M/S PIYUSH OVERSEAS PVT. LTD.,LUDHIANA vs. THE DCIT, WARD 6 (1), LUDHIANA

Briefly the facts of the case are that the assessee company which is engaged in the business of manufacturing and trading of cloth, textiles and readymade garments filed its return of income declaring total income at NIL. The matter was selected for scrutiny and after issuance of notice under section 143(2) and subsequent notices and calling for the information and explanation from the assessee, a show cause was issued to the assessee as to why the books of account should not be rejected by invoking the provision of Section 145(3) of the Act. Thereafter taking into consideration the submissions of the assessee which were not found acceptable, the books of accounts were rejected and taking into consideration the past history of the assessee, the AO applied average G.P. rate of last three years at 3.13% as against G.P. rate of 0.55% declared by the assessee and addition of Rs. 84,01,028/- was made vide assessment order passed under section 143(3) dt. 04/03/2021.

Being aggrieved, the assessee carried the matter in appeal before the Ld. CIT(A), NFAC, Delhi who has since confirmed the order and the findings of the AO. Against the said order and the findings of the Ld. CIT(A), NFAC, Delhi, the assessee is in appeal before us.

During the course of hearing, the Ld. AR submitted that the sole reason for rejection of books of accounts under section 145(3) and estimating the profit by the AO was that the assessee was not maintaining day to day stock register with quantitative details. It was further submitted that the AO has wrongly held in the assessment order that bills and vouchers were not produced by the assessee and therefore, the AO has wrongly concluded that the assessee is not maintaining complete and proper books of account alongwith bills and vouchers and has going ahead and rejected the books of account by invoking the provision of section 145(3) of the Act.

Per contra, the Ld. DR submitted that in this case, the assessee is not maintaining stock register and even bills and vouchers were not produced before the AO. It was accordingly submitted that the AO has rightly rejected the books of account by invoking the provision of Section 145(3) of the Act and thereafter has estimated the G.P. rate based on the average G.P. rate of last three years which is also a settled position as upheld by the Hon’ble High Courts and the various Benches of the Tribunal from time to time. It was accordingly submitted that there is no infirmity in the order so passed by the Ld. CIT(A), NFAC New Delhi and the contention so advanced by the ld AR be dismissed. He accordingly supported the order and findings regarding rejection of books of accounts and estimation of gross profit.

We have heard the rival contentions and purused the material available on record. Prima facie, we find merit in the contention of the ld AR that where the assessment has been conducted through a virtual electronic platform, it may not be feasible to submit and upload the voluminous books of account, sale / purchase register, cash book, and other ledger account along with bills and vouchers, TDS return etc. as so desired by the AO. We find that the said contention has also not been rebutted by the Revenue. At the same time, in all fairness, the AO has the right to examine the books of accounts and the Ld AR has stated at the Bar that where so allowed, the assessee shall produce the books of accounts before the AO for necessary verification. Therefore, in the interest of justice and fair play, we set-aside the matter to the file of the AO to call for and examine books of accounts and related documentation physically and decide the matter afresh as per law. Needless to say,

In the result, the appeal of the assessee is allowed for statistical purposes.