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Judgment
Dr. Satish Chandra, J.—Present appeal u/s 260A of the income tax Act 1961, has been preferred against the judgment and order dated 22.12.2003 passed by Income Tax Appellate Tribunal, Lucknow in ITA No. 305/Luc/2002 for the Assessment Year 1998-99.
1.1 On 06.07.2004, a Coordinate Bench of this Court has admitted the instant appeal on the following substantial questions of law:
Whether considering the facts and circumstances of the case, the Tribunal erred in law in holding that no finding had been recorded for rejecting the books of account, only by relying on the decision of Andhra Pradesh High Court in the case of ITR 442, even though the Assessing Officer had discussed in detail the defects in the books of account before rejecting them u/s 145(3) and the Apex Court has in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd., Madras Vs. Commissioner of Income Tax, Madras, laid down that the income relating to a particular year is to assessed in that very year.
Whether the Tribunal erred in law by holding that the Department is bound to accept the system of accounting regularly adopted by the assessee in the past, although the Apex Court in the case of Commissioner of Income Tax Vs. British Paints India Ltd., has observed that there was no estoppel in taxation matters and the officer was not bound by the method followed in the earlier years.
The brief facts of the case are that the assessee company is engaged in the manufacturing and sale of Khandsari (sugar). For the assessment year under consideration, the assessee has filed its return of Nil income but the A.O. u/s 143(3) has completed the assessment on a total income of Rs. 17,99,380/- by rejecting the books of account u/s 145(3) of the Act. The additions of Rs. 12,15,867/- and Rs. 4,38,400/- respectively were made on estimate basis, which were upheld by the First Appellate Authority but the Tribunal has deleted the same. Being aggrieved, the department has filed the present appeal.
With this background, Sri D.D. Chopra, learned counsel for the department submits that net sale shown for the assessment year under consideration had been declined, as compared to previous assessment years'' sale. The explanation given by the assessee is not acceptable that business was conducted through wholesalers and only on receipt of sale figure from them, sale and expenses were recorded. The assessee was sending Khandsari to Commission Agent at distinctive places including Bengal, Assam and so on and against the consignment sent for sale in future, the assessee was obtaining substantial amount as advances from those commission agents. The assessee was counting for such consignments sale as and when those commission agents were sending sale notice detailing the actual amount of sale consideration and making necessary entries in the books of account. Notices u/s 133(6) were sent, out of which, 12 did not respond. Even in the cases, where response was made, discrepancies were found. So, the explanation given by the assessee pertaining to anomalies was not accepted. In these circumstances, the A.O. has rightly invoked the provisions of section 145(3) and made the addition on estimate basis.
On specific query from the Bench, learned counsel for the department accepted that the assessee was following the same system of accounting from last ten years but for the reasons mentioned above, the books were rejected during the assessment year under consideration. Learned counsel also submits that in the case of Commissioner of Income Tax, Andhra Pradesh Vs. Margadarsi Chit Funds (P) Ltd., and also in the case of Commissioner of Income Tax Vs. British Paints India Ltd., , it was observed that there was no estoppel in the taxation matters.
We have heard learned counsel for the department and gone through the material available on record.
From the record, it appears that the books of account were properly audited, checked and no specific error was detected. Regarding non-compliance to notices sent to various parties u/s 133(6), the assessee explained that the parties might have not received the notice or they were not experts in keeping the accounts in the manner as the A.O. likes. Sales were fully verifiable as the consignments had been dispatched along with forms as required under Sales Tax Act, and copies of challans, mandi tax vouchers, transport billies etc. were also made available to the A.O. The assessee cannot be penalized specially when its books of account were properly audited and relevant vouchers were made available. The assessee cannot be held responsible for not submitting the proper reply by the buyers/commission agents.
In the instant case, the A.O. rejected the books of account and made the addition on estimate basis mainly for the reason that during the assessment year under consideration, the assessee has shown low sale/profit.
It may be mentioned that profit being low by itself cannot be a ground for rejection of the books of account as per the ratio laid down in the following cases:
PUNJAB TRADING CO. LTD. Vs. COMMISSIONER OF Income Tax, SIMLA., , and
Motiram Pesumal Vs. Commissioner of Income Tax,
Moreover, in the instant case, the A.O. has rejected the books of account and made the addition on estimate basis.
It may be mentioned that estimation is a question of fact as per the ratio laid down in the following cases:
Commissioner of Customs (Import) Vs. Stoneman Marble Industries and Others, .
Vijay Kumar Talwar Vs. Commissioner of Income Tax, Delhi, ;
New Plaza Restaurant Vs. Income Tax Officer, , and
Sanjay Oilcake Industries Vs. Commissioner of Income Tax, .
In view of above discussion, no substantial question of law is emerging from the impugned order passed by the Tribunal. Therefore, we find no reason to interfere with the impugned order passed by the Tribunal and the same is hereby sustained for the reasons mentioned therein. Thus, the answer to the substantial questions of law is against the department.
In the result, appeal filed by the department is dismissed.