PRINCIPAL COMMISSIONER OF INCOME TAX RAJKOT 2 vs. STANDARD AGRO ENGINEERS

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TAXAP/1090/2018HC GujaratGJHC24048404201804 September 2018Bench: HONOURABLE MR. JUSTICE AKIL KURESHI,HONOURABLE MR. JUSTICE B.N. KARIA3 pages

AI SummaryDismissed

What did the High Court hold?

The High Court held that no substantial question of law arose in the appeal. Regarding the addition on account of gross profit (Question A), the Court noted that the AO rejected the book results and made an addition at 5% of turnover. The CIT(Appeals) reduced it to 1.51% based on past records, and the Tribunal confirmed this. The Court found this to be a fact-based issue and saw no reason to interfere. For unexplained cash credit (Question B), the CIT(Appeals) and Tribunal found that the assessee had satisfactorily explained the entries, and thus, no question of law arose. Concerning depreciation of cars and guest house expenses (Question C), the CIT(Appeals) and Tribunal found that the cars were purchased from the assessee company and utilized by directors, implying these were not issues of law. For membership fees and MOT charges (Question D), the CIT(Appeals) accepted supporting material placed before him, which the Tribunal confirmed, finding no substantial question of law.

What were the facts?

The Revenue, Principal Commissioner of Income Tax, Rajkot, filed an appeal against the order of the Income-tax Appellate Tribunal (ITAT) dated January 25, 2018. The appeal challenges the ITAT's deletion of additions made by the Assessing Officer (AO) concerning the assessee, Standard Agro Engineers. The disputed amounts include Rs. 1,55,39,185 on account of gross profit, Rs. 52,74,173 for unexplained cash credit, Rs. 1,44,674 for depreciation of cars and Rs. 90,109 on guest house expenses, and Rs. 2,55,883 for membership fees and MOT charges. The CIT(Appeals) had previously modified some of these additions before the ITAT's decision.

What were the issues?

The Tribunal had to decide the following substantial questions of law: 1. Whether the Appellate Tribunal erred in deleting the addition of Rs. 1,55,39,185 on account of gross profit of the assessee? 2. Whether the Appellate Tribunal erred in deleting the addition of Rs. 52,74,173 on account of unexplained cash credit? 3. Whether the Appellate Tribunal erred in deleting the addition of Rs. 1,44,674 made on account of depreciation of cars and depreciation of Rs. 90,109 on guest house expenses? 4. Whether the Appellate Tribunal erred in deleting the addition of Rs. 2,55,883 on account of membership fees and MOT charges? Assessee's Contentions: The judgment does not record specific contentions made by the assessee. The Tribunal's decisions on the issues indicate that the assessee had provided explanations and supporting materials which were accepted by the lower appellate authorities and the Tribunal. Revenue's Contentions: The Revenue contended that the ITAT erred in deleting the additions made by the AO on account of gross profit, unexplained cash credit, depreciation, and membership fees/MOT charges. The Revenue's appeal is based on the premise that these deletions were erroneous in law and fact.

AI-generated summary — verify with the full judgment below

C/TAXAP/1090/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 1090 of 2018 ========================================================== PRINCIPAL COMMISSIONER OF INCOME TAX RAJKOT 2 Versus STANDARD AGRO ENGINEERS ========================================================== Appearance: MR MR BHATT, SENIOR ADVOCATE with MRS MAUNA M BHATT(174) for the PETITIONER(s) No. 1 for the RESPONDENT(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE B.N. KARIA

Date : 04/09/2018

ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI)

Revenue is in appeal against the judgment of the Incometax Appellate Tribunal dated 25.1.2018 raising following substantial questions of law :

“(A) Whether the Appellate Tribunal has erred in law and on facts in deleting the addition Rs.1,55,39,185/ made on account of gross profit of the assessee ?

(B) Whether the Appellate Tribunal has erred in law and on facts in deleting the addition of Rs.52,74,173/ on account of unexplained cash credit ?

(C) Whether the Appellate Tribunal has erred in law and on facts in deleting the addition of Rs.1,44,674/ made on account Page 1 of 3

C/TAXAP/1090/2018 ORDER of depreciation of cars and depreciation of Rs.90,109/ on guest house expenses ?

(D) Whether the Appellate Tribunal has erred in law and on facts in deleting the addition made by AO of Rs.2,55,883/ on account of membership fees and MOT charges ?”

Question (A) pertains to the deletion made by the Assessing Officer on the basis of revised gross profit ratio. The Assessing Officer rejected the book results of the assessee and made addition at the rate of 5% of the turn over by way of profit in appeal. CIT (Appeals) reduced the same to 1.51% on the basis of past records and other relevant materials. This decision was confirmed by the Tribunal.

Having perused the decisions on record we do not find any reason to interfere with the CIT (Appeals) judgment. The results have passed several years in order to come to the GP rate. The Tribunal confirmed such decision. Entire issue is thus fact based.

Question (B) pertains to deletion and addition made by the Assessing Officer on account of unexplained cash credit. CIT (Appeals) and Tribunal noted that the assessee had satisfactorily explained the Page 2 of 3

C/TAXAP/1090/2018 ORDER entries. Here again no question of law arises.

Question (C) pertains to the addition made by the assessee by disallowing the depreciation of cars and guesthouse expenses. The CIT (Appeals) and Tribunal found that the firm purchased the car was from the assessee company and were utilized by the directors. 6. Question (D) pertains to the deletion and addition made by the Assessing Officer on account of membership fees and Merchant Over Time Charges. CIT (Appeals) noted that the assessee could not produce necessary material in support of such expenditure before the Assessing Officer due to shortage of time. He noted that MOT charges were paid to the Excise Department. Thus, supporting material was placed before the CIT (Appeals) which was accepted. The Tribunal confirmed this view. No substantial question of law arises.

Tax appeal is dismissed. (AKIL KURESHI, J) (B.N. KARIA, J) K.K. SAIYED Page 3 of 3

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