2014 (6) TMI 101 - AT - Income Tax

Deletion of gross profits on enhanced turnover Held that - The addition under the Income Tax Act has been made on the basis of enhancement of sales by the Trade Tax Authority - the assessee has pointed out that the appellate authority under the Trade Tax has deleted the enhancement of sales - If it is so, then there would be no case for any addition of the gross profit in the case of the assessee - revenue was of the view that whether the first appellate authority deleted the entire addition and whether his order has become final, requires verification thus, the matter is remitted back to the AO Decided in favour of Revenue.

Summary

Issues:
- Deletion of addition of gross profit on enhanced turnover by the Assessing Officer.

Analysis:
The case involved an appeal by the revenue challenging the deletion of an addition of Rs.2,98,48,133 made by the Assessing Officer on account of gross profit on an enhanced turnover of Rs.17,66,04,632. The facts revealed that a survey at the assessee's factory premises led to the Trade Tax Department of Uttar Pradesh enhancing the turnover by Rs.17,66,04,632. The Assessing Officer then added gross profit on this enhanced turnover. However, the CIT(A) deleted this addition as the enhancement of sales made by the Trade Tax Department was subsequently deleted in appellate proceedings under the Trade Tax provisions of UP. The CIT(A) found that there was no evidence to support the enhancement of sales, and the book results of the assessee were accepted. The revenue, dissatisfied with the CIT(A)'s decision, appealed to the ITAT Delhi. During the hearing, it was highlighted that the first appellate authority under Trade Tax had given a final order deleting the enhancement of sales. As a result, the ITAT Delhi set aside the orders of the lower authorities and directed the Assessing Officer to verify the first appellate authority's order. If the enhancement of sales was indeed deleted, there would be no basis for the addition of gross profit under the Income Tax Act. The Assessing Officer was instructed to consider the final/latest order of the Trade Tax Authority and pass an appropriate order accordingly, ensuring the assessee's right to be heard.

In conclusion, the ITAT Delhi allowed the appeal for statistical purposes, emphasizing the importance of verifying the deletion of the enhancement of sales by the first appellate authority under Trade Tax to determine the legitimacy of the addition of gross profit by the Assessing Officer. The case underscored the interplay between Trade Tax provisions and Income Tax Act assessments, highlighting the need for consistency and evidence-based decisions in tax matters.