SHYAMLAL AGRAWAL vs. INCOME TAX OFFICER

TAXC/46/2009HC ChhattisgarhCGHC01001410200926 January 2010Author: HON'BLE SHRI JUSTICE DHIRENDRA MISHRA,HON'BLE SHRI JUSTICE RANGNATH CHANDRAKAR8 pages
AI SummaryDismissed

What were the facts?

The assessee, M/s Shyamlal Agrawal, filed its income tax return for Assessment Year 2004-05 on March 31, 2005, declaring an income of Rs. 1,47,347/- along with an audit report. The case was selected for scrutiny. On August 1, 2005, the bag containing the assessee's books of accounts was stolen during transit. Consequently, the assessee could not produce the books of accounts and vouchers for expenses claimed. The Assessing Officer (AO), with directions from the Additional CIT under Section 144A, rejected the assessee's accounts, adopted a turnover of Rs. 5,46,76,434/-, applied a gross profit rate of 12.65% (based on preceding years), and made an addition of Rs. 11,19,098/-. The total taxable income was assessed at Rs. 12,66,440/-. The CIT(Appeals) partly allowed the appeal, estimating the gross profit at 11% and making an addition of Rs. 2,16,934/-. The Revenue appealed to the Income Tax Appellate Tribunal (ITAT).

What did the High Court hold?

The High Court, after considering the findings of the AO and the reasons assigned by the Tribunal, held that the procedure followed by the Tribunal for estimating the gross profit at 12% after adopting the total turnover for Assessment Year 2003-04 was just and proper. The Court found that the Tribunal had pointed out an inconsistency in the assessee's explanation regarding recoveries of Rs. 35,26,278/- in the assessment year 2003-04, which was accepted by the CIT(A). The Tribunal's observation that the CIT(A) had not brought any material on record for estimating the gross profit at 11% was noted, especially when the assessee itself had shown a gross profit of 12.65% for the subsequent year. The Court concluded that the Tribunal's estimation of 12% gross profit was justified and did not give rise to any substantial question of law as proposed by the appellant. The appeal was dismissed.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal's finding that the gross profit rate shown was low is contrary to facts and perverse? (Question of law) 2. Whether the inability to produce account books can lead to a best judgment assessment when an audit report is on record? (Question of mixed law and fact, concerning Section 144 and Section 145(3) of the Income Tax Act, 1961) 3. Whether recoveries made for delay in the execution of contract works form part of the gross profit of the contractor? (Question of law) Assessee's contentions: The assessee argued that accounts can only be rejected under Section 145(3) if they are not correct, complete, or if the method of accounting is not followed, not merely because books could not be produced. The assessee highlighted that an audit report in Form 3CB was filed, containing no adverse remarks and certifying agreement with the books of accounts. Form 3CD also stated that books were maintained and examined. The assessee relied on the judgment in Additional Commissioner of Income Tax, Delhi-II vs. Jay Engineering Works Ltd. (1979) 113 ITR 389. Revenue's contentions: The Revenue contended that in the absence of books of accounts and vouchers, the profit earned could not be ascertained. The AO estimated the profit at 12.65% based on the turnover. The Revenue submitted that the Tribunal rightly rejected the estimation of gross profit at 11% by the CIT(A) for valid reasons and that no substantial question of law arises.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 144A,Section 145(3),Section 144,Section 44AB,Section 143(1),Section 143(2),Section 142(1),Section 43B,Section 227(2),Section 227(3)(b),Section 227(3)(c)

AI-generated summary — verify with the full judgment below

TH /}j^-- 13 .ol-TO WtW COWTOf CWATTISGAW AT BILASFUR TaxCase No,46 pf 2009 '> APPELLANT: (Assessee) Ws Shyamlal AgnwK^ Versus RESPONDENT: (Revenue) Income Tax C?fficer OR&ER FOR CONSIDERATEON HON-BLE SHRI R.N. CHANDRAKAR. J Dhirendra Mishra Judge OL<^-t-ejz_ ~<f ~~~ R.N. Chandrakar Judge POST FOROR&ER ON •S-f 'JAWAW. 2010 Dhirendra Mishra Judge sv'~f. 1 ir—y^'~"£;i ^c •'sS^ ^-

HI6H COURT OF CHHATTIS6ARH AT BILASPUR Tax Case No.46 of 2009 APPELLANT: (Assessee) M/s Shyamlal Agrawal (Sohagpur) 36 Subhash Nagar, Kotra Road, Raigarh (CG) Versus RESPONDENT: (Revenue) Income Tax Officer Ward I, Aoyakar Bhawan, Chakradhar Nagar, Raigarh (C&) (Appeals under Section 260-A of the Income Tax Act, 1961) Present. Shri Neelabh Dubey, counsel for appetlant/assessee. Shri Rajeev Shrivastava, Standing Counsel for the respondent/revenue. Division Bench: Honlale Shri Dhirendra Mishra & Hon'ble Shri ft.N. Chandrakar. JJ. OR & E R (Passed on °5'?'f^January. 2010) The foilowing order of the Court was passed by Dhirendra Mishra, J.

1.

The appetlant/assessee has preferred this appeal under Section 260A of the Income Tax Act, 1961 (in short- "the Act") against the order of Annexure A/3 of

The order continues below.

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