Chief Commissioner Of Income Tax Osd Ludhiana v. M/S. Ceigall India Ltd., Ludhiana

ITA-61-2021 (O&M) IN THE HIGH COURT OF PUNJAB AND HARYANAAT CHANDIGARH ITA-61-2021 (O&M)Date of decision : 06.08.2022 Chief Commissioner of Income Tax OSD Ludhiana.... Appellant Versus M/s. Ceigall India Ltd., Ludhiana .... Respondent CORAM: HON'BLE MR. JUSTICE TEJINDER SINGH DHINDSAHON'BLE MR. JUSTICE PANKAJ JAIN Present:Mr. Rajesh Katoch, Sr. Standing Counsel andMs. Pridhi Jaswinder Sandhu, Jr. Standing Counselfor the appellant. FS FC FE PANKAJ JAINiJ. This appeal has been preferred under Section 260-A of theIncome Tax Act, 1961 (hereinafter referred to as 'Act') filed by therevenue impugning the order of Income Tax Appellate Tribunal(hereinafter referred to as ‘ITAT") dated 19.11.2020. 2 Respondent is an assessee under the Income Tax Act. Theassessment for the year 2014-15 was completed under Section 143(3) ofthe Act vide order dated 29.12.2016. =The returned income ofRs.2,63,82,490/- was assessed and enhanced to Rs.8,21,93,828/-. Booksof the accounts were rejected under Section 145(3) of the Act. Additionwas made by applying net provide rate @ 12% on total gross receipt.Further addition under Section 69C. of the Act was made on accoununexplained expenditure. 3,Aggrieved by the order passed by Assessing Officer underSection 143(3) of the Act, the assessee filed an appeal before CIT(A).The same was partly allowed. The addition made by applying net profit ITA-61-2021 (O&M) rate of 12% on the total gross receipt was reduced to 6.5% of the totaleross receipt. Addition under Section 69C of the act on account ofunexplained expenditure was deleted. The order passed by CIT(A) wastaken in appeal before ITAT by the revenue. The appeal filed by therevenue stands dismissed. 4We have heard counsel for the appellant and have gonethrough the records of the case. 5 Learned ITAT while dealing with the issue of net profit rate to be applied held as under:- feyXXXX20.We have considered the submissions of boththe parties and perused the material available on therecord. In the present case it is not in dispute thatthe income of the assessee was worked out byapplying the net profit rate and rejecting the books ofaccounts. Therefore in view ofthe ratio laid down bythe Hon'ble Jurisdictional High Court in_ thaforesaid referred to cases relied by the Ld. Counselfor the Assessee 1.e; CIT Vs. Vinod Kumar (supra)and CIT Vs. Chopra Brothers (supra). However, wedeem it appropriate to restore this issue to the file ofthe A.O. to verify as to whether the claim of theassessee for depreciation was allowed by him or not,as was Claimed by the Ld. CIT DR during the courseof hearing. Accordingly this issue is restored to thefile of the A.O. for the limited purpose 1.e; to verify asto whether the depreciation was already allowed tothe assessee or not and if not allowed then byconsidering the ratio laid down by the Hon'bleJurisdictional High Court, the claim of the assesseefor depreciation is to be allowed from the incomedetermined by applying the net profit rate of6.5%.” 6.While dealing with the issue of addition of unexplainedexpenditure, ITAT held that the issue is no moreres integraand hasbeen adjudicated upon by theAllahabad High Court in'CIT vs. Banwar'Lal Banshidhar'holding that:- “When the gross profit rate was applied, thatwould take care of everything and there was no needfor the Assessing Officer to make scrutiny of theamount incurred on the purchases made by theassessee.” 7 A similar view has been taken by the Hon'ble AndhralPradesh High Court in the case of"Indwell Constructions Vs. CIT"reported in 232 ITR 776 held as under:- 6.While dealing with the issue of addition of unexplainedexpenditure, ITAT held that the issue is no moreres integraand hasbeen adjudicated upon by theAllahabad High Court in'CIT vs. Banwar'Lal Banshidhar'holding that:- “When the gross profit rate was applied, thatwould take care of everything and there was no needfor the Assessing Officer to make scrutiny of theamount incurred on the purchases made by theassessee.” 7 A similar view has been taken by the Hon'ble AndhralPradesh High Court in the case of"Indwell Constructions Vs. CIT"reported in 232 ITR 776 held as under:- “The pattern of assessment under the Income-tax Act, 1961, is given by section 29 which states thatthe income from profits and gains of business shallbe computed in accordance with the provisionscontained in sections 30 to 43D ofthe Act. Section 40provides for certain disallowances in certain casesnotwithstanding that those amounts are allowedgenerally under other sections. The computationunder section 29 1s to be made under section 145 onthe basis of the books regularly maintained by theassessee. If those books are not correct or completethe Income-tax Officer may reject those books andestimate the income to the best ofhisjudgment. Whensuch an estimate 1s made, it is in substitution of theincome that is to be computed under section 29. Inother words all the deductions which are referred tounder section 29 are deemed to have been taken intoaccount while making such an estimate. This willalso mean that the embargo placed in section 40 isalso taken into account. Where the books of account have been rejected, the ITA-61-2021 (O&M) Revenue cannot rely on the same books for additionofan exact item (ofexpenditure) in the profit and lossaccount. 8 In view of the abovesaid facts and circumstances, we findthat no substantial question of law arises in the present appeal foradjudication by this Court. Consequently, the same is dismissed. (TEJINDER SINGH DHINDSA) JUDGE 06.08.2022Dinesh (PANKAJ JAIN)JUDGE Whether speaking/reasoned|YesWhether ReportableNo