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Income Tax Appellate Tribunal, DELHI BENCH ‘E’, NEW DELHI
Before: SHRI J. SUDHAKAR REDDY, A.M. & SH. SUDHANSHU SRIVASTAVA, J.M.
ORDER
PER J. SUDHAKAR REDDY, ACCOUNTANT MEMBER
This is an appeal filed by the Assessee directed against the order of Ld.CIT(A), Muzaffarnagar dated 26.11.2012 pertaining to the Assessment Year (A.Y.) 2009-10.
Facts in brief:- The facts of the case as narrated by the Ld.CIT(A) from para 2 to 2.3 of his order, are extracted for ready reference.
The facts of the case are that the assessee is an individual deriving income from whole sale trading of pulses. Return declaring income at Rs.l,35,279/- was e-filed on 26-09-2009. The assessee had maintained Saharanpur as head office and Delhi as branch office. During the course of assessment proceedings the AO issued notices u/s 143(2)142(1) however the asesse time and again sought adjournments but no compliance was made. The AO has discussed the same in detail in the assessment order which is not repeated here for the sake of brevity.
During the course of assessment proceedings, the assessee furnished copy of FIR lodged with the Police Station Prasant Vihar, New Delhi. The AO issued letter to SHO, Prashant Vihar, New Delhi requiring him to furnish copy of FIR
ITA 1018/Del/2013 A.Y. 2009-10 Sh. Om Prakash Thakkar, Saharanpur, UP lodged with the Police Station along with current status of the case. However, through telephonic message it was conveyed by Police Station, Prashant Vihar, New Delhi that no such FIR was ever lodged by the assessee. Thus absence of any compliance made by the assessee, the AO proceeded to pass ex-parte order on the basis of material evidence available on record. 2.1 The AO has given trading results for A.Ys.2008-09 and 2009-10 which are reproduced as under. Asstt. Year Turnover Gross Profit G.P. Rate N.P. Rate 2009-10 16,25,28,307 21,54,333 1.33% 0.13% 2008-09 I 17,47,52, l39 29,64,689 1.70% 0.14% Further, separate trading results at Saharanpur head office and Delhi branch office have been reproduced b) the AO as under:- Saharanpur Head Office: Asstt. Year Turnover Gross Profit G.P. Rate N.P. Rate 2009-10 3,46,37,569 13,28,363 3.83% 0.24% 2008-09 10,10,80,211 19,52,930 1.93% 0.13% Delhi Branch Office Asstt. Year Turnover Gross Profit G.P. Rate N.P. Rate 2009-10 12,76,50,312 8,25,970 0.64% 0.01% 2008-09 7,36,71,928 10,11,760 1.37% 0.14% The AO after considering the trading results of head office, Saharanpur inferred that the GP rate has been declared at 3.83% on an increasing manner as compared to the last year's GP rate of 1.933% whereas in the branch office Delhi the G.P. rate was 13.7% in AY 2008-09 but the assessee unexpectedly decreased the GP rate in the current year at 0.64% as well as net profit at 0.01 %. The AO keeping in view the facts of the case in totality, held that the average rate for AY 2008-09 was 1.70% and for the year under consideration at 2.23% which was applied on the total turnover declared by the assessee. This resulted in GP at Rs.36,24,381/- and after deducting GP already declared at Rs.21,54,333/-, the balance amount of Rs.14,70,048/- was added to the income of the assessee. 2
ITA 1018/Del/2013 A.Y. 2009-10 Sh. Om Prakash Thakkar, Saharanpur, UP 2.2 The assessee had debited various expenses in trading and profit and loss account of head office, Saharanpur under the following heads:- (i) Freight & Cartage Expenses Rs.2,05,112/- (ii) Purchase Expenses Rs. 24,231/- (iii) Generator Expenses Rs. 7,125/- (iv) Salary Expenses Rs.1,50,000/- (v) Sales Promotion Expenses Rs. 16,956/- (vi) Telephone Expenses Rs. 15,385/- (vii) Travelling Expenses Rs. 5,625/- Since the assesseee had not produced vouchers of such expenses thus in absence of the same the AO disallowed the amount of Rs.1,50,000/- out of such expenses which was added to the income of the assessee . 2.3 The assessee had debited various expenses in trading and profit and loss account of branch office, Delhi under the following heads. i) Car expenses Rs.53,237/- ii) Dalali expenses Rs. 37,163/- iii) Wages expenses Rs.99,946/- iv) Salary expenses Rs.1,63,833/- v) Motor expenses Rs.10,636/- vi) Telephone expenses Rs.9,840/- 3. Aggrieved the assessee filed appeal before the Ld.CIT(A) who granted part relief. Further aggrieved, the assessee is before us on the following grounds . “1 . The order passed by the Id.CIT (Appeals) confirming the additions made by the assessing officer is bad in law, against the facts and circumstances of the case.
2. The learned CIT (Appeal), has erred in law in ignoring the facts that provided by the Ld.assessing officer serving a notice calling upon the appellant to show cause , why the assessment should not be completed to the best of his judgment" and not passing the order of set aside the order of Ld assessing officer with the direction to give fresh opportunity to the asessee.
3. There was no justification either on facts and in circumstance of the case, not to have deleted the addition by the learned CIT (Appeal), instead erred in conforming the partial addition of Rs. 6,08,648/- out of total addition 3 ITA 1018/Del/2013 A.Y. 2009-10 Sh. Om Prakash Thakkar, Saharanpur, UP of Rs 14,70,048/- made by the Assessing Officer without any basis, justification and merit 4. The partial addition of Rs.1,25,000/- out of total addition of 2,50,000/- being dis-allowance of expenses highly incorrect arbitrary and contrary to the facts brought on record.
5. The Appellant craves leave to add or amend any ground of appeal. That the entire case is fully supported and verifiable and there is no case of any disallowance whatsoever. It is therefore, prayed that unjustified addition be deleted and the appellant be given an opportunity of being heard and the matter be restored for fresh hearing.”
We have heard Shri Akarsh Garg, the Ld.Counsel for the assessee and Sh.P.Damkanunjna, the Ld.Sr.D.R. on behalf of the Revenue.
On a careful consideration of the facts and circumstances of the case, orders of lower authorities, material filed on record and case laws cited, we hold as follows.
The Ld.Counsel for the assessee argued that profits have been estimated without rejecting the books of accounts and that no opportunity was granted to the assessee. We do not find any merit in this submission as the assessee has not appeared before the Assessing Officer (A.O.) on various occasions despite notice. In our view there is no violation of the principles of natural justice.
Coming to the rejection of books, we find only books of Delhi Branch Office have not been produced before the Assessing Officer (A.O.). Be it as it may, the A.O. nowhere in his order cited reasons as to why the books of accounts have to be rejected. Mere fall in the gross profit ratio does not authorise the A.O. to reject the books of accounts. The assessee in this case has declared gross profit of 1.33% and the A.O. has estimated gross profit @ 2.33% and whereas on appeal the Ld.CIT(A) applied the last year’s gross 4
ITA 1018/Del/2013 A.Y. 2009-10 Sh. Om Prakash Thakkar, Saharanpur, UP profit rate of 1.71%. As the books are not rejected this addition on the ground that gross profit rate is low does not survive. Hence this ad-hoc addition is hereby deleted. 8. The next ground of appeal is an addition of Rs.1,25,000/-. The A.O. disallowed an amount of Rs.1,25,000/- out of an amount of Rs.2,50,000/- on adhoc basis on the ground that the expenses claimed are highly excessive. The Ld.CIT(A) granted part relief. Such adhoc disallowance cannot be sustained as it is arbitrary. The A.O. has not given any cogent reasons with evidence to support his finding. Hence this disallowance is hereby deleted.
9. In the result the assessee’s appeal is allowed. Order pronounced in the Open Court on 15th March, 2016.