MOHAMMED FAREED ABDUL GANI MEMON,NAVI MUMBAI vs. ITO 28(2)(2), NAVI MUMBAI

Grounds of appeal read as under :- Additions made in the Total Income:

Brief facts of the case are as under :- The return of income was filed on 29-09-2012 by declaring total incdme at Rs.18,96,050/-, The assessee is the proprietor of M/s. SIF Enterprises and is engaged in the business of dealing in meat. The Assessing Officer noted that the statement of purchases, sales, ledger accounts of expenses, TDS details and other relevant details and information called from time to time are filed. The Assessing Officer rejected the books and estimated the profit @ 0.50%. he made further addition of Rs.36,19,405/- and Rs.62,02,016/- u/s.40A(3) of the Act and Rs.1,94,078/- as excess due and receivable. For rejecting the books the Assessing Officer observed that the assessee’s margin were quite high in first six months of the year and comparatively lower in the second half of the year. He noted that overall profit declared was very low. In this regard the assessee’s submissions were as under :- It has been stated by the appellant, vide letter dated 20-01-2015, that his accounting system is Mercantile. All the entries are made in the computer at mercantile basis. The sales tax returns are also filed according to the accounts entered in Tally. The books of accounts were produced before the Assessing Officer. Regarding less margin in the 2nd six months, appellant can't help it. In this business sometimes we get more business, sometimes we get less and sometimes we do not get any business. Every now and then the purchasing rates differ which affects the margin it was stated by the appellant vide letter dated 20.01-2015 that in the line of such business lot of exporters of meat line are there and there is very heavy competitions. In view of this, appellant has to 3 Mr. Mohammed Fareed Abdul Gani Memon keep very low rate of margin to their customers. Much of their goods are spoiled because of its nature of quality i.e. its perishable items.

Against the above order assessee appealed before learned CIT(A). learned CIT(A) confirmed the order of the Assessing Officer qua the assessee of rejection of books and substitution of GP and addition on account of difference in party balance. Against the above order assessee is in appeal before us.

Learned Counsel of the assessee submitted that assessee has submitted all necessary books of account and vouchers. He submitted that no deficiency in the record maintenance has been noted by the Assessing Officer in rejecting books of account. Hence, learned counsel pleaded that there is no cogent reason why books have been rejected. Learned counsel submitted that as the case of the assessee disclosed a profit rate of 20%, the Assessing Officer has substituted the same with his own estimate of 0.50%. That learned Counsel of the assessee submitted that no reason has been given by the Assessing Officer as to what is the basis on which he is estimating the profit at the rate of 0.50%. Hence learned counsel submitted that this is only the wild guesswork of the Assessing Officer not sustainable in law.

Per contra, learned Departmental Representative relied upon the order of authorities below. However, he could not point out the basis on which rate of profit has been estimated by the Assessing Officer.

We have carefully considered the submissions and perused the record. Upon careful consideration we note that assessee has duly submitted all necessary books of account and voucher. No deficiency in the maintenance of books has been noted. The assessee has given proper explanation as referred

Another issue raised is that addition on account of difference of Rs. 1,94,078/- between balance shown by the assessee and the one shown by one of the party.

We find that no reason has been given by the Assessing Officer to why he considered the assessee’s balance as incorrect. No enquiry whatsoever has been done with respect to the party. Without any enquiry the party balance cannot be treated as sacrosanct. It cannot be the sole basis of addition. In these circumstances, in our considered opinion this addition is not at all sustainable in law. Accordingly we set aside the orders of authorities below on this issue.

In the result, appeal by the assessee is allowed. Order has been pronounced in the Court on 13.5.2019.