9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (4) TMI 75 - AT - Income TaxRejection of books of accounts - estimation of gross profit - Held that - In the instant case of the assessee, cash book and ledger were with the Department. The purchase bills along with TCS certificates were also produced. The selling price was also displayed in front of every shop of the assessee. All the purchases are done by the assessee on the basis of license fees and TCS certificates, which were also not disputed by the Department. Neither the AO nor the CIT(A) has conducted any independent enquiry regarding the same and just on the basis of guess work has observed that assessee is not bringing out full particulars. Even the judicial pronouncements are clear on the facts that in the nature of trade as like assessee, cash memos for day-to-day sales are not required and that a consolidated entry in the cash book along with relevant documents of purchase of liquor are sufficient to prove the genuineness. CIT(A) was not justified in confirming the rejection of the books of account and adopting the G.P. rate on the higher side and, therefore, we set aside the order of the ld. CIT(A) on this issue and allow grounds No.1 & 2 of the appeal of the assessee. Disallowance on account of shop rent paid - Held that - Only affidavits and confirmation of receipts of shop rent are enclosed and the Department did not conduct any independent enquiry and physical verification regarding rent paid and both the Assessing Officer and the ld. CIT(A), on ad-hoc and summary basis, have stated that the rent should be @ ₹ 3,000/- per month per shop, however, neither the order of the AO nor of the ld. CIT(A) was a speaking order on this issue and the reasons for arriving at the conclusion was not spelt out specifically. We are of the considered view that any ad-hoc disallowance made summarily by a quasi-judicial authority, without any factual basis, cannot be held justified. Ad-hoc disallowance on account of salary paid - Held that - Total salary paid of ₹ 3,800/- per month and ₹ 1,800/- as house rent allowance i.e. totaling to ₹ 5,600/- per month to each employee, is evidenced with affidavit filed as placed in the paper book from pages 52 to 147. As held in various judicial pronouncements discussed hereinabove, how the business has to be conducted, it is the prerogative of the assessee and not of the Department. The Department is, however, free to conduct enquiry and have a physical verification to put forth the allegation on the assessee, but on guess work and summary basis any addition made is unwarranted. In view of commercial expediency of the expenditure incurred expenses to be allowed. - Decided in favour of assessee Disallowance of processing fee, assessment fee and renewal fee - Held that - Additional evidences go to the root of the matter wherein all these details of renewal, processing and assessment fees paid to the Government are there and such evidences filed by the assessee are accepted. We also find that these payments were paid to the Government agencies and that is certified from the receipt letter of the District Excise Officer - Under these facts and circumstances of the case, these expenses cannot be held as unjustified expenses and it has direct nexus with the nature of business of the assessee and the payment is also duly debited in the cash book and it has been paid to the Government. we set aside the order of the ld. CIT(A) on this issue and allow grounds of assessee.
Issues Involved:
1. Confirmation of rejection of books of account and addition to gross profit. 2. Confirmation of other disallowances after rejection of books and estimation of gross profit. 3. Confirmation of ad-hoc disallowance on account of shop rent paid. 4. Confirmation of ad-hoc disallowance on account of salary paid. 5. Confirmation of disallowance on account of processing fee, assessment fee, and renewal fee. 6. Lack of proper opportunity provided to the appellant before passing the order. Issue-wise Detailed Analysis: 1. Confirmation of Rejection of Books of Account and Addition to Gross Profit: The assessee, engaged in the business of trading liquor, filed a return declaring total income of ?14,02,770. The assessment was completed under section 144 of the Act with a total income of ?62,68,770 after invoking section 145(3) and estimating the G.P. rate at 12.50% against 11.59% declared by the assessee. The Assessing Officer (AO) rejected the books of account due to several reasons, including the production of only cash book and ledger, cash expenses, lack of supporting bills/vouchers, and non-maintenance of stock records. The assessee argued that purchases were verifiable through TCS certificates and that daily consolidated entries were made for retail cash sales. The CIT(A) sustained the AO's decision without providing specific reasons. The Tribunal found that the assessee produced cash book, ledger, and purchase bills with TCS certificates, and that the practice of not issuing daily cash memos was common in the liquor trade. The Tribunal referred to judicial precedents supporting the assessee's practice and concluded that the CIT(A) was not justified in rejecting the books and estimating a higher G.P. rate, thus allowing the assessee's appeal on this issue. 2. Confirmation of Other Disallowances After Rejection of Books and Estimation of Gross Profit: This issue was addressed in conjunction with the first issue, where the Tribunal found the rejection of books and estimation of higher G.P. rate unjustified, thus affecting related disallowances. 3. Confirmation of Ad-hoc Disallowance on Account of Shop Rent Paid: The AO disallowed ?5,88,000 on the grounds that the claimed rent seemed high and questioned whether the expenses were actually paid and reasonable. The CIT(A) accepted the AO's findings without specific reasoning. The assessee provided details of shop locations, landlords, and rent paid, along with affidavits confirming rent receipts. The Tribunal found that the Department did not conduct any independent enquiry or physical verification and that the ad-hoc disallowance lacked factual basis. The Tribunal set aside the CIT(A)'s order and allowed the appeal on this issue. 4. Confirmation of Ad-hoc Disallowance on Account of Salary Paid: The AO disallowed ?16,46,400, questioning the reasonableness of the salary and house rent allowance paid to employees and the lack of documentary evidence. The assessee argued that the expenditure was commercially expedient and supported by affidavits. The Tribunal noted that the Department did not conduct any independent enquiry and that the disallowance was based on guesswork. Citing judicial precedents, the Tribunal held that the reasonableness of expenditure should be viewed from the assessee's perspective and set aside the CIT(A)'s order, allowing the appeal on this issue. 5. Confirmation of Disallowance on Account of Processing Fee, Assessment Fee, and Renewal Fee: The AO disallowed ?13,83,300 due to the absence of details. The assessee later provided complete details and receipts from the District Excise Officer as additional evidence. The Tribunal accepted the additional evidence, noting that the payments were made to Government agencies and were justified. The Tribunal set aside the CIT(A)'s order and allowed the appeal on this issue. 6. Lack of Proper Opportunity Provided to the Appellant Before Passing the Order: This issue was implicitly addressed through the Tribunal's detailed analysis and acceptance of additional evidence, indicating that the appellant's grievances regarding lack of opportunity were considered. Conclusion: The Tribunal found that the CIT(A) and AO's decisions were not justified due to lack of specific reasoning, independent enquiry, and reliance on guesswork. The Tribunal allowed the assessee's appeal on all contested issues, setting aside the CIT(A)'s order.
|
