I.T.O WD - 2(2),ASANSOL, ASANSOL vs. M/S CHINNAMASTA TRADERS, ASANSOL

The facts of the case are stated in brief. The Assessee firm has filed its return of income for A.Y.2009-10 on 30.09.2009. The case was selected for scrutiny u/s 143(2) of the Act and statutory notices were sent by the AO to the assessee but there was no compliance to these notices. However, Shri Salil Baran Majumder appeared as Authorised Representative of the assessee on 14.10.2011 before the AO without submitting any vakalatnama and stated in a letter that one of the partners of the firm, Sri Joy Banerjee, with whom all the books of accounts were kept, had absconded. Because of this reason the books are not available. The assessee could not produce any books of account before the AO. Before completion of assessment several letters were issued to the assessee for obtaining the explanation regarding additions on M/s. Chinnamasta Traders A..Y.2009-10 different heads. There was no compliance on the part of the assessee. The assessee firm has not cooperated with the department. One of the partners of the firm Shri Rakesh Verma has stated that Shri Joy Banerjee, a partner who is absconding for the last few months but they could not produce any FIR and the same could not be shown before the AO. All the partners are literate even then they did not file any FIR to search him. The ld. AO completed the assessment u/s 144 of the Act as per the best judgment and computed the total income at Rs.1,74,14,110/-. Aggrieved by the order of the ld. AO, the assessee filed an appeal before C.I.T.(A), Asansol.

The ld. C.I.T.(A) observed that the option before AO was to disallow expenses in full or part or to reject books of accounts u/s 145(3) of the Act. The latter is also justified as books of accounts were not produced due to the reasons that Shri Joy Banerjee, partner who is in possession of the books is absconding. The ld. CIT(A) relied on the determination of fixed percentage of gross receipts by the AO. However, he considered that the percentage cannot lead to figure equaling what has been fixed by the AO, has no precedent. On the other hand, considering the level of absence of vouchers and defects considered high in this case and 8% is not justified. One with low level of interest or depreciation liability will have higher income. Fixing income at 8% as pleaded by the assesee will be grave injustice to all assesses who has maintained correct and complete accounts. This is a case where even existence of books of accounts have not been made. Even eligibility of deduction is not established. Accordingly he directed the AO to assessee the income from contract work at 12.5% obtained by reducing value of materials supplied from gross receipts.

Although in this appeal the revenue has raised multiple grounds of appeal but at the time of hearing the grievance of the Revenue had been confined to ground nos. 1 ,2 3, 5, 6 and 7 and ground no.4 has not been pressed.

On the other hand, the ld. AR for the assesee has submitted that the assessee could not produce the books of account before AO, the reason being one of the partners has absconded with the books of accounts. The assessee firm is trying to search the absconded partner with the help of relatives and friends circles. The ld. AR also prayed that in this case 8% of profit on gross receipts is reasonable and he cited before us two case laws decided by ITAT, New Delhi in the case of M/s. Balwan Singh & Co. vide order dated 04.11.2011 and ITAT Amritsar Bench in the case of Shri Janak Raj Vs.DCIT , vide ITA No.161(Asr)/2011 order dated 08.06.2012.

Having heard the rival submission, we are of the view that there is merit in the submissions of the ld. DR for the revenue, as the proposition canvassed by him are supported by the facts cited above. As he has explained that one of the partners of the firm has absconded with books of accounts but the assessee had not filed any FIR with the police department therefore their statements can not be relied. There is no point to reveal that the partner has absconded. The CIT(A) did not ask the assessee firm to produce before him the FIR and other documents which can show that one of M/s. Chinnamasta Traders A..Y.2009-10 the partners has been absconded with books of accounts and till date the partner is not traceable. The assessee under consideration comes under the tax audit ambit and Tax audit report u/s 44AB has been certified by the Chartered Accountant therefore assessment can not be done based on estimate. If the books of accounts are absconded by one of the partners but then copy of the tax audit report must be available with the Chartered Accountant of the assessee. The said partner can not steal the tax audit report form CA office and the assessee must produce the tax audit report before AO along with other documents. Besides, the ld. AR for the assessee has submitted before us two case laws which are not applicable to the facts under consideration because the other partners have failed to prove the fact that one of the partners has absconded with the books of accounts and they had not filed the FIR with the police authorities. Therefore it is not acceptable. Therefore these two case laws cited before us are not applicable to the facts under consideration. Accordingly we are of the view that this issue requires fresh examination at the end of the AO. We also direct the assessee to produce the books of accounts, tax audit report etc, before the AO and get the assessment done. Therefore we set aside the order of CIT(A) and restore the issue to the file of AO with the direction to ascertain the net income of the assessee as per the discussion supra.

In the result, all the grounds of appeal of the revenue are allowed for statistical purposes.