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08-11-2019, Ashok Kumar, Section 133A, 145(3), Tribunal Chandigarh

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6 months 2 weeks ago #11367 by amit
Section - 133A, 145(3), 36(1)(iii)
Order Date - 08-11-2019
Favouring - Assessee
Court - Tribunal Chandigarh
Appellant - ITO
Respondent - Ashok Kumar
Citation - 1119Taxpundit102
Appeal No. - ITA No. 12/Chd/ 2019
Asstt. Year - 2014-15



This is an appeal by the Department against the order dt. 03/10/2018 of Ld. CIT(A), Patiala.

2. Following grounds have been raised in this appeal:

1. In the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 1,62,66,878/- made on account of under billing of sales done by the assessee.

2. In the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 1,92,346/- as he erred in appreciating the document impounded for the unaccounted sales, which the assessee was unable to reconcile with the books of accounts.

3. In the facts and circumstances of the case the Ld. CIT(A) has erred in allowing relief to the assessee on account of unaccounted sales as per entries in impounded material during survey.

4. It is prayed that the order of Ld. CIT (A), Patiala be set aside and that of the Assessing Officer be restored.

5. The appellant craves leave to add or amend any grounds of appeal before the appeal is heard and finally disposed of.

3. The facts of the case in brief are that the Assessee was engaged mainly in wholesale trading in timber and wood under the name and style of M/s Chhabra Timber Store. He also maintained a saw mill. A survey under section 133A of the Income Tax Act, 1961 (hereinafter referred to as ‘Act’) was conducted at the business premises of the Assessee on 09/12/2013 and the inventory of physical stock found at the business premises was compared with the provisional stock as per the books of accounts. The Assessee in his return of income disclosed Rs. 24,56,010/- on account of additional stock, however the A.O. neither mentioned the same in the assessment order nor made any discussions with regard to the disclosure of stock found verified during the survey.

The Assessee filed the return of income on 22/11/2014 declaring an income of Rs. 34,08,070/-. The case was selected under compulsory scrutiny as per the guidelines laid by the CBDT. The A.O framed the assessment under section 143(3) of the Act and made the following additions. Accordingly the assessment was framed at an income of Rs. 2,00,24,225/-.

4. Being aggrieved the Assessee carried the matter to the Ld. CIT(A) and challenged the estimation of income without rejecting the books of accounts under section 145(3) of the Act and submitted as under:

“The impugned order is bad in law and not based on the facts, because:

a) Evidently, the books of account have not been rejected yet best judgment assessment has been framed.

b) Evidently, not even a single instance of alleged understatement of sales has been detected yet the sales have been estimated by applying some arbitrary sale rates on whims and fancies of the A. O. and

c) Evidently, the additions of entire amount of alleged unaccounted sales have been wrongly made.

3.2. Ground of Appeal No. 2 relating to the framing of best judgment assessment without rejection of the books of account as envisaged in Sec. 144. : At the very outset, it may be submitted that the books of account, which are being maintained through Computerised System, consisting of Cash Book, Ledger and Journal, maintained in the regular course of business supported by the relevant bills and vouchers etc. and duly audited by the qualified Chartered Accountants were produced before the Ld. Assessing Officer and were admittedly checked by him. Neither any specific defect or mistake or omission or commission had been pointed out therein at any stage of proceedings before the Ld. A.O. but the additions have still been made in the trading results. No positive material has been brought on record to prove the alleged under-pricing which could justify the action of the Ld. A.O in not accepting the results of the assessee and making the impugned additions by applying some presumptive arbitrary and highly excessive sale rates. The additions made to the returned income, without rejecting the account books as envisaged in Sec. 144 of the Act, ibid, are legally invalid and deserve to be deleted."

4.1 The Ld. CIT(A) asked the Assessee to show cause as to why the books of accounts should no be rejected in view of the non maintenance of the stock register and other errors. In response, the assessee submitted as under:

"While imported timber/wood is purchased from the parties of Gandhidham in Gujarat, indigenous/local woods are purchased from the parties of Arunanchal Pradesh, Madhya Pradesh and Himachal Pradesh. This timber/wood is segregated quality wise and size-wise. Generally, the timber/wood of medium quality (being easily marketable due to competitive sale rates) is purchased. Pertinent to mention here is the universal fact that the sale rates of timber/wood are based on the quality, size and seasoning quotients. The assessee also has his own saw mill within the business premises to cut the logs to the requirements of customers. There is nominal trading in plywood etc. also. All sales (majority of them being wholesales were made to traders) are evidenced by regularly issued sale invoices, wherein all material particulars of the purchaser, description of timber/wood sold, per unit sale rate, quantity and total sale value thereof, VAT etc. are truly recorded. The books of account/records including purchase/sale invoices, receipt and expense vouchers and supporting evidence are being

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