2015 (6) TMI 272 - AT - Income Tax

Addition on account of suppression of sale price - CIT(A) deleted addition - reopening of assessment - rejection of books of account u/s. 145 - Held that - On the basis of material available on record Revenue authorities were of the opinion and have reason to believe that income chargeable to tax of more than ₹ 1 lac has escaped assessment for the year under consideration due to failure of assessee to disclose fully and truly all materials facts necessary fro assessment. Therefore, proceedings were initiated u/s.148 and consequential additions were made. In sum and substance, the stand of learned Authorized Representative is that proceeding which initiated at the strength of investigation conducted by DGCEI, Ahmedabad are basis for addition in income tax proceeding as well. It was submitted that proceeding with regards to evasion of exercise was pending before concern Tribunal and which will have bearing on the issue at hand. So, in the interest of justice, matter should be restored to CIT(A) with direction to decide the same as per fact and law in light of final outcome in the Excise proceeding as discussed above. Finding force in the contention of assessee, we set aside the order of CIT(A) and restore the matter to him with direction to decide the same as per fact and law including final outcome in Excise case, which was initiated at the strength on investigation by DGCEI, Ahmadabad and has bearing on the issue of additions in income tax proceeding as discussed above. Since we are restoring the matter to CIT(A) with preliminary issue as discussed above, so, we are refraining to comment on merit of issue at hand. - Decided in favour of revnue and assessee for statistical purpose

Issues Involved:
1. Deletion of addition on account of suppression of sale price.
2. Validity of notice issued under Section 148 for reopening the assessment.
3. Rejection of books of accounts under Section 145 of the Income-tax Act, 1961.
4. Confirmation of suppression of sales and addition of net profits.
5. Levying of interest under Section 234A/B/C.
6. Initiation of penalty under Section 271(1)(c).

Detailed Analysis:

1. Deletion of Addition on Account of Suppression of Sale Price:
The Revenue contended that the CIT(A) erred in deleting the addition of Rs. 49,12,473/- related to the suppression of sale price. The Revenue argued that the assessee had established a syndicate with transporters and dealers to camouflage undervaluation. The Tribunal observed that the CIT(A) had upheld the rejection of books of account under Section 145 due to unreliable records and suppression of MRP. The Tribunal restored the matter to the CIT(A) for reconsideration based on the final outcome of the excise proceedings initiated by DGCEI.

2. Validity of Notice Issued Under Section 148 for Reopening the Assessment:
The assessee challenged the validity of the notice issued under Section 148 for reopening the assessment, arguing that the reassessment proceedings were invalid. The Tribunal noted that the reassessment was based on the investigation by DGCEI, which revealed significant suppression of sales. The Tribunal upheld the initiation of reassessment proceedings, finding that there was a reasonable belief of income escaping assessment.

3. Rejection of Books of Accounts Under Section 145:
The Assessing Officer rejected the books of accounts under Section 145, citing unreliable records and suppression of MRP. The CIT(A) upheld this rejection, noting the Director's admission of receiving additional amounts per box and the practice of suppressing MRP to pay less central excise duty. The Tribunal agreed with the CIT(A) and found that the rejection of books was justified given the unreliable records and suppression of sales.

4. Confirmation of Suppression of Sales and Addition of Net Profits:
The Assessing Officer made additions based on the suppression of MRP, estimating the gross profit (GP) at 40% on unaccounted cash received. The CIT(A) observed that the suppression of sales was accepted by the engaged parties and that the DGCEI had noted various irregularities. The Tribunal found that the additions were based on detailed investigations and upheld the approach of estimating GP on unaccounted receipts. However, the Tribunal restored the matter to the CIT(A) for reconsideration in light of the final outcome of the excise proceedings.

5. Levying of Interest Under Section 234A/B/C:
The assessee contested the levying of interest under Section 234A/B/C. The Tribunal did not provide a specific ruling on this issue, as the matter was restored to the CIT(A) for reconsideration based on the excise proceedings' outcome.

6. Initiation of Penalty Under Section 271(1)(c):
The assessee also challenged the initiation of penalty under Section 271(1)(c). Similar to the interest issue, the Tribunal did not give a specific ruling on the penalty, as the matter was restored to the CIT(A) for reconsideration based on the excise proceedings' outcome.

Conclusion:
The Tribunal restored the matters to the CIT(A) with directions to reconsider the issues based on the final outcome of the excise proceedings initiated by DGCEI. The appeals filed by both the Revenue and the assessee were allowed for statistical purposes, and similar directions were given for related cases involving other assessees. The Tribunal refrained from commenting on the merits of the issues, pending the outcome of the excise proceedings.

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