TMI Blog2018 (10) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... cogent reason why the financial results should be rejected has to be given. Books of accounts cannot be rejected as the assessee has suffered losses, where as in the immediate earlier year profit was made. Fall in gross profit ratio could be due to various reasons, and cannot be the sole and only ground to reject the book results in entirety and frame best judgment assessment [see Commissioner of Income Tax-XII v. Poonam Rani 2010 (5) TMI 57 - DELHI HIGH COURT], Action Electricals v. Deputy Commissioner of Income Tax [2002 (7) TMI 64 - DELHI HIGH COURT]. The reasoning given in the assessment order to compute income on hypothetical basis by applying gross profit ratio of 4% is completely fallacious, wrong and is contrary to well-settled law, as expounded vide judgments reported as Commissioner of Income Tax, West Bengal v. Calcutta Discount Co. Ltd. [1973 (4) TMI 6 - SUPREME COURT] - ITA 995/2018 - - - Dated:- 12-9-2018 - MR. SANJIV KHANNA AND MR. CHANDER SHEKHAR JJ. Appellant Through: Mr. Ruchir Bhatia, Advocate Respondent Through: None SANJIV KHANNA, J.(ORAL): This is a peculiar case where the Assessing Officer had primarily rejected the book results declar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Printing Mills (P) Ltd. 72 TTJ 886 (AHD) Sl.No. Particulars AY 07-08 AY 06-07 Impact on profit 1. Other income 12,013,931 15,488,789 3,474,858 2. Depreciation 32,386,450 24,519921 7,866,529 3. Finance cost 11,337,894 8,648,891 2,689,003 4. Payment to provision for employee 14,53,39,492 1293, 9271 3,24,00,221 5. Cost of service, administration selling expenses 35,89,83,398 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Also we are enclosing comparative chart for the above-mentioned Assessment years showing that there is no opening stock, closing stock WPI. Refer Annexure-1 3. Further on perusal of other income details disclosed by the assessee, it is seen that substantial amount of ₹ 1.13 crores has been shown as provisions written back as against the corresponding amount of ₹ 1.46 crores disclosed in the last year. During the course of the assessment, all the details of provision written back along with the nature of these provisions written back was filed with the Ld. AO. However it is reproduced again for your reference. The Company Ibilt has acquired an Informatic Divison (Division) of the company M/s Crompton Greaves Ltd . with the objective of consolidating similar types of business under one company effective from 1st July 2005. Sales consideration as agreed between the parties was ₹ 100 lacs. Apart from the sale consideration, Ibilt has agreed to take over future liabilities of the Divison towards unexpired warrant and AMC. These futu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... traveling were under taken: Foreign travels were made for business purpose and all the details of foreign travel were filed with the Ld.AO along with the purpose for which it was made during the course of the assessment. The Ld AO was specifically requested vide letter dated 07.12.2009 that if anything still is required or to be explained. But the Ld AO kept mum and did not ask anything further. However it is again attached herewith you for your kind reference. Refer Annexure-3 Therefore the contention of Ld AO is justified in the eyes of the Law 5. It is further observed that the assessee has claimed provision for doubtful advances of ₹ 17,90,884/ which has not been added back to the total income of the assessee, since the same represents unascertained liability. Considering all the above facts discussed above and the circumstances of the case. I am of the view that the assessee has failed in disclosing its true and correct income in its return filed in this office. The assessee has remained silent throughout the proceedings for the reasons for a fall in its profitability as a result of whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd to without giving proper opportunity to the assessee since no show cause was given to the assessee to explain why books of accounts should not be rejected and assessee s total income should not assessed at 4% of the total turnover. Therefore, the contention of the Ld. AO is justified in the eyes of the Law. We are relying on the follow judgments: Sh. Pyare Lal Mittal V/s ACIT (2007) 197 Taxation 186 (Gauhati) Dhakeshwari Cotton Mills V/s. CIT 26 ITR 775 (SC) Puspanjali Dying Printing Mills (P) Ltd. 72 TTJ 886 (AHD) Raghubar Mandal Harihar Mandal V/s State of Bihar 8 STC 770 (SC) Aluminium Industries (P) Ltd. V/s CIT GLR 216 (GAU) Calcutta Discount Pvt. Ltd.V/s 91 ITR 8 (SC) 6. Rejection of books of accounts u/s 145 (3) of the Act Therefore the contention of the Ld AO to reject the book of accounts and invoke the Sec145(3) is not justified. S.No. Observations made by Ld. AO Our submission Remarks 1. The assessee was speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reduction in profit for the year. Also we are enclosing comparative chart for the Assessment years 2004-05, 2005-06, 2006-07, 2007-08 2008-09 showing net profit turnover. Refer Annexure-1 Therefore the contention the Ld AO that the company shown profit last year and loss in current year is not justified. We are relying on the follow judgments: Sh. Pyare Lal Mittal V/s ACIT (2007) 197 Taxation 186 (Gauhati) Dhakeshwari Cotton Mills V/s. CIT 26 ITR 775 (SC) Puspanjali Dying Printing Mills (P) Ltd. 72 TTJ 886 (AHD) Raghubar Mandal Harihar Mandal V/s State of Bihar 8 STC 770 (SC) Aluminium Industries (P) Ltd. V/s CIT GLR 216 (GAU) Calcutta Discount Pvt. Ltd, V/s 91 ITR 8 (SC) 3. It is not disputed and challenged that the respondent-assessee was engaged in supplying computer equipment, networking equipment and computer software on turnkey basis, primarily to government department/bodies and government companies. They were also providing warranty, annual maintenance contract and facility management services for up to five years. The contracts awarded to them were o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nty and the AMC. Clearly, the Assessing Officer did not consider the submission made and had failed to deliberate upon explanation given by respondent-assessee. With regard to the amounts written back, it was stated that these were expenses which had been incurred or paid and accordingly debited to the profit and loss account. Reference could made to the chart/table reproduced above from the order of the Commissioner of Income Tax (Appeals). 7. Section 145 (2) of the Act empowers the Assessing Officer to make best judgment assessment when he is not satisfied with correctness or completeness of the accounts of the assessee. Best judgment assessment in terms of Section 145 can also be framed when no method of accounting has been regularly followed or where the method employed is such that the income, profit and gains cannot be properly deduced therefrom. 8. Books of accounts were not rejected by the assessing Officer as unreliable on the ground that transactions were omitted, proper particulars and vouchers were not forthcoming or there were inherent lacunas and other defects. The two/three feeble reasons given by the Assessing Officer for rejecting the book results have not be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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