DCIT, ROHTAK vs. M/S. HARISH CHANDRA INDIA LTD., ROHTAK
In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.
What did the Tribunal hold?
The Tribunal held that the AO's addition solely based on a fall in NP ratio, without pointing out defects in the books of accounts, was not justified. The CIT(A)'s deletion of the addition was upheld.
What were the facts?
The Assessing Officer (AO) made an addition of Rs. 15.55 crores based on a fall in the Net Profit (NP) ratio compared to the previous year. The assessee contended that no defects were found in their books of accounts. The CIT(A) deleted the addition after a remand report, finding no cogent reasons for the AO's disallowance.
What were the issues?
Whether an addition can be made solely on the basis of a fall in the Net Profit ratio without identifying defects in the assessee's books of accounts.
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI ‘G’ BENCH,
Before: SHRI N.K. BILLAIYA, & SHRI N.K. CHOUDHRY
PER N.K. BILLAIYA, ACCOUNTANT MEMBER,
This appeal by the Revenue is preferred against the order of the CIT(A), Rohtak dated 23.02.2015 pertaining to A.Y 2010-11.
The solitary grievance of the Revenue is that the ld. CIT(A) has erred in deleting the addition of Rs. 15,55,19,584/- made by the Assessing Officer on account of difference in the N.P. ratio of 4.40% as compared to the previous year.
On perusing the records, the Assessing Officer found that the N.P. rate for the year under consideration is very less as compared to the immediately previous assessment year 2009-10. Taking a leaf out of the N.P. rate of assessment year 2009-10, the Assessing Officer made an addition of Rs. 15.55 crores.
The assessee carried the matter before the ld. CIT(A) and strongly contended that the Assessing Officer has not pointed out any defects in the books of accounts of the assessee and has made addition merely on the basis of fall in the N.P. rate.
After considering the facts and submissions and after calling for remand report from the Assessing Officer, the ld. CIT(A) held as under:
“I have examined the submissions made by the appellant and the facts on record. The assessment was made by rejecting the books of the assessee on the grounds that no explanation was given in respect of fall in NP and the absence of details of the value of work-in-progress (W.I.P). However, a perusal of records show that a chart for the same had been submitted. The auditor has not stated that the accounts were faulty. All books of accounts and vouchers were produced before the AO. Although W.I.P. details could not be submitted, all the aforementioned details were submitted at the remand stage. The Assessing Officer during the remand stage has examined the books of accounts. The remand report dated 2/4.02.2015 mentions that books of accounts were test checked. No finding of any discrepancy in accounts has been made. However, there are two issues which have found mention as disallowable expenditure. They are (a) Bad debts expenses worth Rs 1,33,753/- for which no supporting documents were filed and (b) Rs 43,765/- on the excess claim of depreciation on printers. These have been correctly disallowed due to absence of evidence in respect of bad debts and the fact that printers do not qualify for a lighter rate of depreciation. These two expenses amounting to Rs 1,77,518/- stand disallowed.
Finally, in the absence of any logical and cogent reason in disallowing the addition on account of NP rate, I delete the addition made of Rs 15,55,19,584/- to the extent of Rs 15,53,42,066/- (Rs 15,55,19,584/- less Rs 1,77,518/-.)”
Before us, the ld. DR strongly supported the findings of the Assessing Officer but could not point out any error or infirmity in the findings of the ld. CIT(A). We find that the basis of the addition made by the Assessing Officer is only the fall in the N.P. rate when compared to the rate with the immediately preceding assessment year. We do not find any merit in the addition so made. Moreover, in the remand proceedings, the Assessing Officer examined the books of account by test check and could not point out any discrepancy in the accounts of the assessee. On these facts, we do not find any reason to interfere with the findings of the ld. CIT(A).
In the result, the appeal of the Revenue is dismissed.
The order is pronounced in the open court on 05.06.2018.
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