2015 (5) TMI 402 - AT - Income Tax

Rejection of books of accounts by AO - Held that - Assessing Officer was right in rejecting books u/s. 145(3) since assessee has not maintained any stock register/production register and books of accounts were incomplete. There was discrepancy in figure of sale/purchases furnished by assessee at the time of survey and furnished during course of assessment proceeding. Assessing Officer has pointed out the defects in maintenance of books of accounts. The argument of assessee that books of accounts could not be completed since it was middle of the season has no force. Assessee has maintained inward/outward register, souda books and bill books. There was no difficulty in maintaining the books of accounts. Assessee not having completed the books on regular basis has resulted in difference in data furnished during survey and subsequently during assessment proceedings. Assessee is expected to complete books of account on regular basis, which has not been done in this case. In view of discrepancy pointed out by Assessing Officer, books of account of assessee were not reliable. He has rightly rejected the books of account u/s. 145(3). This reasoned finding of CIT(A) needs no interference from our side. We uphold the same. - Decided against assessee. Addition for the alleged low G.P. - Held that - AO has computed gross profit rate of various items dealt with by assessee on the basis of records of assessee, norms of industry and statement of main partner of assessee firm. He then applied gross profit rate so computed on sale of various items to compute gross profit rate of assessee. The sale figures given by assessee during assessment proceedings were adopted by Assessing Officer. Gross profit computed by Assessing Officer is ₹ 37,24,780/-. After reducing gross profit declared by assessee amounting to ₹ 17,61,483/-. Assessing Officer made addition of ₹ 19,63,297/- on account of low gross profit rate. Under facts and circumstances, CIT(A) was justified in upholding the rejection of books of accounts as discussed above and having done so, CIT(A) was justified in sustaining addition of ₹ 19,63,297/- made on account of low gross profit rate - Decided against assessee. Addition on account of sales of cattle feed - CIT(A) deleted the addition - Held that - As regards the addition of ₹ 21,150/- and ₹ 1,23,021/-, CIT(A) observed that these sales have been recorded in books of account produced during assessment proceedings and Assessing Officer has already taken into account sales disclosed by assessee during assessment proceeding for making gross profit addition. Therefore, addition on account of these sale should not be made. As regards addition of ₹ 4,49,682/-, CIT(A) observed that these sales pertained to M/s. Raghuvir Cotton Co. and have been included in turnover of said concern. Since said concern has filed separate return of income Assessing Officer was not justified in making addition assessee s hands. Accordingly, addition of ₹ 5,93,853/- was rightly deleted by CIT(A). This reasoned factual finding of CIT(A) needs no interference from our side. - Decided against revenue. Unaccounted purchase of Kapas Shanker - CIT(A) deleted the addition - Held that - Assessing Officer has chosen not to accept purchase account in which quantity record have been made. It was also stated on behalf of assessee that all purchases so recorded were duly supported by purchase bills and were in agreement with the data contained in impounded books and there was no reason that same be treated as unaccounted. In this background, CIT(A) rightly observed that these purchases are accounted for. Assessing Officer has not mentioned anything in remand report against arguments of counsel. Accordingly, CIT(A) rightly accepted the contentions of assessee and where rightly deleted addition of ₹ 1,23,987/- on account of purchase of Kapas Shanker. This factual finding of CIT(A) needs no interference from our side. - Decided against revenue. Unaccounted purchase of Shankar Kapasiya (cotton seeds) - CIT(A) deleted the addition - Held that - CIT(A) observed that purchases recorded in X-13 pertain to assessee firm and associate concern M/s Raghuvir Cotton Co. The associate concern has filed return of income independently showing these transactions. Return of same has been accepted. Assessing Officer has not mentioned anything in the remand report against the plea of assessee. In this background, CIT(A) rightly observed that purchases recorded in X-13 and X-26 are identical. Assessing Officer has not given any adverse opinion on the point in remand report. Moreover Assessing Officer made addition of the entire purchases which was not correct. At best addition of the peak amount can be made. In view of this, CIT(A) deleted addition of ₹ 71,89,691/-. This factual finding of CIT(A) needs no interference from our side. - Decided against revenue. Unaccounted purchase of Kalyan Kapas - CIT(A) deleted the addition - Held that - CIT(A) having considered arguments of assessee and observations of Assessing Officer and remand report of Assessing Officer observed that Assessing Officer has made this addition on the basis of figures given by assessee during survey while he has made gross profit addition on the basis of sale figures given by assessee at the time of assessment proceedings. In this background, Assessing Officer was not justified in making this addition and same was rightly deleted by CIT(A). This reasoned factual finding of CIT(A) needs no interference - Decided against revenue. Unaccounted sale of cotton. bales - CIT(A) deleted the addition - Held that - The stand of assessee has been that Assessing Officer can add the profit element on sale of such goods since sales were accounted. The amount of sale difference cannot represent the income of assessee, who has disclosed the sale. CIT(A) having considered the argument of assessee and observation of Assessing Officer found that sale of cotton bales is out of accounted stock and at best profit can be added and not entire sale. Accordingly, Assessing Officer is directed to compute profit on sale of cotton bales and make addition of profit on sale of cotton bales and not entire sale. This reasoned factual finding of CIT(A) needs no interference from our side - Decided against revenue. Unaccounted sale of kala - CIT(A) deleted the addition - Held that - CIT(A) having considered arguments observed that Assessing Officer has not accepted the contention of assessee on the ground that impounded book X-13 belongs to assessee and transactions recorded pertained to assessee alone. Assessee on other hand has mentioned during survey itself that it is not dealing in Kala and the associate concern M/s. Raghuvir Cotton was dealing with the same. Moreover, the sale of kala has been reflected in the transactions of associate concern for which return has been filed. Assessing Officer has not pointed out anything adverse in the remand report filed by Assessing Officer. In this background, CIT(A) rightly observed that addition made by Assessing Officer by clubbing the income of M/s. Raghuvir Cotton Co. was not justified and same was rightly directed to be deleted - Decided against revenue. Unexplained stock difference - CIT(A) deleted the addition - Held that - CIT(A) having considered the observations of Assessing Officer and arguments of assessee found that assessee was right in arguing that Assessing Officer has already made addition of gross profit of various items. Same addition can not be made again. Accordingly, same was deleted by CIT(A). This reasoned factual finding of CIT(A) needs no interference from our side - Decided against revenue. Disallowance of unpaid sales tax u/s. 43B - CIT(A) deleted the addition - Held that - Assessing Officer has made addition on the ground that entire procedure has not been followed and only certificate issued by the District Industry Centre was filed and certificate issued by sales tax authority was not furnished. Stand of assessee has been that this certificate was never called for by Assessing Officer and has enclosed the certificate issued by sales tax authority during appellate proceedings. CIT(A) having considered the same observed that Assessing Officer has made addition of this amount on the ground that assessee did not produce required certificate in Form D issued by sales tax Authority. The certificate has been produced by assessee during appellate proceedings since it was not called for during assessment proceedings. In remand report, Assessing Officer has not commented on certificate which shows that he as nothing to say on the point. Since assessee fulfilled the conditions as prescribed in this regard. Assessing Officer was not justified in making addition of unpaid sales tax liability. Same was rightly deleted by CIT(A). - Decided against revenue. Unexplained cash credits - Held that - CIT(A) observed that assessee has failed to file confirmations and also failed to produce the creditors to establish the genuineness of cash credits. Accordingly, addition made by Assessing Officer of ₹ 4, 61,445/- as unexplained cash credit was rightly confirmed by CIT(A), which needs no interference from our side. - Decided against assessee.

Summary

Issues Involved:

1. Deletion of addition on account of sales of cattle feed.
2. Deletion of addition on account of unaccounted purchase of Kapas Shankar.
3. Deletion of addition on account of unaccounted purchase of Shankar Kapasiya.
4. Deletion of addition on account of unaccounted purchase of Kalyan Kapas.
5. Direction to compute profit on sale of cotton bales instead of entire sale.
6. Deletion of addition on account of unaccounted sale of Kala by clubbing the income of Raghuvir Cotton Company.
7. Deletion of addition on account of unexplained stock difference of cotton and cotton seeds.
8. Deletion of addition on account of disallowance of unpaid sales tax under section 43B.
9. Confirmation of rejection of book results under section 145(3).
10. Confirmation of addition for alleged low gross profit.
11. Confirmation of addition on account of unexplained cash credits.

Detailed Analysis:

1. Deletion of Addition on Account of Sales of Cattle Feed:
The Assessing Officer (AO) made additions of Rs. 5,93,853/- due to unaccounted sales of cattle feed. The CIT(A) observed that these sales were already recorded in the books of account and included in the gross profit addition. Additionally, the sales pertained to another concern, M/s. Raghuvir Cotton Co., which filed a separate return. Thus, the CIT(A) rightly deleted the addition, and this factual finding was upheld.

2. Deletion of Addition on Account of Unaccounted Purchase of Kapas Shankar:
The AO added Rs. 1,23,987/- for unaccounted purchase of Kapas Shankar. The CIT(A) found that the purchases were duly recorded and supported by purchase bills, with no discrepancies noted in the remand report. Therefore, the CIT(A) rightly deleted the addition, which was upheld.

3. Deletion of Addition on Account of Unaccounted Purchase of Shankar Kapasiya:
The AO added Rs. 71,89,691/- for unaccounted purchase of Shankar Kapasiya. The CIT(A) noted that the purchases were recorded in the books of both the assessee and M/s. Raghuvir Cotton Co., and the transactions were identical. The AO's addition of the entire purchases was incorrect, and the CIT(A) rightly deleted the addition, which was upheld.

4. Deletion of Addition on Account of Unaccounted Purchase of Kalyan Kapas:
The AO added Rs. 1,65,231/- for unaccounted purchase of Kalyan Kapas. The CIT(A) observed that the purchases were duly recorded in the books of account and impounded records. The AO's addition based on survey figures was not justified, and the CIT(A) rightly deleted the addition, which was upheld.

5. Direction to Compute Profit on Sale of Cotton Bales Instead of Entire Sale:
The AO added Rs. 27,71,015/- for unaccounted sale of cotton bales. The CIT(A) found that the sales were out of accounted stock, and only the profit element should be added, not the entire sale. This reasoned finding was upheld.

6. Deletion of Addition on Account of Unaccounted Sale of Kala by Clubbing the Income of Raghuvir Cotton Company:
The AO added Rs. 8,10,665/- for unaccounted sale of Kala, clubbing the income of M/s. Raghuvir Cotton Co. The CIT(A) noted that the purchases were accounted for in the books of M/s. Raghuvir Cotton Co., and the addition was not justified. This reasoned finding was upheld.

7. Deletion of Addition on Account of Unexplained Stock Difference of Cotton and Cotton Seeds:
The AO added Rs. 11,16,568/- for unexplained stock difference. The CIT(A) found that the AO had already made additions for gross profit of various items, and the same addition could not be made again. This reasoned finding was upheld.

8. Deletion of Addition on Account of Disallowance of Unpaid Sales Tax Under Section 43B:
The AO added Rs. 3,47,181/- for unpaid sales tax. The CIT(A) noted that the sales tax exemption certificate was produced during appellate proceedings, and the conditions were fulfilled. The addition was rightly deleted, and this reasoned finding was upheld.

9. Confirmation of Rejection of Book Results Under Section 145(3):
The AO rejected the book results due to discrepancies and incomplete records. The CIT(A) upheld the rejection, noting the lack of stock/production register and incomplete books. This reasoned finding was upheld.

10. Confirmation of Addition for Alleged Low Gross Profit:
The AO added Rs. 19,63,297/- for low gross profit. The CIT(A) upheld the addition, noting that the AO computed the gross profit based on industry norms and the assessee's records. This reasoned finding was upheld.

11. Confirmation of Addition on Account of Unexplained Cash Credits:
The AO added Rs. 4,61,445/- for unexplained cash credits from five persons. The CIT(A) confirmed the addition, noting the assessee's failure to provide confirmations or produce the creditors. This reasoned finding was upheld.

Conclusion:
Both the Revenue's and the assessee's appeals were dismissed. The CIT(A)'s reasoned findings on various issues were upheld, and no interference was deemed necessary. The judgment was pronounced in the open court on 27th March 2015.