The Income Tax Officer, Ward 2 (3), Chandigarh v. Upinderjit Singh

ITA No. 69 of 1999 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 69 of 1999 Date of Decision: 13.7.2010 The Income Tax Officer, Ward 2 (3), Chandigarh ....Appellant. Versus Upinderjit Singh ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Ms. Urvashi Dhugga, Advocate for the respondent. ADARSH KUMAR GOEL, J. 1.This appeal has been preferred by the revenue underSection 260A of the Income Tax Act, 1961 (in short, “the Act”) againstthe order passed by the Income Tax Appellate Tribunal, ChandigarhBench, Chandigarh (hereinafter referred to as “the Tribunal”) in ITA No.91/Chandi/92 dated 4.1.1999 for the assessment year 1987-88proposing the following substantial question of law:- Whether on the facts and circumstances of the case,ITAT was right in law in holding that provisions ofsection 145 (2) of the Income Tax Act, 1961 cannotbe invoked in the absence of non production/maintenance of stock register, failure on the part ofthe assessee to produce bills and vouchers in support of expenses debited to the profit and lossaccount, failure on the part of the assessee to justifythe low net profit rate and further when assessee hadunderstated the work done during the year by Rs.2lacs?” 2.In the course of assessment, the assessee failed toproduce the bills and vouchers in support of his claim for deductiontowards the expenditure on the ground that entire profit was eaten up bythe abnormal rise in the prices of men and material and as per returnshowed net profit of Rs.87,008/-. Invoking the provisions of Section 145(2) of the Act, the Assessing Officer applied a net profit rate of 10% andmade the addition. On appeal by the assessee against the order of theAssessing Officer, the CIT (A) held that the rejection of the books ofaccount, on failure to produce bills and vouchers was not justified. Thematter was remanded to the Assessing Officer for examining variousitems of expenditure debited to the profit and loss account to determinewhether item of any expenditure was inadmissible and to whatquantum. On further appeal by the revenue, the Tribunal upheld theview of the CIT (A). 3.We have heard the learned counsel for the revenue. 4.The contention raised on behalf of the appellant is thatrejection of books of account was justified under Section 145 (2) of theAct in view of the fact that unjustifiable low net profit was disclosed and,it did not disclose the income correctly. On the face of it, there may besome merit in the contention raised by the learned counsel for theappellant but the effect of the order passed by the CIT (A) and the ITA No. 69 of 1999 Tribunal is that the Assessing Officer would be entitled to disallow claimof expenditure made by the assessee which are inadmissible in natureand remain unsubstantiated in the absence of proof of bills andvouchers. Once that is so, then the resultant income on the basis ofbooks of account would change and the ground taken by the AssessingOfficer for rejecting the books of account on the pretext that low rate ofprofit i.e. 1.33% of the total work done has only been shown may notstand. In the facts and circumstances of the case, the view taken by theCIT (A) as also the Tribunal can be held to be a possible view. 5.In view of the above, no question of law arises forconsideration of this Court. 6.The appeal is dismissed. (ADARSH KUMAR GOEL) JUDGE July 13, 2010gbs (AJAY KUMAR MITTAL)JUDGE