DCIT, MUZAFFARNAGAR vs. M/S. RAVI ORGANICS LTD., MUZAFFARNAGAR

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ITA 3670/DEL/2017Status: DisposedITAT Delhi10 August 2021AY 2012-135 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The CIT(A) deleted the addition, holding that the AO's rejection of books was ad hoc and lacked specific findings of defects. The Tribunal upheld the CIT(A)'s decision, finding no factual error in the deletion.

What were the facts?

The Assessing Officer (AO) rejected the assessee's books of account due to a significant drop in the gross profit (GP) rate from 6.55% to 0.23% and made an addition. The AO cited unverified expenses due to improperly maintained bills/vouchers.

What were the issues?

Whether the AO was justified in rejecting the assessee's books of account and making an addition based on a lower GP rate without pointing out specific defects.

Which sections of the Income-tax Act were involved?

Section 145(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI ‘F’ BENCH,

Before: SHRI N.K. BILLAIYA, & MS. MADHUMITA ROY

For Appellant: Shri M.P. Rastogi, Adv
Hearing: 10.08.2021Pronounced: 10.08.2021

PER N.K. BILLAIYA, ACCOUNTANT MEMBER,

1.

This appeal by the Revenue is preferred against the order of the Commissioner of Income Tax [Appeals], Muzaffarnagar dated 06.03.2017 pertaining to Assessment Year 2012-13.

2.

The solitary grievance of the Revenue is that the ld. CIT(A) erred in deleting the addition of Rs. 3,85,62,210/- made on account of low gross profit rate after rejecting the books of account.

3.

Representative of both the sides were heard at length. Case records carefully perused.

4.

Briefly stated, the facts of the case are that during the course of scrutiny assessment proceedings, the Assessing Officer specifically required the assessee to justify the g.p. of the year under consideration alongwith comparative trading results of last two years.

The assessee furnished necessary details from which the Assessing Officer noticed that during the year, the g.p. declared by the assessee is 0.23% as against 6.55% declared last year.

5.

The Assessing Officer observed that some bills/vouchers were not properly maintained and therefore, in the absence of the same, the expenses debited to the profit and loss account are not fully verifiable.

Applying g.p. rate of 6.55%, the Assessing Officer made addition of Rs. 3,85,62,210/-.

6.

Before the ld. CIT(A), the assessee explained the nature of its business and vehemently contended that the books of account are audited which were produced and examined by the Assessing Officer.

It was also brought to the notice of the ld. CIT(A) that the Assessing Officer has not pointed out any specific defect or error in the books of account and has made general observations for adopting the g.p rate of 6.55%.

5. After considering the facts and submissions and after examining the documentary evidences, the ld. CIT(A) held as under:

“On consideration of facts of the case, it is noted from the assessment order that books of account along with bills/vouchers were produced before the AG which have been test checked The AO has not pointed out any specific defect in the bills/vouchers. Not even a single instance has been mentioned in the assessment order to my discrepancy. Thus the observations of the AO are general and vague. The appellant has relied upon audited books of account along with other records such as Excise, VAT in its support. The reasons for decline in GP have been explained before AO vide submission dated 20-.03-2015. The approach of the AO in rejecting the book of account has been ad hoc. It has been provided u/s 145(3) of the Act that once Lts.ucu that books of account maintained by the appellant are not complete or correct or method of accounting has not been regularly, followed then such books of account are to be rejected. The AO has not made any such specific finding before or the same u/s 145(3) of the Act. The satisfaction of the AO has been mechanical and general. Under the facts, it is held that the AO has not been justified to reject the books of account u/s 145(3) of the Act and thereby m making addition of Rs. 3,85,62,210/-.. The same is hereby deleted. Ground of appeal No.2 is allowed, “

6. Before us, the ld. DR could not point out any factual error or infirmity in the above findings of the ld. CIT(A). We, therefore, do not find any reason to interfere with the findings of the ld. CIT(A). Ground raised by the Revenue stands dismissed.

7.

In the result, the appeal filed by the Revenue in is dismissed.

The order is pronounced in the open court on 10.08.2021 in the presence of both the rival representatives.

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