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M/s. Tejaswini Engineering Pvt. Ltd. Versus Income Tax Office

2015 (4) TMI 762 - ITAT HYDERABAD

Rejection of books of account - Discrepancies in purchases and sales - Estimation of Income - Dis-allowance of depreciation - Assessee argued that its books of accounts had been properly audited' and nofault has been found with the audit - Held that:- the way in which the books of accounts the appellant had been written, it is impossible to either determine purchases or the sales or the expenses. The books are not amenable any sort of verification and the entries mentioned are wrong - reject .....

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t the Assessing Officer to re-examine the matter, after giving reasonable opportunity to the assessee to produce the books of account and other information, and re-determine the income accordingly.

The directions given in the order of this Tribunal in the case of M/s Sujana Universal Industries Ltd. and M/s Sujana Metal Products Ltd. [2015 (4) TMI 580 - ITAT HYDERABAD] dated 13.8.2013, extracted above, apply mutatis mutandis to this case as well. Assessee is directed to cooperate with .....

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the light of the said decision of the coordinate bench. The ground raised by assessee as well as by the revenue are allowed for statistical purposes.

We have heard the submissions of the parties and perused the material on record as well as orders of the revenue authorities. Since the CIT(A) has given a finding that the assets were non-existent, we set aside the issue to the file of the AO to verify the existence of the computers and allow the claim of depreciation. Accordingly, this .....

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n of income for AY 2009-10 on 31/03/2010, declaring total income at ₹ 20,71,880. AO completed the assessment on 30/12/2011 u/s 143(3) r.w.s. 147 of the Act, determining income of assessee at ₹ 3,54,1,850. ITA No. 407/Hyd/2014 by assessee 3. In this appeal, assessee has raised 8 grounds. Grounds No. 1 & 8 are general in nature, hence, no adjudication is required for the same. Ground Nos. 2 to 5 are pertaining to one issue, which are as follows: 2. The ld. CIT(A) erred in upholding .....

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g the course of assessment proceedings, AO investigated into the purchases and sales and found certain discrepancies. Keeping in mind these discrepancies, the AO rejected the books of account and estimated the income of the appellant at 1 % of the turnover by recording the following reasons were given for this action:- 11 On verification of the quantitative details it is found that the assessee made / purchases and sales from April to Octobers with no major gain or loss. However from November 20 .....

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y one month i.e. November. Further the assessee company at Chennai for the month of February purchased 792.44 Mt for ₹ 2,28,22,301/- which works out to ₹ 28,800/- per ton. Similarly, during the month of March assessee purchased 100.220 Mt for ₹ 32,07,892/- which works out to ₹ 32,009/- per ton. Hence the average cost of material purchased during the months of February and March works out to ₹ 29,109/- per ton. However, assessee admitted closing stock at the rate of .....

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discrepancies and as the assessee did not furnish the full details called for, the book of accounts cannot be relied upon and hence /' rejected. The gross income is estimated as @1% of the sales. Aggrieved by the order of Assessing Officer, assessee carried the matter in appeal before the CIT(A). 5. Before the CIT(A), the assessee stated that the rejection of books was not in order. Assessee .argued that its books of accounts had been properly audited' and nofault has been found with the .....

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lding that in such cases the net profit should be much lower. 6. After considering the submissions of the assessee, CIT(A) discussed the issue elaborately vide paras 4.2 to 4.8 of his order and concluded as follows: 4.9 It is clear from above that the way in which the books of accounts the appellant had been written, it is impossible to either determine purchases or the sales or the expenses. The books are not amenable any sort of verification and the entries mentioned are wrong, I accordingly h .....

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information from which it can be inferred as to what should be the actual net profits of someone who is in similar line of business. Therefore, the estimation of income has not been done on the basis of concrete information. On the other hand, the appellant has stated that its own average net profit of the last three years is less than 1 % and this is in line with other similar businesses in the market. The appellant s net profits are available on record. However with regard to other businesses .....

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Aggrieved by the order of CIT(A) assessee is in appeal before us while the revenue also preferred appeal in ITA No. 546/Hyd/2014 against relief granted by CIT(A) to assessee raising the following effective grounds: 2. CIT(A) erred on facts and in law in disturbing the estimation of profit done by the AO even when the estimation is only @ 1% of the turnover which is not very high. 3. CIT(A) erred on facts and in law in stating that the onus lies on the AO to estimate profit by giving cogent reas .....

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de order dated 16/07/2014 while dealing similar issue, the coordinate bench held as follows: 7. Elaborate grounds have been raised by the assessee, contending that the rate of 1% adopted by the CIT(A) for estimation of income of the assessee is on the higher side, since adoption of a rate of 0.5% would be reasonable; and nonallowance of depreciation from such estimated income is against the instructions of the CBDT and the decisions of the Tribunal in similar matters. However, at the time of hea .....

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), where considering similar additions, and similar plea of the assessee, matter was restored to the file of the Assessing Officer for fresh examination, setting aside the orders of the CIT(A) impugned therein. 8. Learned Departmental Representative, on the contrary, opposing the relief granted by the CIT(A) on the ground that the rate of 1.5% adopted by the Assessing Officer was in line with the trend in the market in assessee s line of business, submitted that the order of the Assessing Office .....

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the assessee, in the cases of assessee s own group, vide its order dated 13.8.2013, restored the matter back to the file of the Assessing Officer, in the following manner- 10. Considering the submissions of the parties and keeping in view the interest of justice, we allow one more opportunity to the assessee for production of its books of accounts and other documents before the Assessing Officer to substantiate its claim and accordingly, set aside the Order of the CIT(A) and remit the matter to .....

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n of the books of accounts and other documents finds that there are discrepancies which the assessee is not able to explain, the Assessing Officer would be at liberty to take an independent decision in the matter in accordance with law. The Assessing Officer shall afford a reasonable opportunity of being heard to the assessee. 10. Considering totality of facts and circumstances of the present case and the specific plea of the assessee, in the interests of justice in this case also, we are inclin .....

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to cooperate with the Assessing Officer and comply with the notices, and the Assessing Officer is directed to complete the assessment afresh in accordance with law after giving reasonable opportunity of hearing to the assessee. As the issue under consideration is materially identical to the one decided by the coordinate bench in case of M/s Sujana Towers Ltd. (supra), we set aside the order of the CIT(A) and restore the matter to the file of AO with a direction to decide the same in the light o .....

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