DCIT , FIROZABAD vs. S.R. GLASS INDUSTRIES, FIROZABAD

This revenue’s appeal for assessment year 2014-15 arises against Commissioner of Income Tax (Appeals)-2 [in short, the “CIT(A)”] Agra order dated 28.12.2018, involving proceedings under Section143(3) of the Income Tax Act, 1961, [hereinafter referred to as ‘the Act’].

Heard both the parties. Case filed perused.

“1. That the Ld. Commissioner of Income Tax (Appeals)-2. Agra has erred in law and on facts in deleting the addition of Rs. 2,39,39,527/- made by rejecting the books of accounts of the assessee u/s 145(3) of the I.T. Act, 1961 and income taken @ 10% of the total turnover of Rs. 23,93,95,269/-.

2. That the Ld. Commissioner of Income Tax (Appeals)-2, Agra has erred in law and on facts in deleting the addition of Rs. 14,74,725/- made on account of bogus Purchase of Soda ash from M/s Rama Shyama Papers Pvt. Ltd.

4. That the appellant craves leave to add or alter any or more ground or grounds of appeal as may be deemed fit at the time of hearing of appeal.”

3. Both the parties refer to the CIT(A)’s detailed discussion reversing the assessment findings rejecting the assessee’s books thereby estimating its Net Profit @ 10% as under :

“6.2 As regards the grounds no. 1(a), 1(b), 2(a), 2(b), 2(c), 2(d) and 2(e), all of which are against the addition of Rs. 2,39,39,527/- to the appellant's returned income after rejection of its books of account under section 145(3), it is seen that on the basis of discrepancies described by the A.O. at paragraph numbers 5 to 12 of the impugned order, the appellant's books of account were found unreliable by him and the appellant's net profit was estimated @10% relying on the judgment of Hon'ble ITAT, Hyderabad in the case of M/s Hycons Infrastructure (India) Ltd., Hyderabad vs DCIT.

6.3 Before me, the appellant has vehemently argued against the addition of Rs. 2,39,39,527/- to its returned income after rejection of its books of account under section145(3). After carefully going through paragraphs no. 2.3 (a) to 2.3(h) of its written submission and also examining the supporting evidences annexed by it in its written submission, I am convinced that the discrepancies identified by the A.O. in its books of account are either non-existent or are not supported by sufficient evidence.

Further, with due respect to it, the A.O.'s reliance on the judgment in the case of M/s Hycons Infrastructure (India) Ltd., Hyderabad vs DCIT, for the purpose of estimating the appellant's books of account, in my opinion, is not justified. The judgment in that case was based on materially different facts because in that case books of account or bills and vouchers were not produced by the assessee. In this context, I find merit in appellant's contention that its books of account for the impugned year are duly audited and produced for verification, and have also been accepted by the A.O. in scrutiny proceedings for A.Y. 2013- 14 without drawing any adverse inference. Further, from a perusal of the past history, it is observed that the appellant's gross profit% during the impugned year was 25.28% compared to 24.53% and 12.36% in the immediately preceding two years. Compared to A.Y. 2012-13, the net profit has declined in the impugned year but is still greater than the net profit of A. Y. 2013-14, when it was a net loss of 26.73%. Finally, I find the judicial precedents cited by the appellant strongly support its contentions and cannot be brushed aside on the basis of facts available on record. Hence, in view of the above discussion grounds no. 1(a), 1(b), 2(a). 2(b), 2(C), 2(d) and 2(e) are allowed.”