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Income Tax Appellate Tribunal, DELHI BENCH: ‘C’, NEW DELHI
Before: SHRI BHAVNESH SAINI & SHRI PRASHANT MAHARISHI
This appeal by the assessee has been directed against the order of Ld. CIT(A)- XXVIII, New Delhi, dated 06.11.2013 for Assessment Year 2009-10 on the following grounds:-
“1. The Ld. CIT(A) erred in fact and in law in confirming the addition of Rs. 11,78,847/- which is not only bad in Law but also against the facts and circumstances of the case.
2. The Ld. CIT(A) erred in fact and in law in confirming the action of AO for making estimation of profit @ 5% and thereby rejecting the books of accounts which is not only bad in Law but also against the facts and circumstances of the case.”
Earlier this appeal was dismissed for default vide order dated 25 May, 2017. The appeal was however restored on allowing the miscellaneous application filed by the assessee, vide order dated 04.08.2017, therefore appeal was fixed for hearing on merit.
We have heard the Ld. Representatives of both the parties and perused the material available on record.
According to the office, the appeal is time barred by 3 days. The assessee filed an application for condonation of delay stating therein that assessee has authorized the Chartered Accountant to file the appeal but there was delay on his part. The assessee was suffering from some disease at the time of filing the present appeal and he could not enquire about the filing of the appeal from the Chartered Accountant. The Assessee therefore prayed that nominal delay in filing the appeal may be condoned.
Considering the explanation of the assessee and that there is nominal delay in filing the appeal by 3 days only, we accept the explanation of the assessee and condone the delay in filing the appeal beyond period of limitation.
Briefly the facts of the case are that the assessee filed return of income declaring income of Rs. 5,30,030/-. It was taken up for scrutiny assessment. The assessee is an individual and is engaged the business of fabrication of garments for Exports houses on contract basis and has declared income from business & profession. The assessee has declared NP rate for period under consideration at 1.74% on declaring a turnover of Rs. 3,61,77,535/- as against NP rate of 1.90% in the immediately preceding year at a turnover of Rs. 1,39,95,104/-. During the course of assessment proceedings, the assessee was required to produce books of accounts along with supporting bills and vouchers for examination. However, no one attended the proceedings on appointed date. The assessee was contacted by the AO over phone on many subsequent occasions but even then nobody appeared before AO till 29.12.2011. On 29.12.2011, assessee’s Counsel appeared before AO and filed details but the books of accounts, the supporting bills and vouchers were not produced, despite given opportunity of being heard to the assessee. The AO therefore, proceeded to decide the case on the basis of the information available on record. The AO noted that assessee has been given sufficient opportunities to produce the books of accounts and the required details but the same have not been produced. The AO found from the record that assessee was required to file the details of the expenses claimed on account of Repair and Maintenance etc. because assessee did not own any fixed assets on which such expenses have been claimed. However, no detail has been furnished by the assessee.
The AO accordingly rejected the books of accounts and applied NP rate of 5% on the receipt declared by the assessee and made the addition of Rs. 11,78,847/-.
The assessee challenged the above addition and rejection of the books of account before Ld. CIT(A). The written submission of the assessee is reproduced in the Appellate Order in which assessee briefly explained that, assessee is engaged in the business of fabrication of garments as proprietorship. All the goods and materials for job work is supplied by exporter and the consumables like thread and needles are debited to the account of the assessee. All the machinery for job work is arranged by the contractee and the repair part is debited to the account of assessee. The AO made addition without giving an opportunity to the assessee to rebut the allegation. The AO was not justified in estimating the Net Profit by applying NP rate of 5%. All the expenses are entered into the books of accounts which are audited. The AO failed to appreciate that total expenses of Rs. 355.47 lacs are booked in the books of accounts, in which a sum of Rs. 3.02 lacs were incurred in cash which constitutes less than 1% of the expenses. It was further submitted that assessee has been showing NP rate in the range of 1.5% to 2% since inception of business, therefore, estimation of the NP rate of 5% is unjustified.
The Ld. CIT(A) considering the submissions of the assessee in the light of the material on record, noted that the assessee inspite of repeated opportunities did not comply with the order of the AO and did not produce the books of accounts alongwith supporting bills and vouchers to substantiate the declared results. The details of Repair and Maintenance expenses were not justified because the assessee did not own any fixed assets. The Ld. CIT(A), further, noted that whatever claim was made by the assessee was not proved. The Ld. CIT(A) in order to verify the expenses claimed by assessee, verified the evidence of salary sheet and evidence of disbursement of salary for part period. The Ld. CIT(A) on perusal of the same found that the signature of the number of persons to whom salary has been claimed to have been paid did not tally in various months i.e. the signature of the same person who had allegedly received the salary did not match with his signature in the preceding month even though the other particulars i.e. name, amount of salary etc. were same. The Ld. CIT(A) recorded specific instance when the signature did not match for different months in respect of the same person. In most of the cases against ESI number, it has been mentioned that “Applied For”. None of the signatures were affixed on revenue stamp. The Ld. CIT(A) also noted that assessee was asked to justify the claim of expenses of Rs. 2.61 crores claimed as salary against turnover of Rs. 3.61 crores. The assessee was directed to produce to copy of agreement for job work and evidence of expenditure on thread and needle and conveyance expenses and the salary sheets of Palwal Craft. However, the details asked for were not produced. The Ld. CIT(A) accordingly confirm the rejection of the books of account and estimation of NP rate of 5% because the expenses debited in the books of accounts were not authentic, and were not supported by bills and vouchers. The expenses were found to be inflated, therefore this appeal is dismissed by the Ld. CIT(A).
After considering the rival contentions, we do not find any justification to interfere in the orders of the authorities below. It is an admitted fact that the assessee did not produce books of accounts, supporting bills and vouchers of the expenses before the authorities below. The Ld. Counsel for the assessee, during the course of arguments had not been able to substantiate, if any, books of account produce were before the authorities below along with supporting documents. The assessee did not produce the books of accounts and supporting documents even before the Tribunal to justify the claim of deduction of the expenditure. Therefore, authorities below were justified in rejecting the books of accounts u/s 145(3) of the IT Act, for the purpose of estimating the profit of the assessee. The Ld. Counsel for the assessee contended that books of accounts of the assessee are audited, reiterated the submissions made before the authorities below and also filed chart of NP rate applied in subsequent years for Assessment Years 2010-11 to 2012-13 ranges from 1.81%, 1.75% and 1.77%.
However, this would not help the assessee in any manner. The authorities below have specifically noted that assessee made claim of expenses on account of Repair and Maintenance but the assessee did not own any fixed assets to justify such expenses.
The assessee did not produce any evidence in support of the same. Whatever explanation was given by assessee was further examined by the Ld. CIT(A) by verifying the salary expenses. It was found from the material available on record that signature on the salary sheet did not match for preceding months. Specific instance have been given and quoted at page 7 of the Appellate Order of the Ld. CIT(A). No ESI number have been provided for the persons to whom salary payment have been made. No person has signed the salary receipt on revenue’s stamp. The assessee has declared turnover of Rs. 3.61 crores against which assessee has claimed salary expenses of Rs. 2.61 crores. Therefore, burden was upon assessee to prove that salary was paid to the persons wholly and exclusively for the purpose of business. However, the assessee did not produce complete bills and vouchers of the salary expenses and whatever detail is produced on account of salary payment, there were difference in the signature and that they were not subjected to ESI. It therefore, casts doubt on the explanation of the assessee. When the Ld. CIT(A) asked for the further explanation of the assessee with regard to expenses, salary sheet of Palwal Craft along with expenses incurred on thread and needle and conveyance expenses, the assessee’s Counsel did not appear before the Ld. CIT(A) and did not produce the required details. It would therefore shows that the assessee did not make any compliance to the query of the AO and the Ld. CIT(A).
Therefore, the sole contention of the Ld. Counsel for the assessee that books are subject to audit would not help the assessee in any manner. Since the expenses were claimed of Rs. 2.61 crores against turnover of Rs. 3.61 crores and the same have not been subjected to production of complete bills and vouchers, therefore, the claim of the assessee cannot be allowed as such. The Authorities Below were therefore justified in applying NP rate of 5%. The addition was made of Rs. 11,78,847/- to the returned income of assessee is reasonable as against huge claim of expenditure. Considering the totality of the facts and circumstances, we do not find any justification to interfere in the orders of the authorities below, therefore, we dismiss the appeal of the assessee.
In the result, appeal of the assessee is dismissed.
Order pronounced in the open court on 04/9/2018.