The ITO, Ward-2(4),, Surat v. M/s. Narendra Dhirubhai Desai, Surat

ITA 3280/AHD/2008 | 2005-2006
Pronouncement Date: 09-07-2010 | Result: Dismissed

Appeal Details

RSA Number 328020514 RSA 2008
Assessee PAN ACBPD2804Q
Bench Ahmedabad
Appeal Number ITA 3280/AHD/2008
Duration Of Justice 1 year(s) 9 month(s) 10 day(s)
Appellant The ITO, Ward-2(4),, Surat
Respondent M/s. Narendra Dhirubhai Desai, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 09-07-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 09-07-2010
Date Of Final Hearing 30-06-2010
Next Hearing Date 30-06-2010
Assessment Year 2005-2006
Appeal Filed On 29-09-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI G.D.AGRAWAL VICE-PRESIDENT (AZ) AND SHRI MUKUL SHRAWAT JUDICIAL MEMBER AND DATE OF HEARING : 30/06/2010 DRAFTED ON: 3 0/06/2010 ITA NO.3280/AHD/2008 ASSESSMENT YEAR : 2005-06 THE ITO WARD-2(4) SURAT VS. M/S.NARENDRA DHIRUBHAI DESAI 3 SARJAN SOCIETY ATHWALINES SURAT PAN/GIR NO. : ACBPD 2804 Q (APPELLANT) .. (RESPONDENT) AND CO NO.289/AHD/2008 (ARISING OUT OF ITA NO.3280/AHD/2008) NARENDRA DHIRUBHAI DESAI SURAT VS. THE ITO WAR D-2(4) (CROSS OBJECTOR) .. (RESPONDENT) ASSESSEE BY : SHRI HARDIK VORA C.A. REVENUE BY: SHRI A.K. KHANDELWAL SR. D.R. O R D E R PER SHRI MUKUL SHRAWAT JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE W HICH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-II SURAT DA TED 08/07/2008 AND THE CROSS OBJECTION BY THE ASSESSEE THEREOF. (A) IN REVENUES APPEAL (I.E. 3280/AHD/2008) THE FOLLOWING GROUNDS WERE RAISED: (1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LEARNED CIT(APPEALS)-I SURAT HAS ERRED IN RESTRICT ING THE DISALLOWANCE OUT OF VARIOUS EXPENSES TO 10% WITHOUT ITA NO.3280/AHD/2008(BY REVENUE) AND CO NO.289/AHD/2008 (BY ASSESSEE) ITO VS. M/S.NARENDRA DHIRUBHAI DESAI ASST.YEAR 2005-06 - 2 - ASSIGNING REASONS THEREOF AS AGAINST 20% DISALLOWED BY THE A.O. FOR THE REASONS DISCUSSED IN THE ORDER OF THE ASSESSMENT. (2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LEARNED CIT(A)-I SURAT HAS ERRED IN REDUCING THE DISALLOWANCE OF RS.22 53 451/- TO RS.11 26 726/- OU T OF VARIOUS EXPENSES FOR WHICH NO BOOKS OF ACCOUNT WERE PRODUCED BY THE ASSESSEE OR ANY SUPPORTING EVIDENCE THEREOF WERE FURNISHED TO THE A.O. DURING THE COURSE OF ASS ESSMENT PROCEEDINGS. (B) IN ASSESSEES CROSS OBJECTION (I.E. CO NO.289/ AHD/2008 ARISING OUT OF ITA NO.3280/AHD/2008) THE FOLLOWING SUBSTAN TIAL GROUND HAS BEEN RAISED: 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE DISALLOWANCE OF RS.22 53 451/- MAY BE DELETED IN VIEW OF THE DET AILS SUBMISSION MADE TO LEARNED C.I.T. (APPEALS) AND IN VIEW OF THE FACT OF ACCEPTANCE OF LOSS OF ACCOUNT BOOKS ON ACCOUNT OF FLOOD FOR ASSESSMENT YEAR 2004-05. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143 (3) OF THE I.T. ACT 1961 DATED 28/ 12/2007 WERE THAT THE ASSESSEE HAS FILED HIS RETURN OF INCOME ON 30/08/20 05 DECLARING TOTAL INCOME AT RS.NIL. ALONGWITH THE RETURN OF INCOME A N AUDIT REPORT U/S.44AB OF THE I.T. ACT 1961 IN FORM NO.3CB & 3CD AND BALANCE- SHEET PROFIT & LOSS ACCOUNT ETC. WERE ALSO CLAIME D TO HAVE BEEN FILED. 2.1. THE ASSESSEE IS IN THE BUSINESS OF JOB-WORK AT ART GREY CLOTH. UNDISPUTEDLY THE APPELLANT HAD SHOWN BETTER TURNOV ER AS MENTIONED BY THE ASSESSING OFFICER BY GIVING FOLLOWING DETAILS:- ITA NO.3280/AHD/2008(BY REVENUE) AND CO NO.289/AHD/2008 (BY ASSESSEE) ITO VS. M/S.NARENDRA DHIRUBHAI DESAI ASST.YEAR 2005-06 - 3 - A.Y. TURNOVER (RS.) G.P. G.P. RATIO (%) 2005-06 6 29 30 293 1 66 24 249 26.42 2004-05 4 55 41 653 80 68 090 17.71 2003-04 6 70 88 897 1 23 00 548 18.33 2.2. HOWEVER IT IS ALSO NOT IN DISPUTE THAT AS A GAINST THE ABOVE REFERRED TURNOVER THE APPELLANT HAD SHOWN MEAGER INCOME AS P ER THE STATEMENT OF COMPUTATION AT RS.63 717/- AND SO THEREUPON FILED THE RETURN AT NIL INCOME. IT HAS ALSO BEEN OBSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS CLAIMED AN EXORBITANT EXPENDITURE AS P ER PROFIT & LOSS ACCOUNT APPROXIMATELY OF RS.1 65 CRORES. OUT OF TH AT THE ASSESSING OFFICER EAR-MARKED CERTAIN EXPENSES NAMELY BONUS CLAIM OF DAMAGES DISCOUNT INTEREST LEGAL TELEPHONE VEHICLE OFFI CE EXPENSES ETC. TOTALLING TO RS.1 12 67 254/-. WHEN THE ASSESSEE WAS ASKED TO SUBSTANTIATE THE SAID CLAIM OF EXPENDITURE IT WAS INFORMED THAT IN THE MONTH OF AUGUST- 2006 THERE WAS A FLOOD DUE TO WHICH THE BOOKS OF ACCOUNT BILLS VOUCHERS WERE DESTROYED. SINCE THE ASSESSEE WAS UNABLE TO PLACE ON RECORD THE BILLS AND VOUCHERS IN SUPPORT OF THE AFO REMENTIONED CLAIM OF EXPENDITURE THEREFORE THE ASSESSING OFFICER HAS R EJECTED THE BOOKS OF ACCOUNT BY INVOKING THE PROVISIONS OF SECTION 145(3 ) OF THE I.T. ACT 1961 AND THEREAFTER PROCEEDED TO DISALLOW THE CLA IM OF EXPENDITURE ON ESTIMATE BASIS. THE ASSESSING OFFICER HAS HELD TH AT 20% OF THE SAID CLAIM SHOULD HAVE BEEN DISALLOWED WITH THE RESULT AN ADDITION OF RS.22 53 451/- WAS MADE. THE SAID ADDITION WAS CH ALLENGED IN FIRST APPEAL. ITA NO.3280/AHD/2008(BY REVENUE) AND CO NO.289/AHD/2008 (BY ASSESSEE) ITO VS. M/S.NARENDRA DHIRUBHAI DESAI ASST.YEAR 2005-06 - 4 - 3. THE LEARNED CIT(APPEALS) HAS RESTRICTED THE DISA LLOWANCE TO 10% BY OBSERVING AS UNDER:- DECISION 7. I HAVE GONE THROUGH THE SUBMISSIONS OF THE AR AND I FIND THAT HE HAS RELIED ONLY ON TDS CERTIFICATES. NO WRITTEN SUBMISSION APPEARS TO HAVE BEEN MADE BEFORE THE A.O. EXCEPT FO R A REQUEST TO ALLOW SET-OFF OF UNABSORBED DEPRECIATION OF EARLIE R YEARS. IN FACT IN THE LETTER DTD. 19.3.2008 THE AR HAS REQUESTED FOR SUCH SET-OFF WHILE TAKING INTO CONSIDERATION THE ADDITION OF RS .22 53 451 MADE BY THE AO. THIS MEANS THAT NEITHER THE ASSESSEE NO R THE AR HAVE ANY OBJECTION TO THE DISALLOWANCES AND THE CONSEQUE NT ADDITION MADE IN ASSESSMENT PROCEEDINGS. 7.1. ON MERITS I FIND THAT THE ASSESSEE WAS UNABLE TO SUBSTANTIATE HIS CLAIM THAT ALL HIS BOOKS OF ACCOUN T AND OTHER RECORDS HAD BEEN DESTROYED IN THE FLOOD IN AUGUST 2006. WHERE BUSINESS PERSONS HAVE ACTUALLY LOST BOOKS OF ACCOUN T ETC. AND OTHER RECORDS AND ASSETS CLAIMS FOR INSURANCE HAVE BEEN MADE. SURVEY REPORTS OF DAMAGES HAVE BEEN PREPARED BY THE SMC AND ALSO BY DIFFERENT TRADE ORGANIZATIONS. ALL SUCH RE CORDS ETC. HAVE BEEN FILED BY SOME ASSESSEE AS EVIDENCE REGARDING T HE DESTRUCTION CLAIMED BY THE FLOOD. IN THE CASE OF THE ASSESSEE NO SUCH EVIDENCE WAS FILED BEFORE THE AO NOR HAS ANY BEEN FILED BEF ORE ME IN APPELLATE PROCEEDINGS EXCEPT FOR AN AFFIDAVIT. SU CH AFFIDAVITS ARE BASICALLY SELF-SERVING UNLESS SUPPORTED BY SOME CO RROBORATIVE EVIDENCE. THE TOTAL EXPENSES CLAIMED WAS TO THE E XTENT OF RS.1.65 CRORES AND NOT A SINGLE ITEM HAS BEEN SUPPORTED BY ANY EVIDENCE WHATSOEVER WHICH MEANS THAT ALL SUCH EXPENSES ESP ECIALLY THOSE LISTED BY THE AO IN PARA 10 WERE NOT VERIFIABLE . AS A RESULT IT COULD NOT BE ESTABLISHED THAT SUCH EXPENSES HAD BEE N WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF THE BUSINES S. TO MAKE THEM ADMISSIBLE AS DEDUCTION U/S.37(1) OF THE IT ACT TH E VERIFICATION OF THE ALL SUCH EXPENSES WAS NECESSARY SINCE THE NET PROFIT DISCLOSED ITA NO.3280/AHD/2008(BY REVENUE) AND CO NO.289/AHD/2008 (BY ASSESSEE) ITO VS. M/S.NARENDRA DHIRUBHAI DESAI ASST.YEAR 2005-06 - 5 - WAS LESS THAN 1% OF THE GROSS PROFIT WHICH MEANS TH AT THE GROSS PROFIT RATIO DISCLOSED AT 26.42% WAS REDUCED TO AL MOST NOTHING IN THE PROFIT & LOSS ACCOUNT. 7.2. TAKING INTO ACCOUNT THE ABOVE FACTS AND CIRCU MSTANCES I HAVE COME TO THE CONSIDERED CONCLUSION THAT THE AO WAS FULLY JUSTIFIED IN DISALLOWING A PART OF EXPENSES. HOWEV ER I AM OF THE VIEW THAT IT WOULD MEET THE ENDS OF JUSTICE IF THE DISALLOWANCE IS RESTRICTED TO 10% INSTEAD OF 20%. THE A.O. IS DIR ECTED TO TAKE ACTION ACCORDINGLY. 4. THE LEARNED DEPARTMENTAL REPRESENTATIVE SHRI A.K .KHANDELWAL APPEARED FOR THE REVENUE DEPARTMENT AND LEARNED AUT HORISED REPRESENTATIVE SHRI HARDIK VORA HAS APPEARED FOR T HE ASSESSEE. BOTH THE SIDES HAVE RESPECTIVELY RELIED UPON THE ORDERS OF T HE ASSESSING OFFICER AND LEARNED CIT(APPEALS) HOWEVER LEARNED AUTHORIS ED REPRESENTATIVE OF THE ASSESSEE HAS FURTHER ADDED THAT SINCE THE A DDITION AS WELL AS THE PART RELIEF WERE GIVEN MERELY ON ESTIMATION HENCE SUCH AN ADHOCISM MUST NOT BE APPROVED. 5. WE HAVE HEARD BOTH THE SIDES AND ALSO CAREFULLY EXAMINED THE FACTS OF THE CASE IN THE LIGHT OF THE ORDERS OF THE AUTHO RITIES BELOW. THIS IS A SIMPLE CASE TO PUT ONE ESTIMATE AGAINST ANOTHER EST IMATE AS ADOPTED BY ASSESSING OFFICER & LEARNED CIT(APPEALS) RESPECTIVE LY. ON ONE HAND THE ASSESSING OFFICER HAS DISALLOWED THE EXPENDITUR E BY ADOPTING AN ESTIMATE OF PERCENTAGE AT 20% WHILE THE LEARNED CI T(APPEALS) HAS PARTLY SUSTAINED BY REDUCING THE DISALLOWANCE AFTER ADOPTING AN ESTIMATED PERCENTAGE AT 10%. NEVERTHLESS THE CONTENTION OF THE ASSESSEE WAS THAT THE EXPENDITURE SUCH AS INTEREST BONUS DISCOUNT ETC. WERE LOWER IN ITA NO.3280/AHD/2008(BY REVENUE) AND CO NO.289/AHD/2008 (BY ASSESSEE) ITO VS. M/S.NARENDRA DHIRUBHAI DESAI ASST.YEAR 2005-06 - 6 - PERCENTAGE COMPARING THE PAST YEARS BOOK RESULTS; MOREOVER CLAIMED TO BE EVIDENCED BY TDS CERTIFICATE ETC. WHICH WERE PR OCURED AND STATED TO BE FURNISHED BEFORE THE ASSESSING OFFICER. ADDITI ONALLY IT WAS ALSO PLEADED THAT THE LOSS OF BOOKS OF ACCOUNTS WAS DUE TO FORCE MAJEURE WHICH HAS ALSO BEEN AFFIRMED BY FURNISHING AN AFFI DAVIT BEFORE THE AO. ACCORDING TO US UNDOUBTEDLY THESE SUBMISSIONS ARE QUITE GENERAL IN NATURE SO THAT MUST NOT SUBSTITUTE THE PRIMARY ONUS OF FURNISHING OF REQUISITE DETAILS AS AFFIXED ON THE ASSESSEE. AN Y CLAIM OF EXPENDITURE HAS TO BE SUPPORTED BY COGENT EVIDENCE WHICH WAS AD MITTEDLY LACKING IN THE PRESENT CASE. THE LEARNED CIT(APPEALS) HAS APP RECIATED THE FACTS OF THE CASE AND THEREAFTER THOUGHT IT PROPER TO GIVE ONLY PART RELIEF. SINCE THE ASSESSEE HAS NOT IMPROVED HIS CASE EVEN BEFORE THIS FORUM BY FILING ANY EVIDENCE MAY BE A COGENT ONE; RATHER FAILED T O SUBSTANTIATE HIS CASE MORE THAN WHAT WAS EXPLAINED TO LEARNED CIT(APPEALS ) HENCE WE ARE ALSO OF THE OPINION THAT LEARNED CIT(APPEALS) WAS R EASONABLE AND FAIR TO GIVE A PART RELIEF TO THE ASSESSEE. BY APPROVING THE SAID REASONING OF LEARNED CIT(APPEALS) ATLEAST THIS ASSESSEE SHALL NOW PAY SOME TAX ON A HUGE TURNOVER OF MORE THAN RS.6 CRORES INSTEAD OF DECLARING NIL INCOME. GENERALLY AN ESTIMATION OR ADHOCISM IS N OT APPROVED BY US BUT SPARINGLY A CERTAIN DEGREE OF GUESS-WORK OR A BEST JUDGEMENT OF THE REVENUE OFFICERS HAS TO BE APPROVED AND THAT TOO DU E TO NON-COMPLIANCE OR INCOMPLETE COMPLIANCE BY THE ASSESSEE FOR WHICH HE HIMSELF IS TO BE BLAMED. IF THERE IS NO ARBITRARINESS IN THAT ADHOCI SM OR ESTIMATION AND A REASONABLE APPROACH HAS BEEN ADOPTED BY THE REVENUE DEPARTMENT THEN WE HAVE TO CONFIRM SUCH OVERRIDING POWERS GIVEN TO REVENUE OFFICERS IN ITA NO.3280/AHD/2008(BY REVENUE) AND CO NO.289/AHD/2008 (BY ASSESSEE) ITO VS. M/S.NARENDRA DHIRUBHAI DESAI ASST.YEAR 2005-06 - 7 - EXCEPTIONAL CIRCUMSTANCES. THIS APPEAL CAN BE SAI D TO HAD FALLEN IN SUCH A CATEGORY OF EXCEPTIONAL CASE. WE ARE THEREFORE OF THE VIEW THAT THE PERCENTAG E AS ADOPTED BY THE LEARNED CIT(APPEALS) HAS TO BE AFFIRMED. WE ORDER ACCORDINGLY. WITH THE RESULT REVENUES GROUND IS DISMISSED. ASSESSEES CROSS OBJECTION NO.289/AHD/2008 (ARISING OUT OF ITA NO.3280/AHD/2008) 7. SINCE THE VIEW TAKEN BY THE LEARNED CIT(APPEALS ) AND THE SAID PART RELIEF GRANTED HAS BEEN AFFIRMED BY US IN THE FOREGOING PARAS AND WE HAVE NOT DISTURBED THE SAID PERCENTAGE THEREFORE THE OBJECTION AS RAISED BY THE CROSS OBJECTOR I.E. ASSESSEE IS HEREBY DISM ISSED. 8. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS ALSO DISMI SSED. ORDER SIGNED DATED AND PRONOUNCED IN THE COURT ON 9 TH JULY 2010. SD/- SD/- ( G.D.AGRAWAL ) ( MUKUL SHRAWAT ) VICE PRESIDENT (AZ) JUDICIAL MEMBER AHMEDABAD; DATED 09/ 07 /2010 T.C. NAIR SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEP ARTMENT. 3. THE CIT CONCERNED. 4. THE LD. CIT(A PPEALS)-II SURAT 5. THE DR AHMEDABAD BENCH. 6. THE GUARD FILE. BY ORDER //TRUE COPY// (DY./ASSTT.REGISTRAR) ITAT AHMEDABAD