Case Law Details
Failure of the assessee to give details of the sundry creditors may be a ground for raising suspicion, but suspicion alone is not enough for invoking the powers of best judgment
Relevant Extract of the Judgment
2. The assessee in the present case is a joint venture between M/s. SPML and M/s. CISC Limited for carrying out some works contract jointly. The return of income for the year under consideration was filed by it on 08.02.2010 declaring a loss of Rs.1,36,71,480/-. During the course of assessment proceedings, the assessee could not produce the complete details of sundry creditors as required by the Assessing Officer, inasmuch as the addresses of some of the creditors were not furnished by the assessee and the details of only 106 creditors could be furnished by the assessee out of total 155 creditors appearing in the list. On the basis of this failure on the part of the assessee, the Assessing Officer was not satisfied about the correctness and completeness of the accounts of the assessee and rejecting the same by invoking the provisions of section 145(3), he proceeded to determine the income of the assessee on estimated basis. In this regard, he estimated the income of the assessee from the business of execution of works contract by applying a G.P. rate of 5.15% and determined the loss of the assessee at Rs.1,01,02,822/- in the assessment completed under section 143(3)/144 of the Act vide order dated 30.12.2011.
7. We have considered the rival submissions and also perused the relevant material available on record. It is observed that the books of account of the assessee were rejected by the Assessing Officer merely on the basis of the failure of the assessee to furnish the complete details of the creditors as required by him and there was no other defect pointed out by the Assessing Officer in the books of account maintained by the assessee to justify the rejection of books of account. As held by the Hon’ble Guwahati High Court in the case of Madnani Construction Corporation Pvt. Limited (supra) cited on behalf of the assessee, the failure of the assessee to give details of the sundry creditors may be a ground for raising suspicion, but suspicion alone is not enough for invoking the powers of best judgment. Moreover, the relevant details as sought by the Assessing Officer in respect of sundry creditors were completely furnished by the assessee before the ld. CIT(Appeals) and after having satisfied with the reasons explained by the assesee for not furnishing the same before the Assessing Officer during the course of assessment proceedings, the ld. CIT(Appeals) admitted the same on record and allowed relief to the assessee by relying on the same. Although the ld. D.R. has raised an argument that there is a violation of Rule 46A by the ld. CIT(Appeals), inasmuch as, no opportunity was given by him to the Assessing Officer to verify the said details, it is observed that there is no ground specifically raised by the Revenue in its appeal alleging violation of Rule 46A by the ld. CIT(Appeals). Even otherwise the defect as pointed out by the Assessing Officer regarding the failure of the assessee to furnish the complete details of sundry creditors not being material or sufficient enough to justify the rejection of books of account maintained by the assessee as held by the Hon’ble Guwahati High Court in the case of Madnani Construction Corporation P. Limited (supra), we are of the view that the ld. CIT(Appeals) is fully justified in deleting the addition made by the Assessing Officer by estimating the income of the assessee from the business of execution of works contract by applying higher G.P. rate of 5.15%. Accordingly, we uphold the impugned order of the ld. CIT(Appeals) giving relief to the assessee on this issue and dismiss this appeal filed by the Revenue.
