BULU GHOSH,KOLKATA vs. ITO,WD-33(2),KOLKATA, KOLKATA

O R D E R

PER SONJOY SARMA, JM:

i. FOR THAT the orders passed by the authorities below are arbitrary and capricious in nature: ii. FOR THAT both the authorities below failed to appreciate from the audited profit and loss account produced that the appellant had to incur certain administrative expenses like staff salary/bonus and statutory expenses like VAT/PF/ESI, which made an adverse impact, lead to net loss from the contractual business; iii. FOR THAT when the appellant had duly produced the audited report, final accounts, bank statement of the business at the assessment stage and Profit & Loss (PL) Account, Schedule to PL Account, Purchase Ledger, Paid Challans, Summary of Wages, Hire Charges, Staff Salary, Provident Fund and ESI at the e-proceeding appellate stage, there is no scope to make any estimation or resorting to section 44AD of the Act, when it is Bulu Ghosh A.Y. 2016-17 evident that the net loss shown (governed by the other factors) had no immediate nexus with the contractual receipts, as such the same cannot be acclaimed as discrepancy; iv. FOR THAT at the e-proceeding appellate stage, the Ld.CIT, NFAC totally lost sight of the adjournment prayer and the supporting evidence filed, as such in a mechanical manner held that the expenses are not commensurate with the gross contractual receipts, when it is evident that all the relevant documents were filed on numerous occasions, whereupon there was no room for presumption of inflated expenses to arrive at loss figure shown or scope to support the estimation of profit @ 8% of receipt; 2. Brief facts of the case are that the assessee filed return of income for the A.Y. 2016-17. The return of income was duly processed u/s 143(1) of the I.T. Act. Subsequently, the case of the assessee was selected for scrutiny through CASS followed by notices issued u/s 143(2) and 142(1) of the Act. In compliance to the notices, the ld. AR of the assessee appeared before the AO from time to time and furnished necessary details as asked for by providing copy of audit report along with P & L A/c and balance sheet for the year ended 31.3.2016. The ld. AO examined the documents which were produced before him during the assessment proceeding and find that assessee had reflected net loss of Rs. 13,80,362/- from contractual business whereas as per 26AS details of total value of contract works arrived at to the tune of Rs. 22,13,069/-. On this issue, the ld. AO asked the assessee to explain the discrepancy. However, the assessee could not furnish any documentary evidence to reconcile the same within the stipulated time provided by the AO. Thus the ld. AO decided to add an amount of Rs. 1,77,046/- by calculating 8% of total contract value of Rs. 22,13,070/- by resorting to the provisions of section 44AD of the Act.

Bulu Ghosh A.Y. 2016-17 4. Feeling dissatisfied with the above order, assessee preferred the instant appeal before the Tribunal. The main grievance of the assessee in the appeal is that assessee maintained complete books of accounts and also filed audit report. There is no whisper in the assessment order about the mistake in the books of account. The ld. AO has not invoked the provision of section 145(3) of the Act and without rejecting the books of accounts of addition cannot be made as held by the Rajasthan High Court in the case of CIT vs Maharaja Shree Umaid Mills Ltd. (192 ITR 565).

Respectfully following the judgement of CIT vs Maharaja Shree Umaid Mills Ltd. (supra) based on the discussion on facts recorded herein above. The contentions of assessee in ground no. 3 is hereby allowed

Bulu Ghosh A.Y. 2016-17 and direct the AO to delete the addition made in the hands of assessee. Ground no. 1, 2 & 4 are being general in nature does not require any adjudication and consequential in nature.