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M/s Mittal Rollar And Floor Mills And RIICO Industrial Area Versus Income Tax Officer, Ward-3, Bharatpur

2018 (1) TMI 593 - ITAT JAIPUR

Estimating the income after rejecting the books of account - enhancement of the G.P. - Held that:- CIT(A) accepted the turnover declared by the assessee by holding that the Assessing Officer has failed to bring on record any adverse material to justify the quantification of undisclosed turnover. However, he reduced the G.P. estimation from 8.5% to 8% on the declared turnover. The facts on record shows that this estimate of G.P. @ 8% was not based on any specific defects noted by the Assessing Of .....

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authorities below. In absence of any contrary material on record to the declared gross profit on the declared turnover, the enhancement of the G.P. is unjustified. Therefore, the addition sustained by the ld. CIT(A) is deleted. - Addition U/s 68 - Held that:- After considering the relevant documents submitted by the assessee, the Bench is of the view that the assessee was able to discharge the onus as casted upon by Section 68 of the Act for establishing the identity, creditworthiness and ge .....

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es, the addition to the extent of ₹ 10.00 lacs is deleted. No pleadings were made for the balance addition U/s 68 of the Act of ₹ 27,500/-, therefore, addition to that extent is confirmed. - ITA No. 784/JP/2016 - Dated:- 9-1-2018 - SHRI BHAGCHAND, ACCOUNTANT MEMBER For The Assessee Shri S.L. Jain (Adv) And Shri Ashok Kumar Gupta (Adv) For The Revenue : Shri Rajendra Jha (Addl.CIT) ORDER PER: BHAGCHAND, A.M. This is an appeal filed by the assessee emanates from the order of the ld. CI .....

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icer was of ₹ 10,27,500/- by invoking the provisions of Section 68 of the Act. 3. The ld. CIT(A) sustained the rejection of books of account. However, he accepted the turnover declared by the assessee by holding that the Assessing Officer has failed to bring on record any adverse material to justify the quantification of undisclosed turnover and he also reduced the G.P. rate from 8.5% and adopted by Assessing Officer to 8% on the declared turnover and sustained the addition of ₹ 7,34 .....

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st be fair, reasonable and intelligent well- grounded. 2. That on the facts and in the circumstances of the case Ld. CIT(A) Alwar has grossly erred in law and facts in confirming trading additions of ₹ 7,34,983/- by applying GP 8% on declared turnover without any material facts on record and therefore additions is without justification. 3. That on the facts and in the circumstances of the case Ld. CIT(A) Alwar has grossly erred in law and facts in rejecting audited books of accounts mainta .....

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mp; valid show cause notice before making best judgment assessment order additions / disallowance. 5. That on the facts and in the circumstances of the case Ld. CIT(A) Alwar has grossly erred in law and facts in confirming addition of unsecured loan ₹ 10,27,500/- u/s 68 of the IT Act and further erred in not accepting affidavit of Suresh Chand dully Attested by NOTARY PUBLIC. 6. That on the facts and in the circumstances of the case Ld. CIT(A) Alwar has grossly erred in law and facts in ch .....

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sing Officer and the same were test examined. Since the books of account were duly audited by a qualified C.A. and without specifying any specific defects, the rejection of books of account was without any reasons. Further the ld. AR has submitted that the ld. CIT(A) himself has accepted the declared turnover of the assessee in absence of any material contrary to the declared turnover, therefore, the estimation @ 8% is also arbitrary and without any basis. The ld AR further submitted that the as .....

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accepted. He pleaded that in absence of any specific defects in the various expenses claimed by the assessee, the revenue authorities were not justified in estimating the G.P. without any basis. He also relied on the decision of Hon ble ITAT Delhi G Bench in the case of ITO Vs. Sai International in ITA No. 1406 (Delhi) of 2012 for the proposition that when the assessee is maintaining proper books of account with fully vouched vouchers and no defect has been pointed out nor any adverse material .....

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s of account when the books of account are properly audited by the qualified C.A. U/s 44AB of the Act and the audit report was submitted alongwith the return of income then rejection of books of account was completely unjustified. Reliance was placed on the following case laws:- 1. Namasi Vayam Chattior vs. CIT, (1960) 39 ITR 579 SC 2. (1954) 26 ITR 159 (Punj.) 3. (1960) 38 ITR 152 (Ker.) 4. (1975) 101 ITR 721 (J&K) 5. Similar view has been taken in following cases a. (HC), 80 Taxman 184 (Ga .....

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method of accounting adopted by him was such that true profits of the assessee cannot be deducted there from. The assessee has further relied upon the following decisions: The Hon'ble Jodhpur IT AT in the case of Ganesh Foundry Vs Incometax Officer. It has held that correctness of book results cannot be challenged without pointing out any specific mistake or deficiency in the books of account or without recording a firm finding that the profits and gains cannot be properly deduced from such .....

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ion of production, then in addition, the AO should support his finding by an opinion of the expert." Once the books of account of an assessee are rejected, then, profit has to be estimated on the basis of proper material available (See, Dabros Industrial Co. P. Ltd. V, CIT (1977) 108 ITR 424 (Cal)]. An AO is not flattered by technical rules of evidence and pleasing and he is entitled to act on material which may not be accepted as evidence in a court of law. Nevertheless, the AO is not enti .....

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goods is not produced during the assessment, it is not the justifiable ground that to reject the books of accounts. Mere non maintenance of stock cannot be the valid ground for rejection of books of accounts as held in the case of Tiveni Pharma (2004) 85 TTJ 950 (ITAT, Jaipur Bench Third Member Bench) ITA No. 133/JP/2001 - "Where verifiable records of opening stock, purchases, and closing stock were available there was no justification to reject books and apply section 145 (3), merely on gr .....

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essing Officer has failed to bring on record any adverse material to justify the quantification of undisclosed turnover. However, he reduced the G.P. estimation from 8.5% to 8% on the declared turnover. The facts on record shows that this estimate of G.P. @ 8% was not based on any specific defects noted by the Assessing Officer or by the ld. CIT(A) in the expenses claimed in the P&L account. Once the ld. CIT(A) has accepted the declared turnover of the assessee in absence of any specific def .....

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Therefore, the addition sustained by the ld. CIT(A) is deleted. 8. In the ground No. 5 of the appeal, the issue involved is sustaining the addition of ₹ 10,27,500/- made U/s 68 of the Act. During the year, the assessee has taken loan of ₹ 10.00 lacs from Shri Suresh Chand on 13/5/2010 by account payee cheque. The assessee filed an affidavit of Shri Suresh Chand duly attested by a Notary Public wherein he has confirmed the loan amount given to the assessee. Shri Suresh Chand also subm .....

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icer for examination. The remand report obtained by the ld. CIT(A) was confronted to the assessee and the assessee has filed counter comments on the same. The Assessing Officer during the remand reports hearing has mentioned following documents, which was submitted by the assessee before him: a. Bank Account Statement of document/ evidences submitted of assessee in which loan cheque was deposited. b. Bank A/c Statement of Suresh Chand Choudhary - Urban Cooperative Bank out of which loan was give .....

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ts, which are conclusive to explain the source in the hands of the assessee. He also relied on the following decisions: (a) Filling of confirmation, mentioning therein PAN and disclosure of amount advanced in the income tax return by the creditor can be treated as sufficient compliance for explaining the genuineness of cash credit. [Pradeep kumar Himmatramka Vs. ITO (2002) XXVII Tax world 392 (JP)] (b) Assessee establishing identity of the creditors and amount received by him by way of cheques. .....

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sessee, having filed confirmation letter and affidavit confirming the advancing loan to assessee and having shown loan entries in their respective balance sheets filed with the return, addition cannot be made on ground that loan creditor were not produced before AO. [ACIT Vs. India Tyre House (2001) 72 ITJ (Gauhati) 316] (e) Assessee is not supposed to prove the source of the source of credit of the creditor. [Sideways Investments Pvt. Ltd. Vs. DCIT (2000) XXIV Tax World 146 (JP)] (f) Source of .....

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assessee the identity of the creditor is established through their PAN mentioned in their confirmations. [CIT Vs. Heerala Chhagan Lai (2002) 257 ITR 281 (Raj.)] (i) Cash credits being income tax assessee cannot added but creditors having no capacity to advance amount have to be treated as unexplained. [Kamal Motors Vs. CIT (2003) 180 CTR (Raj.) 166. ] It was held that the fact, that as assessee was not able to satisfy authority as to source of the source. From which the creditor of a; derive the .....

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