D.b.income Tax Appeal v. M/S Banas Sand Toll Tax Collection

IN THE HIGH COURT OF JUDICATURE FOR RAJASTHANBENCH AT JAIPUR D.B.INCOME TAX APPEAL NO. 64 / 2016C I T JAIPUR ----Appellant Versus M/S BANAS SAND TOLL TAX COLLECTION ----Respondent __________________________________________For Appellant :Mr. Anuroop Singhi __________________________________________ HON'BLE MR. JUSTICE K.S.JHAVERI HON'BLE MR. JUSTICE DINESH MEHTAJudgment Per Hon’ble Mr. Jhaveri, J.07/12/2016 1.By way of this appeal, the appellant has assailed thejudgment & order of the Tribunal whereby the Tribunal hasdismissed the appeal preferred by the department. 2.Counsel for the appellant Mr. Anuroop Singhi framed the following question of law which reads as under:- “(i) Whether on the facts and in thecircumstances of the case and in law, theTribunal has erred in passing a contradictoryorder by on one hand, allowing the benefit ofdepreciation of Rs. 1,25,79,130/- and on theother hand, deleting the disallowance u/s 40Aand 40(a)(ia) of Rs. 81,861/- and Rs.62,15,115/- despite holding that after theapplication of net profit rate, no furtheradditions can be made? (ii) Whether, the Tribunal was justified inholding that when two opinions have beenformed by the Hon’ble High Court, theassessee’s favourable opinion has to be applied, by relying upon the judgment ofHon’ble Supreme Court, which is not what washeld by the Honb’le Supreme court and thus,the said finding is erroneous and contrary tolaw? (iii)Whether on the facts and circumstancesof the case, the finding of the Tribunal isperverse, contrary to the record and untenablein the eye of law?” 3.However, in our view, the observations made by theTribunal in para 9, 10 & 11 which reads as under:- “9. Now the revenue is in appeal before us.The ld DR has argued that these additions aredeeming additions and had no relation withthe income estimated on the basis of net profitrate. The ld DR has drawn our attention on thedecision of Hon’ble Agra Bench of ITAT dated21/11/2011 in the case of ITO 1(3), Agra Vs.Shri Ravi Dubey in ITA No. 228/Agr/2010 forA.Y. 2006-07 wherein it has been held that CIT(A) was not right where book having beenrejected by invoking the provisions of Section145(3) of the Act then seperate disallowanceU/s 40(a)(ia) of the Act is not tenable byrelying the decision of Hon’ble Allahabad HighCourt, Luchnow bench in the case of CIT Vs.pradeshiyaIndustrialandInvestmentCorporation of U.P. Limited (2010) 325 ITR583 (All.) by considering the Hon’ble SupremeCourt decision oin the case of Shree SajjanMils Limited Vs. CIT (1985) 156 ITR 585 (SC),therefore, separate addition made by theAssessing Officer is to be confirmed. Furtherhe relied on the decision of Hon’ble SupremeCourt in the case of CIT Vs. Devi PrasadVishwanath (1969) 72 ITR 194 (SC) whereindeeming addition U/s 68 was made on accountof cash creditor U/s 68 as well as income wasestimated by rejecting the book result U/s145(3) of the Act. The addition of casgcreditors was confirmed by the Hon’bleSupreme Court under the income from othersources. He further relied on the decision inthe case of Kale Khan Mohammad Hanif Vs.CIT (1963) 50 ITR 1 (SC) wherein similarissue on deeming addition on account of cashcreditor was held to be income from othersources and not as business income. He further relied on the decision of Hon’ble ITATof Hyderabad Bench in the case of ACIT Vs.Mir Mazharuddin (2013) 35 Taxman. Com 541(Hyd. Trib) wherein the addition made U/s 68in number of years when income is estimatedby Assessing Officer, addition U/s 68 ispermissible. He further relied on the decisionin the case of CIT-1 Vs. G.S. Tiwari & Co.(2014) 41 Taxmann. Com 17(All) wherein theHon’ble High Court has held that the additionU/s 68 on account of unexplained cashcreditor and business estimated by rejectingthe books of account, separate addition can bemade. Therefor, he prayed to confirm theorder of the Assessing Officer. 10. At the outset, the Id AR of the assesseehas submitted that though the assesse firmitself made this disallowance in return ofincome while preparing statement ofassessable income as per books of accounts.But not when ld. AO rejected books of accountsand completed assessment by applying N.P.rate no separate addition U/s 40(a)(ia) can bemade. This legal view has been sustained invarious judgments. In the case of TejaConstruction vs. ACIT (2010) 5 Taxman. Com61 (Hyd ITAT) the decision of IndwellConstructions vs. CIT (1998) 232 ITA 776 (AP)was followed and it was held “that whereincome of the assessee having determined byresorting to estimation there is no scope forany further disallowance either in terms ofSection 40(a)(ia)/40A(3) of the Act orotherwise. The recent judgment in which afterconsidering various judgment on the issue theITAT Cuttak Bench upheld the above legal viewis ITA vs. Sahdev Pradhan (2012) 18 ITA (Trib)180 (Cuttack). He further argued on deletion ofaddition u/s 40A(3) of the Act that on the sameanalogy of law no disallowance u/s 40A(3)could be made when income is assessed onapplication of N.P. rate. He relied on thefollowing decisions:- (i) CIT vs. Purshottamlal Tamrakar Uchehra(2003) 184 CTR (MP) 349. (ii) CIT vs. Smt. Santosh Jain (2007) 159Taxman 392 (Punj & Har). Recently the Jaipur Bench of ITAT JaipurBench, Jaipur in the case of ITO vs. SadhwaniBrothers (2011) 142 TTJ (UD) 26 has held thatwhere Assessing Officer had rejected the books of accounts and had applied net profitrate for purpose of computing income nodisallowance could have been made u/s40A(3). In view of the above judicialpronouncements, no disallowance could bemade U/s 40(a)(ia) and 40A(3) of the Actwhen assessment is made computing incomeby application of NP rate. Thus, he prayed toconfirm the order of the ld CIT(A). 11.We have heard the rival contentions ofboth the parties and perused the materialavailable on the record. It is found that thevarious Hon’ble High Courts as well as ITAThas decided this issue against and in favour ofthe assessee. The Hon’ble Supreme Court inthe case of CIT vs. Vegetable Products Ltd.(1973) 88 ITR 192 (SC) has held that whentwo opinions has been formed by the Hon’bleHigh Court, the assessee’s favourable opinionis to be applied. Therefore, we uphold theorder of the ld CIT(A).” 4.The view taken by the Tribunal is just and proper, nocase is made out nor any substantial question of law isinvolved. 5.The appeal is devoid of any merit and deserves to bedismissed, the same is dismissed. (DINESH MEHTA)J. (K.S.JHAVERI)J. A.Sharma/75