2013 (8) TMI 444 - AT - Income Tax

Partial deletion of trading addition - A.O. made trading addition by applying higher profit rate after rejection of books of accounts - CIT partially deleted addition and sustained partial addition by applying other profit rate - Held that - CIT(A) on the one hand accepted the net profit rate declared by the assessee and on the other hand sustained ad hoc addition without pointing out any specific leakage or shortcomings in the net profit - addition sustained by learned CIT(A) was not justified particularly when he was of the confirmed view that when the assessee had shown better results in the current year the other related omissions/shortcomings towards books of account became insignificant and redundant therefore no trading addition could have been made in such a situation - Decided against Revenue.

Summary

Issues:
- Condonation of delay in filing Cross Objection
- Dispute over trading addition in assessment

Condonation of Delay in Filing Cross Objection:
The appeal involved a dispute regarding the belated filing of a Cross Objection against an order dated 01/08/2012 of the learned CIT(A)-III, Jaipur. The assessee filed an application for condonation of delay, stating that the cross objection was filed promptly upon receiving the grounds of appeal in Form No. 36 from the Department. The Tribunal accepted the contention of the assessee that there was no delay in filing the Cross Objection and admitted it for consideration.

Dispute over Trading Addition in Assessment:
The core issue in the appeal was the trading addition made by the Assessing Officer based on the rejection of the assessee's books of account under section 145(3) of the Act. The Assessing Officer applied a net profit rate of 9% on the turnover declared by the assessee without providing a basis for the same. The CIT(A) sustained an ad hoc addition of Rs.2,00,000/- despite acknowledging that no trading addition could be made when the net profit rate declared by the assessee was better than the previous year. The Tribunal observed that the addition sustained by the CIT(A) was not justified as there were no specific leakages or shortcomings in the net profit. Therefore, the Tribunal deleted the addition and dismissed the Department's appeal while allowing the assessee's Cross Objection.

In conclusion, the Tribunal's judgment addressed the issues of delay in filing the Cross Objection and the dispute over the trading addition in the assessment, ultimately ruling in favor of the assessee by deleting the addition made by the CIT(A) and allowing the Cross Objection.