By Ajay R. Singh
Advocate
14. Pr CIT-19 vs. Rahul J Jain [ ITA no
857 of 2016 Dated: 11th December, 2018 (Bombay High Court)].
[Asst CIT 16(3) vs. Rahul J Jain ; dated 28/09/2015 ; ITA. No
5986/Mum/2013, AY : 2009-10, Bench : D
Mum. ITAT ]
Section 37 (1): Business expenditure – books
of accounts, and details not produced – being destroyed due to flood – filed
evidence indicating the destruction of physical accounts due to heavy rains –
Allowable as deduction – ‘best judgment
assessment’ should not be made as a ‘best punishment assessment’.
The
assessee is engaged in the business of trading in ferrous and nonferrous
metals. During the scrutiny proceeding, the assessee was unable to produce its
physical books of accounts, evidences for sales, purchases and expenses claimed
in the view of the same being destroyed due to flood on 8th July,
2009. The assessee filed necessary evidence indicating the destruction of
physical accounts due to heavy rains on 8th July, 2009. Besides, it
also filed evidences of its sellers and buyers to support its claim of loss.
However, the A.O assessed the income of the assessee at Rs. 57.95 lakh under
the head ‘business’ as against the loss of Rs.18.74 2 lakh as shown by the
assessee in its return of income.
The
CIT(A) allowed the assessee’s appeal inter alia by noting the fact that the
assessee had produced various documents in support of its claims for expenses,
after recording the fact that various confirmation letters from the parties who
had made purchases were also filed. However, the A.O did not carry out any
further verification in regard to it. The CIT(A) also recorded the fact that
the return as submitted should be accepted keeping in view of the fact that
there was a sharp and continuous fall in nickel prices which is the main
ingredient in stainless steel. Further, the assessee has made more than 90 % of
the sale during the year, out of the opening stock held by it as a carried
forward from the earlier year. Moreover, it also takes cognizance of the fact
that the assessee’s book results were also accepted by the Sales Tax and
Central Excise authorities. For all the above reasons, the appeal of the
assessee was allowed by order of the CIT(A).
Being
aggrieved with the order of the CIT(A), the Revenue filed further appeal to the
Tribunal. The Tribunal find that the documentary evidence to support the
assessee’s claim containing sufficient particulars on the basis of which
requisite verification from the parties mentioned therein could have been done
by the A.O, if he has any doubt in regard to the documents submitted. Further,
the Tribunal notes that the documents submitted in support of their claim were
not disputed by the Revenue before the Tribunal. Further, the impugned order
also records fall in the prices of the steel in the global market which lead to
a loss of the sales made by the assessee. In these circumstances, the appeal of
the Revenue was dismissed.
The Tribunal in its order
observed as under :- “We can very well appreciate that at times, the A.O has no choice but to make a best judgment
assessment.
But in our considered view,
the fairness of justice demands that ‘best judgment assessment’ should not be
made as a ‘best punishment assessment’.
Being aggrieved with the order of the ITAT,
the Revenue filed further appeal to the High Court. The court find that both
the CIT(A) and the Tribunal on examination of the facts have come to the
conclusion that there was material evidence available before the A.O for him to
carry out necessary investigation to determine whether or not the loss suffered
by the assessee was justifiable. The
best judgment assessment can certainly be resorted to by the A.O in the absence
of any record, but it cannot be arbitrary. This is more particularly so when
various supporting documents justifying their loss return was filed before the
A.O and he had completely ignored the same. We find that this appeal
essentially is in respect of question of facts. In the above view, the appeal
was dismissed.
