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TMI Blog2024 (5) TMI 1205X X X X Extracts X X X X X X X X Extracts X X X X ..... the Ld. A.O. being estimated net profit @ 10% of total receipts. 5. The appellant craves liberty to add, amend, alter or modify all or any grounds of appeal before final appeal." Brief facts of the case 3. The brief facts of the case are that the assessee had e-filed its return of income for A.Y. 2015-16 on 26.09.2015 declaring loss of Rs. 3,29,55,888/-. The case was selected for complete scrutiny under CASS and accordingly notice u/s. 143(2) of the Income Tax Act, 1961 (hereinafter referred as 'the Act') was issued by the DCIT. The AO noticed that in the current year the assessee had shown loss of Rs. 3,29,55,888/- on total turnover of Rs. 5,40,25,457/- whereas in the preceding year the assessee had declared net profit of Rs. 26,21,429/- on total turnover of Rs. 1,47,09,632/-. Thus, the assessee had shown negative NP of minus 61% during the year as compared to positive NP of 17.82% in the preceding year. The assessee is a builder involved in development of various projects. In the course of assessment, the AO had called for various details from the assessee which was only partly complied. As the assessee did not furnish the complete details as required by the AO, he rejected t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of CIT vs Vikram Plastics [1999] 239 ITR 161 (GUJ.) 2. ITAT Ahmedabad in the case of Pankaj Diamond vs. Assistant Commissioner of Income-tax [2010] 5 ITRCTRIB.) 469 (Ahmedabad) 3. ITAT Ahmedabad in the case of Nice Industries vs ITO, Wd- 5(3),Surat,[2010] 7 taxmann.com 89 (Ahmedabad) 4. ITAT Ahmedabad in the case of Deputy Commissioner of Income-tax, Ahmedabad vs. Asian Grantio India Ltd [2020] 113 taxmann.com 445 (Ahmedabad - Trib.) 5. Ahmedabad ITAT in the case of Inspecting Assistant Commissioner Vs. Dinesh Tiles Factory [1988] 37 TAXMAN 357 (AMD.) (MAG.) 6. ITAT Mumbai in the case of Kamani Oil Industries Pvt. Ltd. Vs DCIT I.T.A. No. 5465/Mum/2017 7. ITAT Rajkot in the case of Panchshil Exim Pvt. Ltd. vs. Deputy Commissioner of Income Tax (2020) 58 CCH 0326 Rajkot Trib" 6. Further, the Ld. AR has relied upon the following decisions in respect of wrong estimation of income: "1. Hon'ble Supreme court in the case of Brij Bhushan Lal Parduman Kumar vs. Commissioner of Income-tax [1978] 115 ITR 524 (SC) 2. Hon'ble Supreme court in the case of Dhakeswari Cotton Mills Ltd. vs. Commissioner of Income Tax (1955) 27 ITR 0126 3. Hon'ble Gujarat Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 145 of the Act and the decision of the Supreme Court in the case of Keshavji Ravji & Co. (supra) was on the binding nature of CBDT Circular & Instructions. The other decisions are also not found on the exact issue as involved in this case. As per Instruction No. 01/2011 of CBDT, the jurisdiction over corporate assessee with income of Rs. 30 Lakhs and above in metro cities was with the DCIT/ACIT. In the current year, the assessee had disclosed loss of Rs. 3,29,55,888/-. The definition of income in Section 2(24) of the Act is an inclusive definition and it is a settled principle that under the provision of Income Tax Act, income includes loss. The Hon'ble Supreme Court had held in the case of CIT v. Harprasad & Co. P. Ltd. (1975) 99 ITR 118 (SC) that the words 'income' or 'profits and gains', should be understood as including losses also. To reproduce from the order: From the charging provisions of the Act, it is discernible that the words "income" or "profits and gains" should be understood as including losses also, so that, in one sense "profits and gains" represent "plus income" whereas losses represent "minus income" CIT v. Karamchand Prem Chand Ltd. [1960] 40 ITR 106 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received from the buyers were submitted. (v) No details regarding reasons of advance given to related parties is furnished. (vi) No details of project wise WIP called in specified format was submitted. Further, no details regarding cost of land or JV agreement was submitted. (vii) No documentary evidence for purchases made as called for was provided. No proof like copy of bills / transportation bill and delivery challan of purchases and services has been submitted by the assessee." 12. The assessee has contended that all the details that were not furnished had no impact on the profitability of the assessee and that it had furnished the trial balance which was examined and analysed in the assessment order. It is true that all the details and documents as not produced by the AO may not have impact on the profit but nevertheless they have a bearing on the correctness of the accounts. The assessee had not explained as to why these documents were not produced before the AO or even before the CIT(A). The assessee has not come forward and produced these evidences before us in the course of present appeal as well and neither the reason for non-production of these details of the acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment in reply dated 22/12/2017 (4 working days left before time barring date) which clearly shows delaying attitude of assessee rather than submitting details to facilitate assessing officer understand the reasonableness and expediency of the transact ions. 3.1.7 As stated above, the assessee failed to produce/furnished justification as well as supporting evidences like basis of WIP, copy of bills and transportation details of expenditure claimed in its books, party-wise ledger account of purchases and services and also failed to furnish project-wise details with copy necessary approval proof . Therefore assessee definitely defaulted in this respect. Further, discrepancies as discussed in above paras have also been found in the net prof it result shown by the assessee during the year under consideration. In absence of details of closing stock and expenditure claimed by the assessee, it is not possible to verify the genuineness of claim and closing stock shown by the assessee in its books. Further it cannot be proved that all the purchases made by the assessee are genuine. Thus there is no evidence to verify the closing stock as well as expenditure claimed on account of purchases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the absence of primary evidences of bills, vouchers, challans, party-wise accounts etc., it was not possible to rely on the veracity of the accounts maintained by the assessee. The quantitative details and workings of WIP were also not produced. As mentioned earlier, the sales had increased almost four-times during the year and the purchases during the year had declined to Rs. 59.32 Lakhs only as against purchase of Rs. 1.25 crores in the preceding year and in spite of these events there was a huge loss during the year, which had raised the eyebrow of the Department. The assessee was duty-bound to produce the details and information as called for by the AO and explain the reason for the abnormal loss incurred during the year. The nonproduction of the details as mentioned earlier and the analysis of the accounts and information as available led the AO to conclude that either the sales were booked at lower than its cost price or the WIP was shown at a much lower amount than what it should actually happen. The assessee has not explained as to why the details and the information as required by the AO were not produced either before the AO or in the course of the appeal proceedings. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the income declared by the assessee, then, the said addition has to be based on some material and the same cannot be added on the whims or caprice of the assessing authority. In the instant case, it was observed that the trading result shown by the assessee compared favourably with the past accepted position in the case of the assessee itself. Therefore, merely rejecting the book result on the ground that quality-wise details of diamonds had not been maintained would not empower the Assessing Officer to add any income to the income shown by the assessee." The assessee in that case was not only in a different trade but the books were rejected due to absence of quality-wise details of diamonds. Further, the book results in that case were comparable with past results. Thus the facts are found to be totally different. 18. In the case of Nice Industries (supra), the assessee was engaged in the process of yarn and had maintained records of quantity of yarn including opening stock, closing stock, purchases, sales oil gain etc. The AO had noted that gross profit ratio of the assessee had fallen steeply as compared to two preceding years which was explained due to shift in office and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not verifiable as neither such record was maintained nor made available, and (iii) claim of maintenance of quantity was not substantiated and the only quantity maintained and made available was on the basis of purchase and sales accounts. The Coordinate Bench of this Tribunal held that the type of business carried on by the assessee reflected special features attached to the nature of the business which made it rather impossible to maintain day-to-day quantitative tally in respect of the consumption, production and disposal of the stocks at various levels. Further, the assessee had produced before the Tribunal, the relevant sales registers wherein various details were given in respect of the sales bills prepared against which the goods were delivered together with the challan number, etc. On consideration of these facts it was held by the Ld. Tribunal that there was no reason to reject either the books of account or to make any addition. 21. In the case of Panchshil Exim Pvt. Ltd (supra) the AO had found that the assessee had sold certain products at a price less than the cost of acquisition which resulted in gross loss to the assessee. The AO doubted that the assessee had sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atio of those decisions can't be imported to the facts of the present case. It is found that the AO has rejected the books of accounts in this case for valid reasons. The assessee didn't respond to the opportunity provided by the AO for rejection of accounts and estimation of income. It was the assessee itself who was to be blamed for rejection of accounts as it didn't submit proper accounts as called for by the AO. Having failed to provide the primary evidences and to provide the other details as required by the AO, the assessee can't blame the AO for rejection of accounts. The assessee can't be absolved from its responsibility of supporting the accounts with proper evidences and explaining the huge loss incurred during the year. 25. Once the books of account are rejected and the assessee is not co-operating, the only option left with the Assessing Officer was to estimate reasonable income after taking into account the total receipts of the year. The AO estimated the income of the assessee @ 10% for the reason that net profit disclosed by the assessee in the preceding year was 17.82%. The rate of estimate of 10% as applied by the AO is found to be reasonable. The work of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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