Case Details:

Devyani Tex Chem Pvt. Ltd. vs. ACIT

Appeal No.:

ITA No. 1009/AHD/2015

Order Pronounced by:

ITAT Surat

Date of Order:

22-06-2021

Assessment Year:

2004-05

During the assessment, the A.O. rejected the books of accounts of the assessee due to the reason that various information called for were not submitted by the assessee. The assessee has stated that although it had leased out the factory and it was receiving lease rent but it had fabricated the books of accounts to show that as job work and for this purpose it had also fabricated the excise register. The assessee had admitted this in writing during the course of original assessment proceedings.

The parties have deducted TDS @ 2% which is the normal rate of TDS for job work. If this income was rental income, then the TDS should have been 20%. Therefore, the A.O. held that the books of the assessee and its accounting is, contrary to all norms and conventions and the books of accounts are, therefore, not believable at all. The A.O. also observed that it is not only a case of rejection of books of accounts but a clear-cut case of prosecution for false verification and for fabrication of record.

In view of the above defects in the accounts of the assessee, the books of accounts were rejected by the A.O. and the gross profit is estimated at the average GP rate of the last two years and addition made accordingly to the total income of the assessee. Before the Hon’ble Tribunal, the Ld. Counsel for the assessee submitted that the assessee’s books of accounts are audited and no specific defect has been found by the A.O., therefore, rejection of books of accounts is not valid and not in accordance with the law. The Ld. Counsel for the assessee also placed his submission in respect of other grounds relating to the addition of Rs. 1,75,840/- on account of alleged fictitious liability and addition of Rs. 16,15,745/- under section 41 of the Act.

Observations

Ruling

• There is a clear-cut finding given by the Ld. CIT(A) that the assessee has fabricated books of accounts that is why the books of accounts have been rejected by the A.O. u/s 145(3) of the Act.
• The assessee did not submit the required documents during the assessment stage. The assessee has manufactured and fabricated its books of accounts. The assessee has also fabricated the excise register.

We have gone through the order of the ld. CIT(A), in the light of the above-narrated facts, and noted that the conclusion arrived at by ld. CIT(A) does not require interference. Therefore, we confirm and approve the order of ld. CIT (A). Thus, this ground of the assessee is not allowed.

Observations

Ruling

• It is abundantly clear that the books of accounts of the assessee were rejected by the A.O. and on appeal, the ld. CIT(A) upheld the rejection of the books of accounts. We also upheld the order of the ld. CIT(A), so far as rejection of books of accounts are concerned.
• Where the A.O. himself rejected the books of accounts of the assessee after holding that the assessee’s books do not show true results and made an estimate addition on a gross profit basis then other item-wise disallowance should not be made.

Thus, we note that, once the books of accounts are rejected then it cannot be said that it shall be good for one purpose and not for other and, therefore, no separate addition of Rs. 1,75,840/- of alleged fictitious liability and addition of Rs. 16,15,745/- u/s 41 of the Act can be made. Therefore, we delete both additions of Rs. 1,75,840/- and Rs. 16,15,745/-.