2016 (8) TMI 1170 - AT - Income Tax

Addition u/s 68 - Held that - The judgment of the Hon ble Gujarat High Court in the case of CIT Vs. Ranchhod Jivabhai Nakhava (2012 (5) TMI 186 - GUJARAT HIGH COURT ) has held that the deletion made by the Assessing Officer based on erroneous approach by wrongly shifting the burden again upon the assessee without verifying the income tax return of the creditors. The position however would have been different if those creditors were not income tax assessee or if they had not disclosed those transactions in their income tax returns of if such returns were not accepted by their Assessing Officer. In view of the aforesaid facts we allow the appeal of the assessee as assessee has given all details pertaining to transaction and thereafter it was the duty of the Assessing Officer to verify details submitted by the assessee but Assessing Officer failed to verify the same. Accordingly we set aside the order of the CIT(A) - Decided in favour of assessee

Summary

Issues:
1. Addition made under section 68 of the Income Tax Act.
2. Assessment based on gross receipts and net profit rate.
3. Non-compliance with directions during assessment proceedings.
4. Appeal against the order of the CIT(A).
5. Verification of details submitted by the assessee.

Issue 1: The judgment deals with the addition made under section 68 of the Income Tax Act, where the assessee contested the addition of ?1,94,500 received from various persons. The CIT(A) confirmed the addition, leading to an appeal by the assessee.

Issue 2: The assessment was based on gross receipts and net profit rate. Initially, the Assessing Officer took gross receipts at ?50,00,000, whereas the assessee had shown ?38,53,476. The net profit was taxed at 12.5%, resulting in an assessed income of ?6,25,000. The Tribunal directed the Assessing Officer to estimate total sales at ?42,00,000 with a net profit rate of 11%.

Issue 3: Non-compliance with directions during assessment proceedings was noted as the assessee and depositors did not attend the proceedings despite multiple opportunities. Consequently, the Assessing Officer finalized the assessment, leading to the income being determined at ?8,42,850 and unexplained cash credits at ?6,40,400 under section 68 of the Act.

Issue 4: The assessee appealed against the order of the CIT(A), citing difficulties in furnishing relevant details due to shifting records. The CIT(A) provided partial relief after the assessee submitted additional evidence during the appellate proceedings.

Issue 5: The verification of details submitted by the assessee was crucial in the judgment. The Tribunal found that the assessee had provided all necessary transaction details, shifting the burden of verification to the Assessing Officer. The judgment emphasized the Assessing Officer's failure to verify the details submitted by the assessee, leading to the allowance of the assessee's appeal.

In conclusion, the judgment addressed various issues related to additions under section 68 of the Income Tax Act, assessment based on gross receipts and net profit rate, non-compliance with directions during assessment proceedings, appeal against the CIT(A) order, and the importance of verifying details submitted by the assessee. The Tribunal allowed the assessee's appeal, highlighting the Assessing Officer's responsibility to verify the details provided by the assessee.