2012 (11) TMI 854 - HC - Income Tax

Best Judgement Assessment - held that - Rejection of the books of account and estimation of turn-over and profits by the best judgment assessment has been upheld by the Tribunal taking into consideration sales of Rs. 9.26 lakhs which was recorded outside the books of account - Tribunal has upheld the determination of turn-over at Rs. 2.30 crores as against Rs. 2.50 crores fixed by the Assessing Officer and reduced by CIT(Appeals). So far as the deletion of addition of Rs. 4,85,691/- in respect of M/s. Vikas Chappal House, Rs. 33,045/- in respect of Bani Footwear and Rs. 47,913/- in respect of Agarwal Shoe Store are concerned Tribunal in the impugned order has held that where best judgment assessment is made, there is no question of addition on the ground of sundry creditors. Moreover, while determining the gross profit, these additions have already been taken into consideration - order passed by the Tribunal does not suffer from any legal infirmity - appeal fails and is dismissed.

Summary

Issues:
1. Reduction of addition on account of extra profit.
2. Deletion of addition on account of undisclosed sales.
3. Deletion of addition in respect of unexplained credits.

Reduction of addition on account of extra profit:
The High Court considered whether the Tribunal was justified in reducing the addition on account of extra profit to Rs. 6,00,000 as against the original addition of Rs. 14,89,027. The Tribunal had recorded sales outside the books of account amounting to Rs. 9,26,403. The Court upheld the Tribunal's decision, stating that the determination of turnover and profit was based on various factors. The Court found no legal infirmity in the Tribunal's order and agreed with the Tribunal's reasoning for reducing the addition.

Deletion of addition on account of undisclosed sales:
The Court analyzed whether the Tribunal was correct in reducing the addition on account of extra profit to Rs. 6,00,000 and deleting the addition on account of undisclosed sales of Rs. 9,26,403. The Tribunal had recorded sales outside the books of account, which influenced the turnover determination. The Court found the Tribunal's decision justifiable, as it considered all relevant materials in fixing the turnover at Rs. 2.30 crores. The Court concluded that the Tribunal's order did not have any legal flaws.

Deletion of addition in respect of unexplained credits:
Regarding the deletion of additions in respect of unexplained credits, the Court examined the Tribunal's decision to delete the addition of Rs. 4,85,691 in respect of one entity and other amounts in respect of different entities. The Tribunal held that in a best judgment assessment, there was no basis for adding sundry creditors. The Court concurred with the Tribunal's reasoning, noting that these additions had already been factored into the gross profit determination. Consequently, the Court found no legal deficiencies in the Tribunal's order and dismissed the appeal.

In summary, the High Court upheld the Tribunal's decisions on all three issues, finding no legal infirmities in the Tribunal's orders. The Court affirmed the reduction of additions on account of extra profit, deletion of additions related to undisclosed sales, and deletion of additions concerning unexplained credits. The appeal was dismissed based on the Court's analysis and agreement with the Tribunal's reasoning and conclusions.