The Assistant Commissioner Of Income Tax, Circle -2,Muzaffarpur v. M/S Salauddin

IN THE HIGH COURT OF JUDICATURE AT PATNAMiscellaneous Appeal No.344 of 2011 ====================================================== THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE -2,MUZAFFARPUR ... ... Appellant/s Versus M/S SALAUDDIN. C/O TRISHUL CONSTRUCTION, CHHATRADHARIBAZAR, CHAPRA ... ... Respondent/s ======================================================Appearance :For the Appellant/s: Mr. Rishi Raj SinhaFor the Respondent/s: Mr. ====================================================== CORAM: HONOURABLE THE CHIEF JUSTICE and HONOURABLE MR. JUSTICE RAJEEV RANJAN PRASADORAL JUDGMENT(Per: HONOURABLE THE CHIEF JUSTICE) Date : 25-06-2018 This is Revenue's appeal under Section 260A of theIncome Tax Act calling in question tenability of an order passed bythe Income Tax Appellate Tribunal in ITA No. 111/Pat/ 2010 forthe assessment year 2004-05. The order is dated 10.12.2010 andthe Revenue feels aggrieved by the impugned order to the extentof disallowing certain additions said to have been made by thelearned Commissioner for Income Tax under Section 40(a)(ai) ofthe Income Tax Act (hereinafter referred to as 'the Act'). The assessee in question submitted a return for tax andthe total income was declared at Rs.82,35,555/-. The main sourceof income was from contract awarded to the assessee by theRailway and Public Works Department and the assessee had disclosed a total receipt of Rs.1581.26 lacs for the year in questionas against receipt of Rs.1285.89 lacs for the previous year. TheAssessing Officer found that rate of net profit declared for only 5%of turnover against 5.10% for the preceding year. The AssessingOfficer rejected the Books of Accounts under Section 145(3) of theAct and determined the net profit at the rate of 8% of the totalcontract received and accordingly determined the income of theassessee at Rs.1,26,50,146/-. The assessee challenged the samebefore the learned Commissioner (Appeals) and the Commissioner(Appeals) having made addition of Rs.47,42,596/- on the basis ofprofit not disclosed the matter travelled to the Tribunal and theTribunal in paragraph-11 of the impugned order decided the issuein the following manner:- “11. From the above para of the order of theITAT in the assessee's own case for the same assessmentyear, we find that it is observed by the ITAT that takinginto account the totality of facts and circumstances ofthe case, action of Assessing Officer to estimate theincome by applying net profit rate of 8% is upheld. Oncethe books of the assessee has been rejected and theincome of the assessee was estimated @ 8% of theturnover, the Assessing Officer cannot take help of thesame books of account to make any further disallowanceon the basis of entries in such rejected books of account.Considering this aspect of the case, we are in agreement “11. From the above para of the order of theITAT in the assessee's own case for the same assessmentyear, we find that it is observed by the ITAT that takinginto account the totality of facts and circumstances ofthe case, action of Assessing Officer to estimate theincome by applying net profit rate of 8% is upheld. Oncethe books of the assessee has been rejected and theincome of the assessee was estimated @ 8% of theturnover, the Assessing Officer cannot take help of thesame books of account to make any further disallowanceon the basis of entries in such rejected books of account.Considering this aspect of the case, we are in agreement of the learned Commissioner (Appeals) that onceincome is estimated by the Assessing Officer afterrejecting the books of account of the assessee, no furtherdisallowance can be made by the Assessing Officer. Thejudgment of Hon'ble Andhra Pradesh High Courtrendered in the case of Inwell Construction vs. CIT(supra) also, supports this view. In that case also, theincome of the assessee was estimated by the AssessingOfficer at Rs.2.50 lacs after rejecting the books ofaccount under sec. 145 of the Act. Against thisassessment order, learned Commissioner was of the viewthat this assessment order is erroneous and prejudicialto the interest of the revenue and after invoking theprovisions of Section 263 of the Act, it was held by himthat a sum or Rs.63,859/- should be further added whichwas shown as interest and salary paid to the partners inthe P & L account. Under these facts, it was held by theHon'ble Andhra Pradesh High Court that once estimateis made, all the deductions which are referred to undersec. 29 are deemed to have been taken into accountwhile making such an estimate and this will also meetthat the embargo placed in sec. 40 is also taken intoaccount. Respectfully following this judgment of Hon'bleAndhra Pradesh High Court, we uphold the order of thelearned Commissioner (Appeals) on this issue.” Now it is canvassed before us that once the addition wasmade based on the statutory provision the Tribunal committed anerror in rejecting the same and, therefore, it is stated that the substantial question of law arises for consideration is as to whetherthe addition made as per the statutory provision could be interferedwith in a manner done. Having heard learned counsel for the parties and onanalyzing the reasons that weighed with the Tribunal for rejectingthe justification given by the learned Commissioner (Appeals), wefind that the Tribunal has not committed any error. Once the Booksof Account were rejected and the profit was estimated @ 8% ofturnover, then, the same Books of Account cannot be relied uponfor the purpose of making addition under the provision of Section40 of the Act. In doing so, the Tribunal has not committed anyerror. We do not find any substantial question of law warrantingreconsideration. The appeal is therefore dismissed. (Rajendra Menon, CJ) mrl./- ( Rajeev Ranjan Prasad, J) AFR/NAFRNAFRCAV DATEN.A.Uploading Date29.06.2018Transmission Date