Contact us   Feedback   Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (5) TMI 752 - ITAT KOLKATA

2016 (5) TMI 752 - ITAT KOLKATA - TMI - Rejection of books of accounts - addition to book profits - addition towards difference in balances of sundry creditors - Held that:- AO on one hand had rejected the books of account and on the other hand resorted to make various additions by relying on the same rejected books of account u/s. 145(3) of the Act. In these circumstances, the ld.AO ought to have resorted to estimate the business profit in a rational manner. To meet the ends of justice, we deem .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

0/CIT(A)-XXXIII/ITO, Ward 1, Ha/08-09 dated 12-11-2012 against the order of assessment framed for the assessment year 2006-07 u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the Act ). 2. At the outset, the assessee has raised the following additional ground:- That in the facts and circumstances of the case the Assessment Order made after the computation of income by making additions to the Book Profit and disallowances in the manner done by the Assessing Officer after reject .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

gation of facts. Hence, in the light of the judgment of the Hon ble Supreme Court in the case of NTPC Ltd Vs. CIT reported in 229 ITR 383(SC), we admit the additional ground as raised by the assessee before us. 4. The assessee has raised the following regular grounds of appeal :- I. The ld. CIT(A) XXXIII Kolkata is wholly wrong to act and decide the issue being difference in running accounts of regular supplier without confronting both the parties as to the correctness of the respective figures .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

T(A) is not justified to confirm the addition of ₹ 30,775/- what related to the outstanding balance of the earlier year but received this year and which the supplying party being M/s. VTR marketing did not mention according to the A.O; V. The ld. CIT(A) is wrong in not applying the ratio obtainable from the Orissa High Court decision relied upon i.e. Aurobindo Sanitary Stores 276 ITR 549; VI. The ld. CIT(A) is wrong to confirm the addition of ₹ 87,000/- in regard to the investment in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

stifying cash payments for the genuine purchases; 5. The ld.AO had made the additions in the sum of ₹ 2,25,633/- and ₹ 30,775/- towards unexplained expenditure in respect of payments made to 1) M/s. United Enterprise, and 2) M/s. VTR Marketing respectively 6. The brief facts of this issue are that the ld.AO obtained information u/s. 133(6) of the Act from the sundry creditors of the assessee namely 1) M/s. United Enterprise and 2) M/s. VTR Marketing and found that the assessee had ma .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ings. 7. The ld.AO had rejected the books of account of the assessee by furnishing elaborate reasons, which are reproduced herein below for the sake of convenience:- 3. Rejection of Accounts u/ s 145(3) : 3.1 In course of assessment proceedings the following discrepancies in accounts of the assessee were observed:- i) It was observed that there was difference in ledger accounts received under section 133(6) from M/s. V.T.R. Marketing Ltd and M/s. United enterprises, (creditors of assessee) about .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

to the said bank and interest claimed to be paid in books of accounts. v) The cash payments made to different per-ties for purchase were not recorded in books of accounts correctly. 8. This addition was also upheld by the ld. CIT(A) on 1st appeal. Aggrieved, the assessee is in appeal before us. 9. The ld.AR argued that no addition ought to have been made by the ld.AO towards difference in balances of sundry creditors after rejecting the books of account u/s. 145(3) of the Act. In response to th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the sundry creditors by placing reliance on the same rejected books of account. In this regard, we place reliance on the co-ordinate bench decision of this tribunal in the case of Prafulla Kumar Ghosh Vs. ITO, W-2, Malda in ITA No. 686/Kol/2012 for the A.Y 2006-07 dated 18.9.2015 , wherein it has been held as under:- 3.3 … … …We hold that once the business income is determined on estimated basis, any further addition towards business income would only get telescoped with th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

lf such as allowance of interest and remuneration to partners in 'the case of a partnership firm. Reliance is placed in this regard on the decision of Hon'ble Andhra Pradesh High Court in the case of Indwell Constructions vs CIT reported in 212 ITR 776 (AP), wherein Lordships had held as under :- "The pattern of assessment under the Income-tax Act, 1961, is given by section 29 which states that the income from profits and gains of business shall be computed in accordance with the pr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

is in substitution of the income that is to be computed under section 29. In other words all the deductions which are referred to under section 29 are deemed to have been taken into account while making such an estimate. This will also mean that the embargo placed in section 40 is also taken into account. " 11. We also find that the ld.AO has made separate addition u/s. 40A(3) of the Act amounting to ₹ 5,18,163/-. 12. Brief facts of this issue are that the ld.AO observed that the ass .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s upheld by the ld.CIT(A) on 1st appeal. Aggrieved, the assessee is in appeal before us. 14. The ld.AR argued that these parties are located in a village, where no banking facilities were available and distance between the said village and place in which the assessee is conducting his business is beyond 10 kms. Accordingly, he said it would be highly risky from the aspect of security to carry cash and deposit the same in the bank account of the assessee maintained with U.B.I. To mitigate this ri .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tail trading of foreign liquor and in the normal course of business he had to make the payments to the above mentioned four (4) parties for the purpose of business. We also find that the assessee has also produced the translated version of the certificate issued by the Itamgara- 2 Gram Panchayat, Mahisadal, Dist: Purba Medinapore vide dated 22-08-2012, confirming the distance between the assessee s shop and the UBI is 10 kms. We find lot of force in the arguments of the ld.AR that the ld.AO havi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

and Govind Chemicals. The Hon ble MP High Court in the case of Puroshottam Lai Tamrakar (supra) as well as Hon ble Allahabad High Court in the case of Banwarilal Bansidhar ( supra) have held that where the AO applied net profit in computing income, Section 40A(3) has no application and no disallowance can be made. The Allahabad High Court has also held that when the gross profit rate is applied that would take care of everything and there was no need for the AO to make scrutiny of the amount inc .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ITR 776) in this regard. The reason as given by the ld. ITAT in the case of M/s. Chien Hsing Tannery is reproduced below: … … In our opinion, while exercising one option i.e. estimating the ideal profit by the Assessing Officer and rejecting the books of accounts, the Assessing Officer, ipso factor renounces the other alternative of modifying the book results so accepted in the light of various provisions. With rejection of books of account and with the consequential determination .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of ₹ 23,12,497/- cannot be sustained. Accordingly, the same is deleted. 5. In the instant case also the books of accounts were rejected and the AO had estimated the income by applying the net profit rate of 8%. Though the appellant has challenged the net profit rate as applied by the AO, the matter regarding rejection of books of accounts and completion of assessment ex-parte u/s. 144 of the Act has not been challenged by the appellant. Under the circumstances, respectfully following the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the books of account and on the other hand resorted to make various additions by relying on the same rejected books of account u/s. 145(3) of the Act. In these circumstances, the ld.AO ought to have resorted to estimate the business profit in a rational manner. To meet the ends of justice, we deem it fit and appropriate , to direct the ld.AO to adopt 8% of the turnover of the assessee s business as taxable business profits . Accordingly, the additional ground as raised by the assessee before us .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

₹ 2,500/- towards other incidental expenditure for registration of the said property. These two payments were admittedly not recorded in the books of account of the assessee and the ld. AO brought the same to tax as unexplained investment. 19. Similarly, the ld.AO found that the assessee has made investment in reinvestment deposits and recurring deposits with the bank for a sum of ₹ 53,000/-, which was also brought to tax as unexplained investment by the ld.AO. On 1st appeal, the ass .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version