2015 (4) TMI 580 - AT - Income Tax

Rejection of books of accounts - Failure to produce the books of account and the supporting documents for verification - Estimation of profits on adhoc basis - Held that - The learned CIT/DR appearing for the department did not have any serious objection to the contention of the assessee for affording another opportunity for production of the books of accounts and submitted that the matter can be remitted back to the file of Assessing Officer for denovo assessment. Considering the submissions of the parties and keeping in view the interest of justice, we allow one more opportunity to the assessee for production of its books of accounts and other documents before the Assessing Officer to substantiate its claim and accordingly, set aside the Order of the CIT(A) and remit the matter to the file of the Assessing Officer for denovo assessment after examining the books of accounts and other documents. We also direct the assessee to produce all its books of accounts, documents, bills, invoices and any other information called for by the Assessing Officer and cooperate in finalisation of the proceeding. In the event, the assessee does not co-operate by producing the books of accounts and other information called for by the Assessing Officer or if the Assessing Officer on examination of the books of accounts and other documents finds that there are discrepancies which the assessee is not able to explain, the Assessing Officer would be at liberty to take an independent decision in the matter in accordance with law. The Assessing Officer shall afford a reasonable opportunity of being heard to the assessee. - Matter remanded back.

Summary

Issues Involved:
Cross-appeals by two different assessees and revenue against separate orders of CIT(A)-IV, Hyderabad for the assessment year 2009-2010 involving common issues of rejection of books of accounts and profit estimation.

Detailed Analysis:

Issue 1: Rejection of Books of Accounts
- The Assessing Officer rejected the books of accounts due to the assessee's failure to produce essential details like purchase and sales information, operating stock, production details, and machinery usage specifics.
- The rejection was based on discrepancies leading to the inability to ascertain the correct income, as the production and consumption details were not verifiable.
- The CIT(A) upheld the rejection emphasizing that being a listed company does not exempt the obligation to produce books for verification.
- The CIT(A) justified the rejection due to the assessee's failure to provide necessary documents for verification, despite regular audits.

Issue 2: Estimation of Profit
- The Assessing Officer estimated the income at 1.5% of the turnover due to the rejection of books of accounts.
- The CIT(A) directed the assessment at 1% of the turnover, deeming the initial estimation high.
- The assessee contested the estimation, citing an actual profit margin of 0.9% and requested a chance to explain entries and provide documents.
- The Tribunal allowed an opportunity for the assessee to produce books of accounts and documents for a denovo assessment, setting aside the CIT(A) order.
- The Tribunal emphasized the importance of cooperation and directed the assessee to provide all necessary information for a fair assessment.

Final Decision:
- The Tribunal allowed the assessee's appeals for statistical purposes, granting an opportunity for denovo assessment by the Assessing Officer with cooperation from the assessee.
- The department's appeals were dismissed as infructuous due to the remittance of the matter back to the Assessing Officer for fresh assessment.

This judgment highlights the significance of maintaining accurate books of accounts, the obligation to provide necessary documents for verification, and the procedural fairness in assessment proceedings.