baseless and illegal. Prayer: - In light of the above factual matrix of the case along with submission made and binding judicial precedents from high....
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....the assessee was even given an opportunity by the ld. AO to have the VC on the issue and the assessee failed to reconcile the figure of purchase and thereby the books were rightly rejected by the ld. AO. Even the assessee has not furnished anything new before the ld. CIT(A) and therefore, ld. CIT(A) has rightly confirmed the view of the ld. AO. 9. In the rejoinder the ld. AR of the assessee submitted that as regards the VC the user id and password was not given correct and therefore, the assessee has reasons and order of the ld. AO is against the principles of natural justice. The assessee has reconciled the alleged difference in the five dealer and that aspect of the matter has not been dealt with while adjudicating the appeal of the assessee by the ld. CIT(A) and therefore, ld. CIT(A) has ignored the submission so placed on record and therefore, that order is also against the principles of natural justice and required to be quashed. 10. We have heard the rival contentions and perused the material placed on record. The bench noted that the assessee has taken effectively four grounds and the fifth ground being general in nature and does not require any finding. Thus, we feel ....
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....ear and specific details were filed by the assessee and had replied that the transportation was mostly done by Tractor trolley, camel cart and buffalo cart but the assessee did not provide any details like date of transportation, Name, Address, Vehicle No. the amount paid etc. It was also noted by the ld. AO from the Balance Sheet that the assessee does not possess any godown, and he does not pay any godown rent as no such expenses was debited in the profit and loss account. With that observation ld. AO asked the assessee to show cause as to why the books of account should not be rejected u/s. 145(3) as the correctness and completeness of the account of the assessee are not satisfactory and it was proposed that the gross profit @ 8 % of sales computed at Rs. 1,56,46,709/-. The assessee submitted a reply objecting to the rejection of the books of account and thereby estimating profit. The assessee in response submitted that the books of accounts of the assessee are maintained in accordance with the law and are audited by an independent Chartered Accountant. The books results declared by the assessee were accepted in AY 2020-21 wherein the GP declared by the assessee was accepted and....
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.... FROM URD DEALER 71,21,585.36 PURCHASE INSTATE GST @5% 18,17,30,089.09 PURCHASE INSTATE GST EXEMTED 12,74,774.92 SUTALI EXP. 5 % 27,952.00 TULAI ON MUSTERRE 1,089.68 Grand Total 19,54,55,321.26 As is evident from the above breakup that the revenue has compared the figure of in state purchase with that of the total purchase reported in the portal at Rs. 18,50,48,070/-, if considered the breakup of whole purchase then the reasons advanced has not ground to stand that there is purchase shown less by the assessee. As regards the above expenses were part of the purchase invoice were supported by the various invoices placed on record by the assessee before the lower authority and there is no finding on it by both the authority. So we hold that in fact there is no difference as observed by the ld. AO and in fact the turnover in the books is more than what is reported in the portal so the first reasons is against the facts on record. Now coming to the reasons for selection of the case of having purchase from non-fillers on this aspect of the matter the ld. AO has not made any adverse finding and....
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....to why the provision of section 145(3) cannot be invoked in the case of the assessee. The assessee submitted before the lower authority that AO cannot reject the books of accounts and apply the provisions of section 145(3) of the Act unless no material record has been brought on record to hold that book results are not reliable, when that are maintained and audited by independent Chartered Accountant. In the audit report no adverse observation were observed by the lower authority. Even the ld. CIT(A) has simply supported finding of the ld. AO without dealing with the contention of the assessee. 16. The bench noted that ld. CIT(A) has justified the action of the ld. AO without dealing with the submission of the assessee. The ld. CIT(A) chose to remain silent so far as to the contention for rejection of the books of account based on the submission of the assessee and has merely relied upon the provision of section 292B of the Act and justified the action of the ld. AO passing the order. Thus, considering the provision of section 145(3) and the fact that as such while examining the books no defects as such was observed in the books of accounts which suggest the rejection of book re....
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....145(3) of the Act the rejection of the book results were merely based on the surmises and conjectures. Based on the reasons of the scrutiny there is no case of the revenue that the assessee has shown the bogus purchase to claim the lower profit in fact the ld. AO says that the assessee has not accounted various expenses and thus, the scope of scrutiny cannot be expanded without following the sanctioned route for that even on that aspect of the matter revenue has not demonstrated that there is no force in the arguments of the assessee. and therefore, we see no reason to support the rejection of the book results as the assessee figure is more than the what is reported in the portal for purchases. We get support of our view from the decision of the co-ordinate bench in the case of M/s Bajrang Trading Company, Gangapur City Vs. ITO, Sawai Madhopur (Tax World, Vol XLV Part-1 Jan 2011) wherein it was held by ITAT, Jaipur Branch that the AO cannot reject the books of accounts and apply provisions of Section 145(3) unless any no material record has been brought on record to hold that book results are not reliable. Also, it was held that the AO cannot make an addition on ill-founded assumpt....
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....one china crockery and in the case of stoneware crockery it worked out to 24% to 34.8% We agree with the arguments of the ld. AR that the main objection raised by the AO was that input/output ratio in various months has the inconsistency which has been duly explained by the assessee vide letter dated 26.03.2004 and the second objection by the AO was that the sister concern M/s. Bharat Potteries Ltd. has declared more yield and more gross profit, has also been explained by the assessee vide the same letter dated 26.03.2004. Therefore, the inconsistency in the input/out ratio in various months the reasons for which has been explained by the assessee, cannot be the basis for rejection of books of account. The yield and gross profit rate declared by the assessee can also not be the basis for rejection of books of account since M/s. Bharat Potteries Ltd. is manufacturing maximum of stoneware crockery and for many other reasons which were explained by the assessee vide its letter dated 26.03.04 which was ignored by the AO and the AO has not pointed out any specific defects in the purchases, sales, opening stock and closing stock of the assessee and the AO has not brought on reco....
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....08007 GSTIN: OSAALFB762801ZN TIN- 08940755326 PAN-AALFB7628Q R.T.A.L.No. 103 मै. बृजमोहन दिनेश चनà¥à¤¦ दà¥à¤•à¤¾à¤¨ नं. 32, नई मणà¥à¤¡à¥€ यारà¥à¤¡, नदबई (à¤à¤°à¤¤à¤ªà¥à¤°) राज. Original for Recipient Duplicate for Supplier TAX INVOICE डांसपोरà¥à¤Ÿ मो. नं. गाड़ी नं. बिल नं. : BD/19-20/ बिल तारीख 23 -2:294.42 माल à¤à¥‡à¤œà¤¨à¥‡ की तारीख सà¥à¤Ÿà¥‡à¤Ÿ. राजसà¥à¤¥à¤¾à¤¨ सà¥à¤Ÿà¥‡à¤Ÿ कोड़ :08 सà¥à¤¥à¤¾à¤¨ खरीददार फरà¥à¤® का विवरण फरà¥à¤® नाम: - पृसà....