THAN SINGH,HARYANA vs. ITO, WARD-2, HARYANA

ORDER

Per Dr. B. R. R. Kumar, Accountant Member:

2. The Assessee has raised the following grounds of appeal:

1. That the order of the Ld. CIT(A) is against law and facts.

2. That the Ld. CIT(A) erred in confirming the addition of Rs. 71,81,964/- made by the Ld. AO by applying 8% NP rate u/s 44AD on the gross receipts of the appellant.

3. That the Ld. CIT(A) erred in confirming the order of the Ld. AO in applying the provisions of Section 44AD on the appellant although the assessee doesn’t fall within the preview of the Section 44AD.

4. That the Ld. CIT(A) erred in confirming the order of the Ld. AO although the Ld. AO wrongly refused to accept the books of accounts of the appellant.

5. Without conceding on merits, NP rate applied of 8% on the gross receipts of the appellant is on much higher side, since the assessee is doing business in milk which is perishable item and the NP rate applied should not be more than 1%.”

Assessee was running a Milk Chilling Plant under a proprietorship firm namely M/s Than Singh Milk Chilling Plant at Village Kanina, Mohindergarh during the year under proceedings. Return declaring an income of Rs. 2,27,380/- was filed on 17.07.2013. The assessee has declared net profit of Rs. 3,03,166/- from gross sales of milk of worth Rs,9,35,64,115/-. During the assessment proceedings, the assessee failed to produce books of accounts, bills and vouchers etc. In absence of books of accounts and vouchers, the profit declared the assessee was not accepted by the AO on the following grounds:-

(1) The assessee has shown his gross receipts at Rs. 9,35,64,115/- against purchases of Rs. 9,08,29,490/- during the year under consideration but failed to justify the correctness of the sales and purchases.

(2) The assessee has not produced his books of accounts of the year under consideration for examination with his financial statements. Thus, the statement of the assessee was recorded on oath in pursuance of summon u/s 131 on 07.01.2016 where he has categorically denied of maintaining any books of accounts (statement reproduced above). It is pertinent to mention here that the statement was recorded in presence of Counsel of the assessee.

(3) In absence of books of accounts, the sales and purchases could not be verified as a result the financial statements cannot be relied upon.

(4) The assessee has not furnished any bills / voucher and justification of the expenses debited to Profit-Loss account.

(5) On the basis of details of debtors and creditors furnished by the assessee, summons was issued to these persons. One of them Sh. Mahender S/o Sh. Ram Swaroop deposed in his statement that he had advanced a cash loan to the assessee. As per Balance sheet of the assessee, he was a creditor but the person himself has stated that he had advanced a loan to the assessee that too in cash.

(6) The assessee provided the list of persons to whom salary was paid during the year. Two of them attended the office and their statement was recorded on oath. They were asked to identify the persons given in the list provided by assessee being their colleagues. Bothe of them were ignorant about the names of the persons given in list. In his statement, assessee also failed to give the name of persons employed during the year. In a small scale industry like this proprietors not only knows name of employees but also their addressees. In the instant case, even colleagues were unaware about the names given in list.

(7) Further, other creditors namely Sh. Suraj Bhan S/o Sh. Nand Lai and Sh. Sunil Modi S/o Sh. Ramotar have stated in their statement that they had supplied milk to the assessee and the payments were made through Self payee Cheque. They also stated that this practice is being followed with all the suppliers. This establishes the fact that assessee has made payments to the suppliers exceeding Rs.20,000/- otherwise than by a account payee cheque or draft. This aspect was also accepted by the assessee in his statement recorded on 07.01.2016 (reproduced above). Inspite of the facts that all these suppliers accepted in their statement that they had bank accounts. Furthermore the suppliers are not farmers but doing the business of supply of milk and supplied huge quantity of milk to the assessee since long.

(8) The information was also called for U/s 133(6) of the Act from the PNB Bank where assessee was maintaining his account to verify the facts narrated by suppliers. The bank supplied copy of account and instruments issued by the assessee for making payments to Page | 3 suppliers. A perusal of the information received from bank reveals that all the payments were made through self payee cheque and all of them exceeds Rs. 20,000/-. In this way assessee contravenes the provisions of section 40A(3) of Income Tax Act.

Keeping in view the above facts and circumstances, in absence of books of accounts, vouchers and bills etc. the profit statement submitted by the assessee are not reliable and hence not acceptable. Thus, provisions of section 44AD are applied on the gross receipts of the assessee and the income is computed.”