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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: SHRI WASEEM AHMED&
IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT (THROUGH VIRTUAL COURT) BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER & Ms. MADHUMITA ROY, JUDICIAL MEMBER I.T.A. No.431/Rjt/2015 (Assessment Year: 2012-13) Income-tax Officer, Vs. Amit Cotton Industries Ward-1(1)(1), Room No. Shapar Survey No. 234, Plot 709 7th Floor, Aayakar No. 11, At: Shapar Veraval, Bhavan Race Course Rind Tal: Kotda Sangani, Rajkot Road, Rajkot [PAN No.AAEFA6720D] (Appellant) .. (Respondent) Appellant by : Shri Deepak Rindani, AR. Respondent by : Shri Vidyasagar S. Ubale, Sr. D.R.
Date of Hearing 08/02/2022 Date of Pronouncement 04/03/2022
O R D E R PER Ms. MADHUMITA ROY - JM:
The instant appeal filed by the Revenue is directed against the order dated 26.06.2015 passed by the Commissioner of Income Tax (Appeals)-1, Rajkot arising out of the order dated 19.03.2015 passed by the ITO, Ward – 1(1)(1), Rajkot under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred as to “the Act”) for the Assessment Year (A.Y.) 2012-13.
Deletion of addition of Rs. 2,53,51,365/- made by the Ld. AO upon rejection of the books of account under Section 145(3) of the Act treating the purchases as unexplained expenditure under Section 69C of the Act is the challenge before us.
The assessee engaged in the business of Cotton Ginning & Pressing filed its return of income on 28.08.2012 declaring total income at Rs. 1,58,500/-. The case was selected
- 2 - ITA No.431/Rjt/2015 ITO vs. Amit Cotton Industries Asst.Year – 2012-13 for scrutiny through CASS a notice under Section 143(2) dated 07.08.2013 was served followed by a detailed questionnaire under Section 142(1) dated 28.08.2014. Upon verification of the books of accounts produced by the assessee alongwith other documents in respect of purchase, sales and expenditures incurred, it was found that URD purchases of Kapas were evidences through self-made vouchers. 75 vouchers out of the total vouchers produced by the assessee found to be unsigned by recipient of sale proceeds. The aggregate quantum of cash payments against such URD purchases amounting to Rs. 2,53,51,365/- was shown as expenditure under the head purchase and finally disallowed under Section 69C of the Act treating the same as unexplained expenditure and added to the total income of the assessee which was, in turn, deleted by the Ld. CIT(A). Hence, the instant appeal before us.
We have heard the relevant submissions made by the respective parties, we have also carefully considered the materials available on record before us.
The case of the Revenue is this that most of the vouchers produced by the assessee mention the name of the person whereas no address or no name of village or town is mentioned. In the absence of those details verification of their purchase prices from the respective suppliers which were claimed to be the farmers could not be made. Apart from that regarding the purchase of Kapas, the extract of the 7/12 and 8A of the person from whom such purchase was claimed to have been made were found relevant for F.Y. 2011-12 not to the succeeding years i.e. F.Y. 2013-14, 2014-15. The Revenue was of the opinion that the assessee did not disclose the true and fair business affairs in the books of accounts. Though the same is duly audited, the correctness of the same was not proved. Further that the documentary evidences in respect of the expenditure are not genuine. Moreso, the assessee suppressed the profit by manipulating the expenditure especially purchases of raw cotton which were debited in the books of account but without any cogent evidence. Hence, under Section 145(3) of the Act the Ld. AO rejected the books
- 3 - ITA No.431/Rjt/2015 ITO vs. Amit Cotton Industries Asst.Year – 2012-13 of accounts. The expenditure of Rs. 2,53,51,365/- shown under the head ‘Purchase’ has been treated as unexplained expenditure. Considering the unsigned vouchers of raw material in cash/credit the correctness of the payment was not admitted. Out of the total 12 bills 10 bills found to be a sister concern namely M/s. Amitkumar & Co. which failed to prove the correctness of the purchase price. Moreso, out of those 10 bills 3 sales bills issued by M/s. Amitkumar & Co. found to be unsigned. Finding the plea taken by the assessee to justify its business affairs on baseless evidences the Ld. AO was of the opinion that the assessee manipulated the expenditure by debiting the baseless expenditure and suppressed the profit. Therefore, by invoking the provisions of Section 145(3) of the Act the books of accounts of the assessee stood rightly rejected by the Ld. AO and the expenditure to the tune of Rs. 2,53,51,365/- shown under the head ‘Purchase’ has been treated as unexplained expenditure within the meaning of Section 69C of the Act as the case made out by the Revenue before us.
On the other hand, the Ld. Counsel appearing for the assessee submitted before us that the books of accounts was not found to be incomplete neither any defect has been pointed out by the Ld. AO particularly on the basis of the doubtful purchase vouchers and on that basis the audited books of accounts has been wrongly rejected by the Ld. AO. He, therefore, relied upon the order passed by the Ld. CIT(A).
He has further relied upon the judgment passed in the matter of CIT vs. Vikram Plastics, reported in (1999) 239 ITR 161, passed by the Hon’ble Gujarat High Court. A copy whereof has also been submitted before us while dealing with the identical issue the Hon’ble was pleased to observe as follows: "When no specific discrepancies or defects in the book of accounts of the assessee has been pointed out nor was any material brought to establish that purchases were inflated or receipts suppressed, there is no justification in invoking the provisions of Section 145 of the Act."
We further find that on the one hand the books of account was rejected by the Ld. AO but the addition to the tune of Rs. 2,53,51,365/- as unexplained expenditure under
- 4 - ITA No.431/Rjt/2015 ITO vs. Amit Cotton Industries Asst.Year – 2012-13
Section 69C of the Act was made on the basis of the same books of accounts which is not justifiable.
In this regard, we find the following observation has made by the Ld. CIT(A): “6. I have duly considered the submission of the appellant and also gone through the discussion made in the assessment order. 6.1 I am inclined to agree with the appellant that this is not a case of rejection of books of account u/s. l45(3) as has been done by the A.O. The books of accounts can be rejected only when the books of accounts are not correct or complete. It means there are defects in books of accounts. Here m this case the AO has not detected/found any defect, in the books of accounts. He has rejected the books on the basis of doubtful purchase vouchers wh.ch cannot be basis for rejecting the properly audited books of account. Not only that on the one hand he has rejected the books of account and on the other hand has made addition on the basis of books of account. This is an extreme case or non application of mind. Hence the addition made is hereby deleted and the grounds of appeal are allowed.”
The observation of the Ld. AO is not compatible with the decision of the Ld. AO. Once books of account stood rejected the Ld. AO is not permissible to made addition on the basis of the same books of account which is total non-application of mind which has rightly been taken into consideration by the Ld. CIT(A) in its proper perspective without any ambiguity so as to warrant interference. The appeal preferred by the Revenue is found to be devoid of any merit and, thus, dismissed.
In the result, the appeal preferred by the Revenue is dismissed.
This Order pronounced in Open Court on 04/03/2022
Sd/- Sd/- (WASEEM AHMED) (Ms. MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 04/03/2022 TRUE COPY TANMAY, Sr.PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT
- 5 - ITA No.431/Rjt/2015 ITO vs. Amit Cotton Industries Asst.Year – 2012-13
आयकर आयु�त(अपील) / The CIT(A). 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Rajkot 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, राजोकट / ITAT, Rajkot 1. Date of dictation 08/02/2022& 02.03.2022 2. Date on which the typed draft is placed before the Dictating Member 09/02/2022& 03.03.2022 3. Other Member… 4. Date on which the approved draft comes to the Sr.P.S./P.S … 03/03/2022 5. Date on which the fair order is placed before the Dictating Member for pronouncement… 6. Date on which the fair order comes back to the Sr.P.S./P.S 04/03/2022 7. Date on which the file goes to the Bench Clerk 04/03/2022 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Despatch of the Order………………