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2016 (10) TMI 922 - ITAT AHMEDABAD

2016 (10) TMI 922 - ITAT AHMEDABAD - TMI - Rejection of the books - claim of expenditure on the basis of self-made vouchers - receipt of on-money - Held that:- When the AO has verified the primary details showing the incurrence of expenditure, then the assessee failed to submit those details and failed to reconcile the expenditure. The moment the assessee has accepted receipt of on-money of more than ₹ 2.13 crors then, factually it would have been inferred by the AO that expenditure might .....

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n ground that labour payments made by the assessee on self-made vouchers. This is an inference of fact in a particular situation. It is not a ratio of law. The ld.CIT(A) miserably failed to appreciate the facts in right perspective. Therefore, on detailed analysis of the facts considered by the AO, and the manner in which ld.CIT(A) has appreciated them in the finding recorded in para.43, we are of the view that the ld.CIT(A) has failed to appreciate the facts in right perspective and erred in up .....

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HATURVEDI, ACCOUNTANT MEMBER For The Revenue : Shri James Kurian, Sr.DR For The Assessee : None ORDER PER RAJPAL YADAV, ACCOUNTANT MEMBER Revenue is in appeal before the Tribunal against order of the ld.CIT(A)-V, Surat dated 10.5.2011 passed for the Asstt.Year 2008-09. 2. This appeal was listed on the board for the first time on 13.2.2015. A notice of hearing was issued to both the parties fixing the date of hearing as 27.3.2015. Thereafter, the appeal was listed on ten different occasions. Out .....

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was prosecuting the proceedings before the ld.Revenue authorities below, applied for an adjournment. The application of the tax consultant read as under: Date : 04.07.2016 To, The Members of The Income-tax Appellate Tribunal Bench-B Ahmedabad. Reg: M/S.Krishan Corporation C/o.M/s.Ashwin Pareikh & Co. Chartered Accountant 401-404, Bonista Rajhans B/gh. Ram Chow Temple Ghod-dod Road, Surat. Appeal: ITA-2200/Ahd/2011 Sub: Hearing of appeal as on 04.07.2016 Before B Bench-Request for adjournment .....

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the appeal ex parte qua the assessee with the assistance of the ld.DR. 4. The Revenue has taken the following grounds of appeal: 1. On the facts and in the circumstances of the case and in law, the ld.CIT(A) has erred in accepting the book result of the assessee. 2. On the facts and in the circumstances of the case, and in law, the ld.CIT(A) has erred in deleting the addition of ₹ 69,90,011/- on account of suppression of income on shop sales. 3. On the facts and in the circumstances of the .....

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t not to have been rejected by the ld.AO. If the books are to be rejected, then what addition could be made in the total income of the assessee. This aspect has been challenged in ground no.2. 6. We take both these grounds together. 7. Brief facts of the case are that the assessee is firm engaged in the business of development residential township. It has filed its return of income on 27.9.2008 declaring total income at ₹ 2,52,67,993/-. The case of the assessee was selected for scrutiny as .....

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ee has shown gross-turnover of ₹ 12,67,59,025/- and declared a GP of ₹ 1,07,56,252/-, in terms of percentage, it was declared at the rate of 8.49% of the gross turnover. The GP in the immediately preceding year declared by the assessee at 14% of the gross-turnover. Thus, there was a decline in the GP at the rate of 5.51%. The ld.AO has confronted the assessee to show reasons for decline in such GP. In response to the query of the AO, a detailed reply was submitted by the assessee. Th .....

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G P working should be Particulars A.Y. 2007/08 A.Y. 2008/09 Sales 5,12,88,475 12,67,59,025 Gross Profit excluding Interest and Income disclosed 91,49,745 1,88,82,876 17.84% 14.90% [d] The assessee accepts that the correct difference in Gross Profit is 2.94% as compared to A.Y, 2007/08. [e] The assessee claims that there is a difference in the sale of shops (Rs. 700 per Sq. Fts) and flats (Rs. 525/- per Sq. Fts) . It claims that there was a sale of shop in A Y 2007-08 which was NIL in AY 2008-09 .....

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f against the income disclosed as the assessee is entitled to telescope the fall in Gross Profit against the income disclosed. [h] The decision of the Whiteline Chemicals is not applicable since in that case the assessee had profit during the pre Survey period and had shown a huge loss wiping off the profit in a pre-survey period . In the case of assessee the profit in post survey period is higher than profit in pre-survey period. The assesses has filed the G P working for pre - and post survey .....

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6,63, 71, 230 Expenses 39,80,385 1,55,33,423 By Gross Profit 46,35,052 1,42,47,824 Net Profit 6,54,667 2,01,58,225 Other income 0 12324 Total 46,35,052 3,56,91,648 46,35,052 3,56,91,648 4.4 As per the above data filed by the assessee, the G P is claimed to be at 14.74% in the pre survey period and 14.95% in the post survey period excluding the bank interest, as explained above, it may be noted here that the assessee has accepted that the G P for AY 2007-08 excluding bank interest was 17.84% and .....

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uantification of the amount at ₹ 1,37,99,000/- is concerned, the ld.CIT(A) has observed that it is an incorrect quantification. According to the ld.CIT(A), the alleged difference between the GP declared by the assessee as well as calculated by the AO could be ₹ 69,90,011/-. The finding of the CIT(A) about pointing out incorrect computation of the amount has been recorded in para 6.3 of the order. It is pertinent to take note of this finding: 6.3. I have carefully gone through the sub .....

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e-return filed on 27.09.2008 - ₹ 2, 52, 67, 263 ₹ 1,37, 99, 000 The Assessing Officer has, worked out Gross Profit including disclosure by applying 14% Gross Profit rate at ₹ 3,90,66,263/-, From this figure he reduced the Net Profit of ₹ 2,52,67,263/- which is the Returned Income and not the Gross Profit shown in the Regular books of account. The Gross Profit shown in the books of account including disclosure is ₹ 3,20,76,252/-(Rs.1,07,56,252/-+ ₹ 2,13,20,000 .....

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is pertinent to take note of this section. It reads as under: 145. (1) Income chargeable under the head "Profits and gains of business or profession" or "Income from other sources" shall, subject to the provisions of sub-section (2), be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. (2) The Central Government may notify in the Official Gazette from time to time [accounting standards] to be followed by any class .....

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anism how to compute the income of the Assessee. According to subsection 1, the income chargeable under the head profit and gains of business or profession or income from other source shall be computed in accordance with the method of accountancy employed by an Assessee regularly, subject to sub-section 2 of Section 145 of the Act. Sub-section 2 provides that the Central Government may notify in the official gazette from time to time, the Accounting Standard required to be followed by any class .....

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ct the book result and the assess income according to his estimation or according to his best judgment. The Assessing Officer in that case is required to point out the defects in the accounts of Assessee and required to seek explanation of the Assessee qua those defects. If the assessee failed to explain the defects than on the basis of the book result, income cannot be determined and Assessing Officer would compute the income according to his estimation keeping in view the guiding factor for es .....

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sued under sub-section (2A) of that section], or (c) having made a return, fails to comply with all the terms of a notice issued under sub-section (2) of section 143, the [Assessing] Officer, after taking into account all relevant material which the [Assessing] Officer has gathered, [shall, after giving the assessee an opportunity of being heard, make the assessment] of the total income or loss to the best of his judgment and determine the sum payable by the assessee [* * *] on the basis of such .....

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f this section as they stood immediately before their amendment by the Direct Tax Laws (Amendment) Act, 1987 (4 of 1988), shall apply to and in relation to any assessment for the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year and references in this section to the other provisions of this Act shall be construed as references to those provisions as for the time being in force and applicable to the relevant assessment year.] 13. It is pertinent to note that .....

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for this purpose he must be able to take into consideration, local knowledge, reputation of the assessee about his business, the previous history of the assessee or the similarly situated assessee. It is also pertinent to mention that judgment is a faculty to decide matter with wisdom, truly and legally. Judgment does not depend upon the arbitrary, caprice of an adjudicator, but on settled and invariably principles of justice. Thus, in a best judgment, even if, there is an element of guess work .....

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tter is one of finding of fact on the basis of statements of a witness and their judicial evaluation. This maxim relates to credibility of witness. Thus, the accepted position in law is that search and survey are the last resort with the Revenue for detecting concealment of the income of the assessee. If during the survey, an assessee is found in possession of incriminating material, which was found as basis for concealment of income, obviously, for other period also, conduct of the assessee wou .....

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assessee has been working out its GP after including interest expenditure in construction expenses. The GP which was considered for comparison of the Asstt.Year 2007-08 was also worked out by including this expenditure. Therefore, this cannot be a reason to explain the fall in GP. The ld.CIT(A) while dealing with this aspect, has observed that GP is to be worked out excluding the amount of interest for the purpose of comparison of GP of two years. CIT(A) has failed to appreciate that the compar .....

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rate of the shop is ₹ 700 per sq.feet whereas that of flat is ₹ 525/- per sq.feet. The ld.AO has held that this is factually incorrect. He made reference to the statement of the partner, who has disclosed additional income. He admitted that shops were sold in this year. The AO further made reference to the amounts mentioned in the statement of the assessee exhibiting the shops sold by it. He made reference to page nos.78 to 83 of the diary impounded during the course of survey. Next .....

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with the finding recorded by the AO, then it would find that the AO has not rejected the books for this reason. The case of the assessee is that the assessee has accepted receipt of money on sale of flats. The sale consideration was unrecorded in the books. Similarly, it has incurred expenditure without recording in the regular books. When the AO has verified the primary details showing the incurrence of expenditure, then the assessee failed to submit those details and failed to reconcile the e .....

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