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TAXAP/1690/2010 3/ 3 ORDER
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX
APPEAL No. 1690 of
2010
=========================================================
COMMISSIONER
OF INCOME TAX - III - Appellant(s)
Versus
M/S
SONAL CONSTRUCTION - Opponent(s)
=========================================================
Appearance
:
MR
MANISH BHATT, SENIOR COUNSEL
for
Appellant(s) : 1,
None for Opponent(s) :
1,
=========================================================
CORAM
:
HONOURABLE
MR.JUSTICE AKIL KURESHI
and
HONOURABLE
MS JUSTICE SONIA GOKANI
Date
: 15/11/2011
ORAL
ORDER
(Per
: HONOURABLE MR.JUSTICE AKIL KURESHI)
Revenue
is in appeal against judgement of the Tribunal dated 12.2.2010
raising following questions for our consideration :
(A) Whether
in the facts and circumstances of the case and in law, the Appellate
Tribunal was right in holding that the books cannot be rejected under
section 145, despite the fact that the assessee never maintained
periodical site wise register for consumption of raw material?
(B) Whether
in the facts and circumstances of the case and in law, the Appellate
Tribunal was right, in holding that the books were correct and
complete in spite of the various evidences to the contrary that were
brought on record including the lack of consumption details, in the
absence of which it is not possible to deduce the correct profit of
the business?
(C) Whether,
on the facts and in the circumstances of the case and in law, the
Appellate Tribunal was right in holding that the production of bills
was sufficient to prove the genuineness of expenses without
production of the support and ancilliary records like their receipt,
movement and consumption necessary to compute the profit of civil
contractor assessee?
(D) Whether,
on the facts and in the circumstances of the case and in law, the
Appellate Tribunal was right in deleting the addition made by the
Assessing officer at Rs.24,82,752/- despite the fact that the
assessee could not prove the genuineness of the expenses claimed by
it?
(E) Whether
on the facts and in the circumstances of the case, the Appellate
Tribunal was right in deleting the addition made by the Assessing
Officer at Rs.24,82,752/- merely on the basis that the assessee had
shown a better net profit in the year under consideration compared to
earlier year when the facts clearly show that the assessee only
incurred a net loss, even excluding depreciation in its construction
business?
Entire
issue pertains to rejection of book results and estimation of Gross
Profit by the Assessing Officer as confirmed by the CIT(Appeals).
Upon further appeal, however, the Tribunal deleted the same primarily
on two grounds. Firstly that the grounds of rejection of book results
under Section 145 of the Income Tax Act were not satisfied and
secondly as per the assessee’s accounts, GP rate for current year
comes to 2.8% as compared to previous year when the same was 1.71%
and 1.75% respectively. Tribunal thus disapproved the Assessing
Officer’s estimation of profit at the rate of 5% and thereby deleted
entire addition of Rs.24.87 lakhs. Tribunal gave following reasons :
“8.
We have carefully considered the rival submissions and perused the
materials available on record. After carefully analyzing the facts of
the case, it is seen that Assessing Officer has rejected the book
results mainly on the ground that assessee did not maintain
consumption records of materials on site wise basis and that there
are discrepancies in the vouchers relating to carting and other
expenses. We are of the view that book results can be rejected only
if the provisions of sub-section(3) of section 145 of the Act are
satisfied. The above sub-section provides for rejection of book
results only if the accounts are found to be either incorrect or
incomplete or where the method of accounting/accounting standards
notified u/s 145(2) have not been regularly followed. However, none
of the conditions laid down in above section stands satisfied in the
instant case. As regards the consumption of materials, it is seen
that the assessee has produced relevant bills in support of the
expenses and no discrepancy in the same has been pointed out. Further
work at the end of the year is almost complete as can be seen from
the fact that no major amount is shown as outstanding in the balance
sheet under the head of Sundry Debtors/Sundry Creditors considering
the total volume of activity for the year under consideration and
therefore, consumption of materials cannot be said to be unverifiable
purely on the ground that site wise details have not been maintained.
There is no evidence on record which indicates that assessee has
inflated the purchases of materials. Further considering the nature
of activity and the place at which the work is required to be carried
out, the carting expenses cannot be regarded as non-genuine on the
ground of certain discrepancies as pointed out by assessing Officer
and the same does not by any means lead to the conclusion that entire
book results are not reliable. It is also not the case where carting
expense have been claimed at a higher amount as compared to earlier
year. It is also seen that N.P. Ratio before payment to partners and
depreciation is better as compared to earlier years as the same comes
to 2.80% for the year under consideration as against 1.71% for A.Y.
2002-03 and 1.75% for A.Y. 2001-02. Hence, considering the totality
effects and circumstances of the case and the better results as
compared to earlier years, the addition of Rs.24,87,175/- made by
assessing officer by estimating the profit at the rate of 5% s not
sustainable and the same is hereby deleted.”
We
are of the opinion that entire issue is based on appreciation of
material on record. Tribunal having examined all relevant aspects and
having given sufficient reasons for interfering, we see no question
of law arising. Tax Appeal is therefore, dismissed.
(Akil
Kureshi,J.)
(Ms.
Sonia Gokani,J.)
(raghu)
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