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Income Tax Appellate Tribunal, “B” BENCH : BANGALORE
Before: SHRI ARUN KUMAR GARODIA & SHRI LALIET KUMAR
Assessment Year : 2009-10 Shri G.T. Umesh, BSP Compound, The Income Tax Behind Hotel Surya, Officer, vs. Hiriyur Tk., Chitradurga Ward 1, District. Chitradurga. PAN: AAOPU6237B APPELLANT RESPONDENT Assessee by : Shri Narendra Sharma, Advocate Revenue by : Shri K.R. Narayana, JCIT (DR) Date of hearing : 21.03.2019 Date of Pronouncement : 29.03.2019 O R D E R
Per Shri A.K. Garodia, Accountant Member
This appeal is filed by the assessee and the same is directed against the order of ld. CIT(A), Davangere dated 22.02.2017 for Assessment Year 2009-10.
The grounds raised
by the assessee are as under. “1. The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case.
2. The learned CIT[A] is not justified in directing the learned A.O to estimate the gross profit at 14.09% as against 20% adopted by the learned A.O under the facts and in the circumstances of the appellant's case.
3. The learned CIT[A] ought to have appreciated that the appellant has maintained the books of accounts which are audited u/s 44AB of the Act and produced before the learned A.O. in course of assessment proceedings and no defects have been found by the learned A.O. for rejecting the income reported by the appellant based the books of accounts maintained and consequently, the direction of the learned CIT[A] to estimate the income at 14.09% deserves to be vacated.
4. Without prejudice to the above, the income estimated is excessive and liable to be reduced substantially.
Page 2 of 4 5. Without prejudice to the right to seek waiver with the Hon'ble CCIT/DG, the appellant denies himself liable to be charged to interest u/s.234B and 234D of the Act, which under the facts and in the circumstances of the appellant's case deserves to be cancelled.
6. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs.”
At the very outset, it was submitted by ld. AR of assessee that this appeal of assessee should be decided in favour of the assessee by following the Tribunal order rendered in the case of brother of the assessee Shri G.T. Babu Reddy vs. ITO in dated 31.07.2018 rendered under similar facts. He submitted a copy of this Tribunal order. The ld. DR of revenue supported the order of CIT(A).
We have considered the rival submissions. We find that in the present case, the AO has estimated the income of the assessee by applying GP @ 20% on the basis of reply received from KSBCL authorities in which it is stated that the assessee is getting 20% profit on sale of liquor. The AO in Para 2 of the assessment order has noted that this was submitted by assessee before him that the assessee cannot sell the liquor with higher profit because of tough competition which forces the assessee to sell at low rate. From the assessment order, it is seen that there is no mention about rejection of books of accounts maintained by the assessee. Now in the light of these facts, we examine the applicability of Tribunal order cited by ld. AR of assessee. In this case also, as against GP rate of 12.61% shown by assessee, the AO adopted GP rate of 20% after making enquiries from KSBCL authorities. In Para no. 6 of this Tribunal order, the Tribunal held that if the AO made the estimation without rejecting the books of accounts, such an assessment is liable to be set aside. The Tribunal has followed the judgment of Hon'ble Karnataka High Court rendered in the case of CIT Vs. Anil Kumar & Co. as reported in [2016] 67 taxmann.com 278 (Kar). For ready reference, we reproduce Para no. 6 of this Tribunal order.
Page 3 of 4 “06. We have heard the rival contentions and perused the record. We find that the High Courts in the matter of CIT v. Anil Kumar & Co., [(2016) 67 Taxmann.com 278 (Kar)1, CIT v. Symphony Comfort System Ltd [(2013) 35 taxmann.com 533 (Guj)1 and PCIT v. Marg Ltd [(2017) 84 taxmann.com 52 (Mad), have held that no addition can be made on estimated basis without rejecting books of account of assessee. In Marg Ltd (supra), the assessment order is passed u/s.144 of the Act, without rejecting the books of account. However, if we look into the provision of Section 144 of the Act then, it is clear that section 144 works in various situations mentioned in 144(1)(a), (b) and (c). Besides that a special provision is also given u/s.145 (3) where the AO has been given the power to estimate the income, in case he is not satisfied with the correctness or completeness of the account, to make an assessment u/s.144 of the Act. In the present case, the AO estimated the income based on the information obtained from KSBCL authorities disclosing the percentage of profit on sale fixed by the Karnataka government. It is not the case of the AO that the books were not properly maintained. Not even a word has been whispered by the AO that the books were not in accordance with the method of accounting, or were incorrect / incomplete. In our view, the laws commands us to set aside the assessment made on the basis of estimation, if the AO made the estimation without rejecting the books of account. In the matter of Anil Kumar (supra), the Hon’ble jurisdictional High Court has held as under : 11. In so far as the estimation of gross profit made by the Assessing Officer modified by the Commissioner of Income-tax (Appeals), the Tribunal has rightly held that when the books of account of the assessee had not been rejected and assessment having not been framed under section 144 of the Income-tax Act the said authorities were in error in resorting to an estimation of income and such exercise undertaken by them was not sustainable. Section 145(3) of the Act lays down that the Assessing Officer can proceed to make assessment to the best of his judgment under section 144 of the Act only in the event of not being satisfied with the correctness of the accounts produced by the assessee. In the instant case the Assessing Officer has not rejected the books of account of the assessee. To put it differently the Assessing Officer has not made out a case that conditions laid in Section 145(3) of the Act are satisfied for rejection of the books of account. Thus, when the books of account are maintained by the assessee in accordance with the system of accounting, in the regular course of his business, same would form the basis for computation of income. In the instant case it is noticed that neither the Assessing Officer nor CIT(Appeals) have rejected the books of account maintained by the assessee in the course of the business. As such tribunal has rightly rejected or set aside the partial addition made by Assessing Officer for arriving at gross profit and sustained by the CIT(Appeals) and rightly held that entire addition made by the Page 4 of 4 Assessing Officer was liable to be deleted. The said finding is based on sound appreciation of facts and it does not give rise for framing substantial question of law. In view of the above, we do not find that the order passed by the CIT (A) is in accordance with law. Therefore we hold that the assessee is entitled to the relief claimed.”
The ld. DR of revenue could not point out any difference in facts in the present case as compared with facts of this case and hence, respectfully following this Tribunal order and in turn following the judgment of Hon'ble Karnataka High Court rendered in the case of CIT Vs. Anil Kumar & Co. (supra), we hold that the addition made by the AO by estimating the GP without rejecting books of accounts is not justified and hence, we delete the same.
In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on the date mentioned on the caption page.