2017 (1) TMI 1566 - AT - Income Tax

Trading addition - rejection of books of accounts on account of unverified purchases and estimation of appropriate gross profit rate - Held that - Anuj Kumar Varshney & Others vs. ITO (2015 (4) TMI 533 - ITAT JAIPUR) has held that 15% of unverifiable purchases shall be held to be income of the assessee from undisclosed sources in the relevant years. Set aside the issue raised in such appeals, to the file of the AO to decide the same afresh after the judgement.

Summary

Issues Involved:
1. Recalling of the order by the ITAT Jaipur Bench regarding estimation of income on account of bogus/unverifiable purchases.
2. Justifiability of setting aside the assessment by the Tribunal for an indefinite period.
3. Application of Section 153(2A) of the IT Act, 1961 in the assessment proceedings.
4. Consideration of gross profit rate on unverified purchases and rejection of books of accounts.

Analysis:

1. The primary issue in this case revolves around the Misc. application filed by the revenue seeking the recalling of the order passed by the ITAT Jaipur Bench regarding the estimation of income on account of bogus/unverifiable purchases. The Tribunal had set aside the assessment for fresh consideration after the judgment of the Hon’ble High Court is delivered in a related case.

2. The revenue contended that setting aside the assessment for an indefinite period is not justifiable, as assessments are required to be completed within a specified time frame as per Section 153(2A) of the IT Act, 1961. The Tribunal's decision was challenged on the grounds that keeping the assessment in abeyance until the High Court's judgment is delivered is not legally supported.

3. The application of Section 153(2A) of the IT Act, 1961 was a crucial aspect of the case. The Tribunal had not considered this provision initially. The section allows for a fresh assessment to be made within one year from the end of the financial year in which the order is received by the concerned Commissioner. The failure to adhere to this statutory provision led to the decision to recall the order for fresh consideration.

4. Another significant issue was the consideration of the gross profit rate on unverified purchases and the rejection of books of accounts. The AO had applied a 25% gross profit rate on unverified purchases, which was upheld by the CIT(A) and formed the subject matter of appeal before the Coordinate Bench. The Tribunal decided to set aside this issue and directed a fresh assessment after the High Court's judgment is delivered.

In conclusion, the judgment highlighted the importance of following statutory provisions, such as Section 153(2A) of the IT Act, in conducting assessments. The decision to recall the order for fresh consideration was based on legal principles and the need for proper adherence to procedural requirements in tax matters.