2012 (9) TMI 953 - AT - Income Tax

Summary

Issues Involved:
1. Rejection of Books of Accounts.
2. Addition on Account of Gross Profit (GP).
3. Addition on Account of Freight Liability.
4. Addition u/s 68 for Unexplained Deposits.
5. Disallowance of Noor and Jakat Expenses.

Summary:

Issue 1: Rejection of Books of Accounts
The assessee's appeal contested the rejection of its books of accounts by the Assessing Officer (AO) u/s 145(2). The AO noted discrepancies in freight liabilities and cash transactions, deeming the books unreliable. The ITAT found that the AO did not provide sufficient evidence to justify the rejection, as the assessee consistently followed its accounting methods and no significant defects were pointed out. The Tribunal held that the rejection of books was not proper and allowed the assessee's appeal on this ground.

Issue 2: Addition on Account of Gross Profit (GP)
The AO made an addition of Rs. 12,27,096 by estimating a GP rate of 17%. The ITAT noted that the assessee's GP rates for various items were consistent with previous years and no specific defects were pointed out in the trading results. The Tribunal concluded that the GP addition was not justified and allowed the assessee's appeal on this ground.

Issue 3: Addition on Account of Freight Liability
The AO added Rs. 12,66,045, alleging that part of the freight liability shown by the assessee was fictitious. The ITAT found that the AO's basis for this addition was not supported by concrete evidence. The Tribunal held that the freight liability was not bogus and deleted the addition, allowing the assessee's appeal on this ground.

Issue 4: Addition u/s 68 for Unexplained Deposits
The AO made additions for unexplained deposits from various parties. The ITAT examined the confirmations and evidence provided by the assessee. For some deposits, the Tribunal found the explanations satisfactory and deleted the additions, while for others, where confirmations were not provided, the additions were upheld. The appeal was partly allowed on this issue.

Issue 5: Disallowance of Noor and Jakat Expenses
The AO disallowed 10% of Noor and Jakat expenses, amounting to Rs. 2,02,840, due to lack of complete details. The ITAT noted that the AO did not specify what details were missing and that no actual addition was made in the computation of income. The Tribunal found the ad-hoc disallowance unjustified and deleted it, allowing the assessee's appeal on this ground.

Revenue's Appeal
The revenue appealed against the deletion of various additions by the CIT(A). The ITAT upheld the CIT(A)'s order, finding no reason to interfere with the deletions made, and dismissed the revenue's appeal.

Conclusion
The assessee's appeals for the assessment years 2005-06 and 2006-07 were partly allowed and allowed respectively, while the revenue's appeals were dismissed.