Pr. Commissioner Of Income Tax-1, ... vs Varha Indra Limited
2021 Latest Caselaw 17049 Raj

HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR

D.B. Income Tax Appeal No. 29/2021

Pr. Commissioner of Income Tax-1, Jodhpur

----Appellant Versus

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

----Appellant Versus

Varha Infra Limited, Plot No. 6, Jalam Vilas Scheme, Jodhpur

----Respondent

For Appellant(s) : Mr. K.K. Bissa

For Respondent(s) : Mr. Anjay Kothari

HON'BLE MR. JUSTICE VIJAY BISHNOI HON'BLE MR. JUSTICE ANOOP KUMAR DHAND

Judgment / Order

16/11/2021

These appeals are filed by the Revenue under

Section 260-A of the Income Tax Act, 1961 (for short 'the

(2 of 7) [ITA-29/2021]

Act of 1961') against the orders dated 13.8.2020 and

28.1.2021 passed by the Income Tax Appellate Tribunal,

Jodhpur Bench Jodhpur (for short 'the ITAT') in ITA

No.270/Jodh/2019 (Assessment Year 2016-17) and ITA

No.340/Jodh/2019 (Assessment Year 2016-17)

respectively, while claiming that the following substantial

questions of law are involved in the present appeals :-

"1. Whether on the facts and in the circumstances of the case, the ld. ITAT erred to assess the total income of the assessee at Rs.50 lakh on adhoc basis without considering the fact and evidences as mentioned in the assessment order by the AO that the assessee has not maintained proper books of accounts even when the ld. ITAT also agreed for some technical mistakes in the books of accounts and the decision of AO rejecting books of account was not cancelled ?

2. Whether, on the facts and in the circumstances of the case, the ld. ITAT has erred in determining the income of the assessee at Rs.50 Lakh on adhoc basis even after accepting that it is undisputed fact that there are technical mistakes in the maintenance of Books of Account by the assessee and the observation of the AO with regard to the expenditure has also been upheld ?

3. Whether, on the facts and in the circumstances of the case, the ld. ITAT has erred in not holding that the AO has reasonably estimated the N.P rate by taking the average N.P rate of past 3 years despite agreeing that there were some technical mistakes in maintenance of books of account and some of the observation made by the AO to be correct with regard to certain expenditures and erroneously estimated

(3 of 7) [ITA-29/2021]

income of the assessee at Rs.50 lakh on adhoc basis ?"

Brief facts of the case are that the respondent-

assessee has filed return of income on 14.3.2017 for the

assessment year 2016-17 declaring loss of

Rs.3,17,161/-. The case of the assessee was selected for

complete scrutiny and notice under Section 143(2) of the

Act of 1961 was issued and the assessee was asked to

furnish some details. In response to that, the assessee

has submitted certain documents, however, further

details were sought from the assessee, but as per the

Assessing Officer, when no such documentary evidence

was produced then, a further notice was issued to the

assessee and ultimately, the Assessing Officer has

rejected the books of accounts and estimated net profit

for the year under consideration at 7.6% of the total

turnover of Rs.4,48,83,51,085/- i.e. Rs.34,11,14,682/-.

Penalty proceedings for not disclosing accurate income

were separately initiated against the assessee and

interest applicable under the Act of 1961 on the income

assessed was also levied.

The assessment order dated 23.12.2018 was

challenged by the assessee before the Commissioner of

Income Tax (Appeals-2), Udaipur (for short 'the CIT(A)')

(4 of 7) [ITA-29/2021]

by way of appeal. The CIT(A) vide order dated 22.7.2019

has directed the Assessing Officer to estimate profit @

10.32% before depreciation and further directed that the

depreciation shall be allowed on fixed assets (except for

the fixed assets added during the year under

consideration). After giving effect to the order of the

CIT(A), the assessee's income was recomputed at

Rs.15,73,12,882/-.

Being aggrieved with the order dated 22.7.2019

passed by the CIT(A), the assessee as well as the

Revenue have filed separate appeals before the ITAT.

In appeal being ITA No.270/Jodh/2019, the assessee

has raised the only grievance relates to the addition

made by the Assessing Officer estimating the net profit at

7.6% of total receipts. The ITAT vide order dated

13.8.2020, while disposing of the appeal preferred by the

assessee, has directed the Assessing Officer to assess

income of the assessee at Rs.50 lacs in place of returned

loss of Rs.3,17,161/-. Further, the ITAT in view of the

order passed by it in the appeal preferred by the

assessee, has dismissed the appeal filed by the Revenue

being ITA No.340/Jodh/2019 vide order dated 28.1.2021.

Being aggrieved with the impugned orders passed by

the ITAT, the Revenue has preferred the instant appeals.

(5 of 7) [ITA-29/2021]

Learned counsel for the Revenue has argued that the

findings recorded by the ITAT are ex facie contrary to the

facts and law. It is submitted that the ITAT has erred in

assessing the total income of the assessee at Rs.50 lakh

without considering the fact and evidence as mentioned

in the assessment order passed by the Assessing Officer.

It is also argued that though the ITAT has accepted that

there are technical mistakes in the maintenance of books

of accounts by the assessee, but despite recording this

fact, has assessed the income of the assessee at Rs.50

lakh only.

Learned counsel Mr. Bissa has argued that once it is

clear that the assessee has not maintained the books of

accounts in proper manner, the findings recorded by the

Assessing Officer cannot be faulted with. It is, thus,

prayed that the instant appeals involve substantial

questions of law, which are required to be answered.

Per contra, Mr. Anjay Kothari, learned counsel

appearing for the assessee, while supporting the

impugned orders passed by the ITAT, has argued that no

substantial questions of law involve in the instant appeals

as the findings arrived at by the ITAT are based on facts,

which are not liable to be interfered with.

(6 of 7) [ITA-29/2021]

Heard learned counsel for the parties and perused

the material available on record.

The ITAT has observed that though there is no

dispute regarding the fact that there are some technical

mistakes in maintaining the books of accounts, however,

the Assessing Officer should not loose sight of the gross

profit rate shown by the assessee during the year under

consideration as compared to the gross profit rate shown

in the immediate proceeding year while coming to the

conclusion of rejecting the books of accounts and

estimating the net profit rate. The ITAT has found that

during the year under consideration, the gross profit rate

shown by the assessee is 29.29% as compared to the

gross profit fate of 27.87% shown in the immediately

preceding year. The ITAT is of the opinion that the gross

profit rate shown during the very year is much better

than the gross profit of preceding year and, in such

circumstances, there is justification for complete decline

of contract expenditure claimed by the asssessee, which

goes to constitute the gross profit rate. The ITAT has

further taken into consideration the profit and loss

accounts of the assessee for comparison of expenses and

found that the same are in order. After finding the gross

profit shown by the assessee as reasonable, the ITAT has

(7 of 7) [ITA-29/2021]

found that the assessee's claim of interest expenditure

and depreciation is required to be allowed.

In our opinion, the ITAT after thoroughly examining

the material available on record has assessed the income

of the assessee and according to us, the same is

essentially a question of fact and appreciation of

evidence. After going through the entire material

available 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 out

any perversity in the finding of fact recorded by the ITAT.

In such circumstances, we do not find any

substantial question of law requiring adjudication by this

Court under Section 260-A of the Act of 1961.

Resultantly, the instant appeals, being devoid of

merit, are hereby dismissed.

(ANOOP KUMAR DHAND),J (VIJAY BISHNOI),J

7-8 ms rathore

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