2016 (10) TMI 1068 - HC - Income Tax

Addition made under section 69C - Held that - When income is estimated and while assessing the same and rejecting the books of account, it would not be appropriate to rely on the books of account for any addition other than estimate made by the Assessing Officer. In that view of the matter, the contention raised by the appellant deserves to be accepted. The income which has been added on the basis of books of account having been rejected and in that view of the matter, addition requires to be deleted. - Decided in favour of the assessee

Summary

Issues:
Challenge to Tribunal's judgment and order, Double addition concern, Rejection of books of account, Addition under section 69C, Interpretation of previous court decisions, Assessment based on estimation, Rejection of books for addition of unexplained income, Proper assessment procedure.

Analysis:
1. The appellant challenged the Tribunal's judgment allowing their appeal and dismissing the Department's appeal. The main issue raised was whether trading additions and additions by rejecting some purchases could be made simultaneously, leading to potential double taxation concerns.

2. The court framed questions of law regarding the rejection of the appellant's books of account and subsequent estimation of income, including the addition under section 69C of the Income-tax Act. The appellant argued that such additions could amount to double taxation.

3. The appellant contended that the Assessing Officer rejected the books of account and made additions based on estimation, leading to potential double taxation. The court considered the overall turnover and various additions made, including on undisclosed income and trading additions.

4. Referring to a previous court decision, the appellant argued that the income added based on the rejected books of account should not be relied upon for further additions. The court examined the decision and its implications on the current case.

5. Citing judgments from other High Courts, the appellant emphasized the importance of correctly identifying the sources of income and the need for proper assessment procedures when rejecting books of account and making additions.

6. The court reiterated the principle that when income is estimated and books of account are rejected, it is inappropriate to rely on those books for additional additions beyond the estimation made by the Assessing Officer.

7. The respondent's counsel argued that the concurrent findings of both authorities supported the assessment made, and no interference was warranted. However, the court found in favor of the appellant based on the legal principles discussed.

8. After hearing both counsels, the court concluded that the income added based on the rejected books of account should be deleted, as relying on those books for further additions was not appropriate.

9. The court allowed the appeal, answering the question in favor of the assessee and against the Department, highlighting the importance of following proper assessment procedures and avoiding double taxation concerns.