9911796707
TMI Blog2025 (5) TMI 1066X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 145(3) of the Act. 3. That both the lower authorities have erred in law as well in facts in making/sustaining addition of Rs. 1,29,91,430/- by estimating Income by applying unprecedented GP rate of 8%, divorced from past history, comparable case & nature of business and thereby made/sustain addition of Rs. 1,29,91,430/-. 4. That Ld. CIT(A) erred in law as well in facts in not holding that AO travelled beyond the scope of limited scrutiny in violation of CBDT guideline. 5. That the appellant reserves his right to add, amend, alter or withdraw any ground of appeal on or before hearing of this appeal. 3. Succinctly, the fact as culled out from the records is that the assessee is the proprietor of M/s Shivcharanlal Satyanarayan and is a General Commission Agent at Navin Mandi, Nadbai, Bharatpur. The assessee has filed his return of income showing Rs. 4,94,540/- as his taxable income on a total turnover of Rs. 19,56,03,558/-. The case was selected for scrutiny through CASS for the following reason: Assessee has made substantial purchases from such suppliers who are either non filers or have filed non business ITR or reflected a substantially lower turnover in ITR as compar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, Vehicle No. the amount paid etc. It was also noted by the ld. AO from the Balance Sheet that the assessee does not possess any godown and he does not pay any godown rent as no such expenses was debited in the profit and loss account. 3.4 In the light of that observation ld. AO asked the assessee to show cause as to why the books of account should not be rejected u/s. 145(3) as the correctness and completeness of the account of the assessee are not satisfactory and it was proposed that the gross profit @ 8 % of sales computed at Rs. 1,56,46,709/-. As the assessee has already disclosed, a gross profit of Rs. 26,55,274/- thus the difference of Rs. 1,29,91,435/- was proposed to be added to back to the total income of the assessee. The assessee submitted a reply objecting to the rejection of the books of account and thereby estimating profit. 3.5 The assessee in response submitted that the books of accounts of the assessee are maintained in accordance with the law and are audited by an independent Chartered Accountant. The books results declared by the assessee were accepted in AY 2020-21 wherein the GP declared by the assessee was accepted and thereby assessee objected to the reje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing officer is unable to rely on the books of accounts maintained and accordingly to deduce actual net profit earned by the assessee. Under the circumstances, the Ld AO has correctly rejected the books of account and estimated the gross profit of the appellant @ 8% of the turnover. 7.5 Another plea of the appellant is that the assessment is void ab initio as the AO has invoked provisions of sub section (3) of section 145 of the Act but failed to pass the order u/s 144 of the Act. However, in the submission filed the appellant has not elaborated on this issue. I find that the appellant in the grounds of appeal contends that the impugned order passed under section 143(3) r.w.s. 144B of the Act is bad in law as the said order was required to be passed u/s 143(3) r.w.s. 144B r.w.s 144 of the Act. 7.6 I have considered the assessment order and perused the material on record and also the legal position on the issues at hand. I am of the view that mere omission of section 144 of the Act in the order passed does not invalidate the assessment order. I also note that the notice u/s 143(2) and 142(1) of the Act was issued and duly served on the appellant. The appellant has responded to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of section 292B is defeated. Accordingly, I do not agree with the plea of the appellant that the assessment is void ab initio and should be deleted and accordingly these grounds of appeal are dismissed. 8.0 Ground no 10 of the appellant is that the Ld. A.O. has erred in law and on facts in charging interest u/s 2344/2348/234C of the Act. This ground is consequential in nature. The AO is directed to verify and charge the correct amount of interest u/s 234A/234B/234C as per law. 9.0 In result, the appeal is dismissed." 5. As the assessee did not find any favour, from the appeal so filed before the ld. CIT(A)/NFAC, the assessee has preferred the present appeal before this Tribunal on the ground as reproduced hereinabove. The assessee's AR has submitted written arguments for the various grounds raised, as follows: "The Appellant is an individual and is engaged in business of general commission agent under the trade name of M/s Shiv Charan Lal Satya Narayan at Navin Mandi, Nadbai, District Bharatpur. The appellant filed his original return of income u/s 139(1) of the Act on 08.03.2022 declaring total income to the tune of Rs. 4,94,540/- on Sales Turnover of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is encapsulated as under: - 1. Brief Facts: - 1.1 The appellant claimed Purchases of Rs. 19,54,55,321.26 in the audited financial statements (Kindly refer Pg 56 of PB). The Trading Account is reproduced as under: - (F.Y. 2020-21) SHIV CHARAN LAL SATYA NARAYAN NAVIN MANDI YARD, NADBAI, BHARATPUR, BHARATPUR Trading Account for the year Ending 31st March 2021 Particulars Sch Amount Particulars Sch Amount To Opening Stock 11 37,32,480.00 By Sales of goods 14 19.55,83,865.46 To Purchases 12 19,54,55,321.26 By Closing Stock 16 63,05,968.00 To Direct Expenses 13 66,450.79 By Other operating revenue 15 19,693.41 To Gross Profit 26,55,274.82 Total 20,19,09,526.87 Total 20,19,09,526.87 The accompanying notes are an integral part of the financial statements. As per our report of even date For Garg Yatendra & Associates Chartered Accountants (Registration No. 029643C) For SHIV CHARAN LAL SATYA NARAYAN Sd/- Yatendra Garg Proprietor Membership No .: 451107 Place: Bharatpur Date: 14/02/2022 Sd/- SATYA NARAYAN Proprietor 1.2 That there were various sub heads of purchase account, the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the contention that in fact purchases claimed in books of accounts were over & above what is shown on IT portal as there were exempt & nontaxable purchases not depicted on IT portal. 1.6 Thus, the crux of the contention of the assessee appellant was that, the booking of purchase invoice was done under various constituents i.e. Purchase - Instate GST, Purchase (GST Exempted), Purchase (URD), Mandi Tax, KUMS, freight & Muddat & etc. as per description in bill and whereas IT portal contained the consolidated figure of the bill inclusive of material cost and charges on which GST have been charged. 2. As per Assessing Officer 2.1 Ongoing through the submission filed by the assessee in respect of purchases and sales and comparing the same with the information available on the system, it is deduced that the assessee has not disclosed the correct picture of the business transactions. Total GST purchase (exclusive of GST) shown by the assessee is Rs. 18,17,30,089/- while the corresponding purchases available on the system amounts to Rs. 18,50,48,070/-(Difference amount Rs. 33,17,981/-). [AO Order Pg 4 Para 2] 2.2 Further on perusal of trading account and profit and loss account fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es are concerned the assessee reiterated that goods are transported by tractors trolleys, camel cart and buffalo carts and the purchasers pay for freight expenses. However, the assessee had not shown any expenses on transportation on his own purchases. Even there is no clear reply on the issue of godown and shop rent. The assessee sought personal hearing through VC for making oral submissions. As the assessee failed to explain the specific issues raised in the SCN through written submission as discussed above, despite having sufficient time to explain, it is therefore held that he has nothing to say in this regard. In view of the discussion made above the books of account are hereby rejected u/s 145(3) as the correctness and completeness of the account of the assessee are not satisfactory. As a result, the gross profit is estimated @ 8% of sales, which comes to Rs. 1,56,46,709/-. Since the assessee has disclosed a gross profit of Rs. 26,55,274/- thus the difference of estimated gross profit and disclosed gross profit which comes to Rs. 1,29,91,435/- is added back to the total income of the assessee. [AO Order Pg 10 Para 1] 3. As Per Worthy CIT(A) 7.4 From the perusal of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 33,17,981/- i.e. purchases recorded in books of accounts at Rs. 18,17,30,0,89/- and purchases depicted on system at Rs. 18,50,48,070/-. 4.2 That both the lower authorities have failed to appreciate that the alleged purchased of Rs. 18,50,48,070/- as depicted on the system was completely accounted for in the books of accounts, but under different subheads of purchases. 4.3 That the total Purchases of Rs. 19,54,55,321.26 was claimed in the Audited Trading account & same was bifurcated among various constituents as under (Kindly Refer Pg 56 of PB): - Shivcharanlal Satyanarayan Nadbai Bharatpur Purchase Accounts Group Summary 1-Apr-20 to 31-Mar-21 Page 1 Particulars Closing Balance Debit Credit Tulai Expenses 29,01,970.59 KUMS @ 5 % 9,23,727.86 MANDI TAX 25,890.48 MANDI TAX 1 % 12,75,882.17 MANDI TAX FREE 10,282.67 MUDDAT ON 5 % 1,62,076.44 PURCHASE FROM URD DEALER 71,21,585.36 PURCHASE INSTATE GST @5% 18, 17,30,089.09 PURCHASE INSTATE GST EXEMTED 12,74,774.92 SUTALI EXP. 5 % 27,952.00 TULAI ON MUSTERRE 1,089.68 Grand Total 19,54,55,321.26 4.4 That ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re there was no occasion for the AO to make observation of less booking of purchase by the appellant. 4.7 That to leave no stone unturned in clearing the air over the matter, the copy of sample invoice from M/s. Brijmohan Dinesh Chand is reproduced (Kindly Refer Pg No. 152-153 of PB): - The same is Bill No. 42 dated 23.06.2020 where in purchase of mustard seed 32 Quintal @ Rs. 4449/ Quintal have been made resulting in Total amount of Invoice Inclusive of GST at Rs. 156553.56. The GST Charged on invoice is Rs. 7454.92 (3727.46 SGST +3727.46 CGST). The material cost is Rs. 143008/- and Tulai, Mandi Tax, KUMS & wages is Rs. 3217.68, 1430.08, 1430.08 & 12.80 respectively. Thus, total of other charges (except material cost) is Rs. 6090.64. The System (AIS/TIS) depicts GST Purchase at Rs. 149099/- (143008+6091) and in books the purchase is booked at Rs. 1,43,008/- and charges are debited to different heads under purchases and direct expense. Thus, in reality there is no difference in accounting and all the bills have been duly incorporated in books of accounts. 4.8 That the ld AO failed to appreciate that the appellant duly filed the copy of ledgers of all sub heads of purchase vid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hase in Books of Rs. 42, 18,983 /- [Kindly Refer Pg No. 132-133 Excel, 150-153 (133_6) 141 AIS /178-179 2A of PB] That the Id AO observed difference of Rs. 113692/- in purchase as per system and as per books. The difference was due to posting of mandi tax, freight & etc. charged in invoice to different ledger. Purchases in Books Tulai 5% Mandi Tax 1% Wages Freigh t KUMS 5% Muddat 5% Tulai Mustaree Total Purchases 4225697.40 60691.19 26883.11 240.80 16080.06 1911.25 1089.68 4332593.49 Thus, your good self will appreciate that the difference as alleged by the AO of Rs. 113692/- is unfounded and in fact there was no difference. 4.9.3 Jagdish Pd Narendra Kumar - (Purchase on System stood at Rs 4717525 /- vis-à-vis purchase in Books of Rs. 4579902) [Kindly Refer Pg No. 134-135 (Excel), 141(AIS), 179/182 (2A) of PB] That the Id AO observed difference of Rs. 137623 /- in turnover as per system and as per books. The difference was due to posting of mandi tax, freight & etc. charged in invoice to different ledger. Purchases in Books Tulai 5% Mandi Tax 1% Wages KUMS 5% Total Purchases Remarks 4492152.35 52620.66 23312.21 220.80 11696.55 45 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is submitted that invoking section 145 does not confer blind & unreasonable powers to A.O. to assess the Income at whatever figures he wants. The AO is bound to make an honest estimation of Income taking into consideration material available on records, past history of the case and N.P. rate held by Higher Authorities in Comparable Cases. The Assessment based upon whims & surmises of A.O. being arbitrary is not permitted in the eyes of law. The legal position under Section 144 or 145 for the purpose is the same. The law u/s 144 or 145 is well established to the effect that while making an estimation, it is best judgment which the A.O. is required to take, by making an honest exercise on all direct /indirect evidence and available material. In present case the exercise which the A.O. was bound to make under law has not been done. Reliance is placed on the following case laws wherein Hon'ble courts have explained the duty & powers of A.O., In case of estimation: - Supreme Court in Kanchwala Gems v JCIT 2007 288 ITR 10 (SC) - - In a best judgment assessment, there is always a certain degree of guess work but at the same time authorities should not act in an arbitrary manner a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.53% 2021-22 19,55,83,865.46 26,55,274.82 1.36% 3.2 That the appellant-maintained Stock register which was sufficient to explain any fall in GP Rate. The proper book accounts was maintained. 3.3 That your good self will appreciate on bare glance of AO order justifying higher GP Rate, that action is apparently baseless & high pitched, when for mere difference in purchase recorded in books of accounts of Rs. 33,17,981/-, he made addition of Rs. 1,29,91,435/-. The same shows arbitrariness & hasteness in action of AO. 3.4 That the appellant relies upon the judgment of Hon'ble Rajatshan High Court in CIT v Gotan Lime stone khanij Udhyog (256 ITR 243) wherein it has been held that mere rejection of books of accounts need not necessarily lead to addition to returned income. It was held that books of accounts together with past history of the case as also material collected by the AO will form the very basis of making the addition. GOA 4: That ld CIT (A) erred in law as well in facts in not holding that AO travelled beyond the scope of limited scrutiny in violation of CBDT guideline. Submission: - The Action of the ld AO in travelling beyond the scope of li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lige." 6. To support the contention so raised in the written submission reliance was placed on the following evidence / records : S.NO. PARTICULARS PAGE NO. 1 Written Submission 1-14 2 Written Submission filed before CIT(A) dated 20.09.2024 along with acknowledgement. 15-21 3 Submission filed before AO dated 10.12.2022 along with acknowledgement. 22-26 4 Submission filed before AO dated 10.10.2022 along with acknowledgement.` 27-30 5 Copy of Audit Report along with Audited financial Statement. 31-58 6 Copy of Tabulated Excel Sheet showing party wise break up of purchases, KUMS, Freight & etc. 59-128 7 Copy of Ledger of Parties 129-137 8 Copy of Information depicted on IT portal (AIS) 138-145 9 Copy of Invoice from parties, namely which were furnished to AO in response to notice u/s 133(6) 146-174 10 Copy of GSTR-2A Sheet Downloaded from GST portal 175-196 11 Copy of Audited Balance Shet and Trading and P&L A/c for FY 2020-21,2019-20, & 2018-19 197-203 12 Copy of Purchase Register 204-228 7. The ld. AR of the assessee in addition to the above written submission so filed vehemently argued that the assessee the rejection of the books res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts related to the dispute are that the assessee is the proprietor of M/s Shivcharanlal Satyanarayan and is a General Commission Agent at Navin Mandi, Nadbai, Bharatpur. For the year under consideration the assessee filed his return of income showing Rs. 4,94,540/- as his taxable income on a total turnover of Rs. 19,56,03,558/-, the case of the assessee was selected for scrutiny through CASS for the reason that the assessee has made "substantial purchases from such suppliers who are either non-filers or have filed non-business ITR or reflected a substantially lower turnover in ITR as compared to turnover shown in GSTR 1 Return. There is a possibility that the assessee has booked bogus expenses to reduce its profit/taxable income. Therefore genuineness/correctness of expenses related to these entities may be verified". 11. On that issue the assessee was asked to furnish reply to inter-alia regarding purchases, transportation, payments to suppliers, expenses etc. In response to the above, the assessee had furnished the list of all suppliers from whom purchases were made. He also submitted the payments made to them but not supported the same by necessary evidence. The assessee also d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Mukkhi Ram Shree Chand, Bansal Traders, Jagdish Pd Narendra Kumar, Brij Mohan Dinesh Chand and Ranjit Agarwal. He noted that for all the dealers purchase recorded in the books are lower than what is reported in the portal. Ld. AO also noted that since the assessee failed to explain the difference of Rs. 33,17,981/-and the assessee has not shown transportation of the expenses, godown expenses and shot rent and he even though an opportunity of being heard was given in VC the assessee did not avail. Accordingly, ld. AO proceeded to estimate the profit rejecting the book result and thereby made addition of Rs. 1,29,91,435/- in the hands of the assessee. 12. When the matter reached before the ld. CIT(A) the assessee stated that the order was passed u/s. 143(3) but when the books are rejected the same shall follow the section 144 of the Act. That contention the assessee was rejected by the ld. CIT(A) stating the recourse of provision of section 292B of the Act. Ld. CIT(A) thereby confirmed the rejection of results and estimation of profit @ 8 % made by the ld. AO. 13. The bench noted that the case of the assessee was subjected to verify whether the purchases recorded in the books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of accounting. 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 income computation and disclosure standards to be followed by any class of assessee's or in respect of any class of income. (3) Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) has not been regularly followed by the assessee, or income has not been computed in accordance with the standards notified under sub-section (2), the Assessing Officer may make an assessment in the manner provided in section 144. 15. Thus, as it is clear from the above provision of the act that the ld. AO or that of the ld. CIT(A) may proceed under Section 145(3) under any of the following circumstances : * Where he is not satisfied about the correctness or completeness of the accounts; or * Where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o discrepancies whatsoever have been indicated by the ld. CIT(A). This is an utter disregard of the fact that all the books of account were maintained and regularly audited were simply not relied and rejected based on one simple reason that there exist a difference in the figure of purchase reported in the books and in the portal data base of the revenue and there is no other reasons. So far as the rent on godown, transportation of the goods and labour, the lower authority failed to understand that nature of business carried on by the assessee. The records reveals that the assessee performs the duty of commission agent who purchase the perishable goods from the agricultural products producers and then forward the same to the ultimate whole vendor or the retail and therefore, the person comes with their own vehicle and deliver the goods in the Mandi itself as per the direction of the assessee and the Mandi provide the storage facility for the temporary period. Thus, the rejection of books is purely based on surmises and conjectures and against the set of records made available on record. As we note that during the assessment proceedings the appellant has submitted all the ledger of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur jurisdictional High Court rendered in the case of Commissioner of Income Tax v. Ceramic Industries [ 88 taxmann.com 520 (Rajasthan) ] wherein our Hon'ble court has held that ; 7. Taking into consideration the tribunal has observed as under:- We have perused the facts of the case. The ld. AR Mr. H.M. Singhvi argued that assessee has produced all the books of account, vouchers and the assessee's accounts are audited and all the production is subject to Excise Duty and not even a single unit of production can go out of the factory without recording the same in the Excise Registers which are regularly and continuously verified by the excise Department and are under their control. The AO has not pointed out any defect in the purchases, sales, opening stock and closing stock and as explained before the AO and the ld. CIT(A) that M/s. Bharat Potteries Ltd. i.e. a sister concern is manufacturing more of maximum stoneware crockery and the assessee is manufacturing more of bone china crockery and the difference in yield and the wastage and the gross profit had been explained vide our letter dated 26.03.2004 before the AO and similarly the output/input ratio has also been explained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. AR has pointed out that the in the same report it has been mentioned that the said organization is not involved production practice and the are not sure to what extent their opinion will be useful for the purpose of the assessee and in such circumstances and facts of the case, the report of CGCRI, Calcutta alone cannot be the basis for rejection of books of account and making an estimation of wastage and the ld. CIT(A) was not justified in ignoring other material which was placed before him as mentioned hereinbefore. Therefore, the ld. CIT(A) was not justified in sustaining the applicability of Section 145(3) of the Act and addition of Rs. 11,15,087/-. Thus Ground No.1 of the assessee is allowed and the solitary ground of the Revenue is dismissed. 8. In our considered opinion the argument which has been canvassed by Mr. Mathur that the stone average loss as 29.4 should not be 30.1 as per Khurja is also 23.1. 9. Taking into consideration that the bones china crockery of the delicate nature, the report of Khurja for the specific industry has been accepted by the tribunal, no error is committed in doing so. 10. Both the issues are answered in favour of assessee and agai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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