Pr. Commissioner Of Income Tax-1, Jodhpur v. Varha Infra Limited, Plot

HIGH COURT OF JUDICATURE FOR RAJASTHAN ATJODHPUR D.B. Income Tax Appeal No. 29/2021 Pr. Commissioner of Income Tax-1, Jodhpur Versus ----Appellant Varha Infra Limited, Plot No. 6, Jalam Vilas Scheme, Jodhpur ----Respondent Connected With D.B. Income Tax Appeal No. 4/2021 Pr. Commissioner of Income Tax-I, Jodhpur Versus ----Appellant Varha Infra Limited, Plot No. 6, Jalam Vilas Scheme, JodhpurFor Appellant(s) : Mr. K.K. BissaFor Respondent(s): Mr. Anjay Kothari ----Respondent HON'BLE MR. JUSTICE VIJAY BISHNOI HON'BLE MR. JUSTICE ANOOP KUMAR DHAND 16/11/2021 Judgment / Order These appeals are filed by the Revenue underSection 260-A of the Income Tax Act, 1961 (for short ‘the Act of 1961’) against the orders dated 13.8.2020 and28.1.2021 passed by the Income Tax Appellate Tribunal,Jodhpur Bench Jodhpur (for short ‘the ITAT’) in ITANo.270/Jodh/2019 (Assessment Year 2016-17) and ITANo.340/Jodh/2019(AssessmentYear2016-17)respectively, while claiming that the following substantialquestions of law are involved in the present appeals :- “1.Whether on the facts and in thecircumstances of the case, the ld. ITAT erredto assess the total income of the assessee atRs.50 lakh on adhoc basis without consideringthe fact and evidences as mentioned in theassessment order by the AO that the assesseehas not maintained proper books of accountseven when the ld. ITAT also agreed for sometechnical mistakes in the books of accountsand the decision of AO rejecting books ofaccount was not cancelled ? 2. Whether, on the facts and in thecircumstances of the case, the ld. ITAT haserred in determining the income of theassessee at Rs.50 Lakh on adhoc basis evenafter accepting that it is undisputed fact thatthere are technical mistakes in themaintenance of Books of Account by theassessee and the observation of the AO withregard to the expenditure has also beenupheld ? 3. Whether, on the facts and in thecircumstances of the case, the ld. ITAT haserred in not holding that the AO hasreasonably estimated the N.P rate by takingthe average N.P rate of past 3 years despiteagreeing that there were some technicalmistakes in maintenance of books of accountand some of the observation made by the AOto be correct with regard to certainexpenditures and erroneously estimated income of the assessee at Rs.50 lakh on Brief facts of the case are that the respondent-assessee has filed return of income on 14.3.2017 for theassessment year 2016-17 declaring loss ofRs.3,17,161/-. The case of the assessee was selected forcomplete scrutiny and notice under Section 143(2) of theAct of 1961 was issued and the assessee was asked tofurnish some details. In response to that, the assesseehas submitted certain documents, however, furtherdetails were sought from the assessee, but as per theAssessing Officer, when no such documentary evidencewas produced then, a further notice was issued to theassessee and ultimately, the Assessing Officer hasrejected the books of accounts and estimated net profitfor the year under consideration at 7.6% of the totalturnover of Rs.4,48,83,51,085/- i.e. Rs.34,11,14,682/-.Penalty proceedings for not disclosing accurate incomewere separately initiated against the assessee andinterest applicable under the Act of 1961 on the incomeassessed was also levied. The assessment order dated 23.12.2018 waschallenged by the assessee before the Commissioner ofIncome Tax (Appeals-2), Udaipur (for short ‘the CIT(A)’) by way of appeal. The CIT(A) vide order dated 22.7.2019has directed the Assessing Officer to estimate profit @10.32% before depreciation and further directed that thedepreciation shall be allowed on fixed assets (except forthe fixed assets added during the year underconsideration). After giving effect to the order of theCIT(A), the assessee’s income was recomputed atRs.15,73,12,882/-. The assessment order dated 23.12.2018 waschallenged by the assessee before the Commissioner ofIncome Tax (Appeals-2), Udaipur (for short ‘the CIT(A)’) by way of appeal. The CIT(A) vide order dated 22.7.2019has directed the Assessing Officer to estimate profit @10.32% before depreciation and further directed that thedepreciation shall be allowed on fixed assets (except forthe fixed assets added during the year underconsideration). After giving effect to the order of theCIT(A), the assessee’s income was recomputed atRs.15,73,12,882/-. Being aggrieved with the order dated 22.7.2019passed by the CIT(A), the assessee as well as theRevenue have filed separate appeals before the ITAT. In appeal being ITA No.270/Jodh/2019, the assesseehas raised the only grievance relates to the additionmade by the Assessing Officer estimating the net profit at7.6% of total receipts. The ITAT vide order dated13.8.2020, while disposing of the appeal preferred by theassessee, has directed the Assessing Officer to assessincome of the assessee at Rs.50 lacs in place of returnedloss of Rs.3,17,161/-. Further, the ITAT in view of theorder passed by it in the appeal preferred by theassessee, has dismissed the appeal filed by the Revenuebeing ITA No.340/Jodh/2019 vide order dated 28.1.2021. Being aggrieved with the impugned orders passed bythe ITAT, the Revenue has preferred the instant appeals. Learned counsel for the Revenue has argued that thefindings recorded by the ITAT are ex facie contrary to thefacts and law. It is submitted that the ITAT has erred inassessing the total income of the assessee at Rs.50 lakhwithout considering the fact and evidence as mentionedin the assessment order passed by the Assessing Officer.It is also argued that though the ITAT has accepted thatthere are technical mistakes in the maintenance of booksof accounts by the assessee, but despite recording thisfact, has assessed the income of the assessee at Rs.50lakh only. Learned counsel Mr. Bissa has argued that once it is clear that the assessee has not maintained the books ofaccounts in proper manner, the findings recorded by theAssessing Officer cannot be faulted with. It is, thus,prayed that the instant appeals involve substantialquestions of law, which are required to be answered. Per contra, Mr. Anjay Kothari, learned counsel appearing for the assessee, while supporting theimpugned orders passed by the ITAT, has argued that nosubstantial questions of law involve in the instant appealsas the findings arrived at by the ITAT are based on facts,which are not liable to be interfered with. Heard learned counsel for the parties and perused the material available on record. The ITAT has observed that though there is nodispute regarding the fact that there are some technicalmistakes in maintaining the books of accounts, however,the Assessing Officer should not loose sight of the grossprofit rate shown by the assessee during the year underconsideration as compared to the gross profit rate shownin the immediate proceeding year while coming to theconclusion of rejecting the books of accounts andestimating the net profit rate. The ITAT has found thatduring the year under consideration, the gross profit rateshown by the assessee is 29.29% as compared to thegross profit fate of 27.87% shown in the immediatelypreceding year. The ITAT is of the opinion that the grossprofit rate shown during the very year is much betterthan the gross profit of preceding year and, in suchcircumstances, there is justification for complete declineof contract expenditure claimed by the asssessee, whichgoes to constitute the gross profit rate. The ITAT hasfurther taken into consideration the profit and lossaccounts of the assessee for comparison of expenses andfound that the same are in order. After finding the grossprofit shown by the assessee as reasonable, the ITAT has found that the assessee’s claim of interest expenditureand depreciation is required to be allowed. found that the assessee’s claim of interest expenditureand depreciation is required to be allowed. In our opinion, the ITAT after thoroughly examining the material available on record has assessed the incomeof the assessee and according to us, the same isessentially a question of fact and appreciation ofevidence. After going through the entire materialavailable on record, the ITAT has come to the conclusion,which in our view is not liable to be interfered with.Learned counsel for the Revenue has failed to point outany perversity in the finding of fact recorded by the ITAT. In such circumstances, we do not find anysubstantial question of law requiring adjudication by thisCourt under Section 260-A of the Act of 1961. Resultantly, the instant appeals, being devoid ofmerit, are hereby dismissed. (ANOOP KUMAR DHAND),J (VIJAY BISHNOI),J 7-8 ms rathore