2011 (1) TMI 118 - HC - Income Tax

Books of the assessee was rejected by the assessing officer - addition made to the trading results deleted holding that where books of account have been rejected it was not mandatory to make any trading addition - Tribunal while upholding the order of the assessing officer that the account-books of the assessee cannot relied upon has applied the G.P. rate as was disclosed by the assessee and was accepted by the Department for the immediate preceding year as well as of the subsequent year - Tribunal held that even after rejection of the account-books it is not open to the Revenue Authority to fix the turn-over - Tribunal has found that no evidence was brought on record to suggest that the assessee has made extra sales in addition to the sales turn-over disclosed Appeal dismissed

Summary

Issues:
1. Appeal against the judgment and order passed by the Income Tax Appellate Tribunal.
2. Dispute regarding the assessment year 1987-88.
3. Rejection of account-books by the assessing officer and additions made based on G.P. rate.
4. Appeal before C.I.T.(A) and further appeal before the Tribunal.
5. Question of law raised regarding the deletion of trading results addition.
6. Tribunal's decision on the reliance on account-books and G.P. rate.
7. Lack of evidence to suggest extra sales made by the assessee.
8. Legality of the Tribunal's approach and conclusion.

Analysis:
The appeal in question was filed against the judgment and order passed by the Income Tax Appellate Tribunal concerning the assessment year 1987-88. The dispute arose when the assessing officer rejected the account-books of the assessee and made additions based on the belief that the G.P. rate disclosed by the assessee was on the lower side. The first appeal before C.I.T.(A) partially allowed the appeal, leading to further appeals before the Tribunal by both the assessee and the Department. The Tribunal partly allowed the appeal of the assessee and dismissed the appeal filed by the Revenue.

The main question of law raised in the memo of appeal was whether the Tribunal was justified in law in deleting the addition made to the trading results. The Tribunal, while upholding the assessing officer's decision to reject the account-books, applied the G.P. rate disclosed by the assessee and accepted by the Department for the preceding and subsequent years. It was noted that no evidence was presented to indicate that the assessee had made extra sales beyond the disclosed turnover. The Tribunal emphasized that even after rejecting the account-books, the Revenue Authority cannot arbitrarily fix the turnover.

Upon review, the High Court found no illegality in the Tribunal's approach. The Court deemed the Tribunal's order to be well-considered and based on factual findings, concluding that no substantial question of law was involved. Consequently, the appeal was dismissed for lacking merit.