2015 (11) TMI 74 - HC - Income Tax

Rejection of book results u/s. 143(3) - estimating total income - revision u/s 263 - Held that - We find that there was sufficient material available on record for the Assessing Officer to reach the conclusion that the books of account as produced by the Respondent Assessee were not reliable. The rejection of books of account were on account of cumulative factors such as the Respondent Assessee not being able to give the names and addresses of the persons who purchased the frames in cash. It is not only the failure of the Respondent-Assesssee in giving the names and addresses of the purchasers in cash of the defective frames but various other factors which are listed herein above including the fall in the GP ratio from 34.73% in the preceding assessment year to 20.35% in the subject assessment year. The grievance about the submissions made in respect of the order passed by the Commissioner of Income Tax under Section 263 of the Act on behalf of Respondent Assessee cannot be now countenanced as the order dated 27th March, 2006 passed by the Commissioner of Income Tax under Section 263 was accepted by the Appellant. Be that as it may, we are of the view that there was material on record which supports the view taken by the Assessing Officer in rejecting the books of account under Section 145(3) of the Act. This has been confirmed by the Commissioner of Income Tax and the Tribunal by the impugned order. In the above facts, no substantial question of law arises for our consideration. - Decided against assessee.

Summary

Issues:
Challenge to order under Section 260A of the Income Tax Act, 1961 for A. Y. 2002-03.

Analysis:
1. The Assessing Officer initially assessed the Appellant to a total income of Rs. 14,244 under Section 143(3) of the Act. However, the Commissioner of Income Tax exercised revision power under Section 263, setting aside the assessment due to discrepancies in income declaration during a survey. The Commissioner found the initial assessment erroneous and prejudicial to revenue, leading to a fresh assessment order.

2. The fresh assessment order, dated 6th December, 2006, rejected the books of account under Section 145 of the Act. The rejection was based on discrepancies in Gross Profit (GP) rate, additional income declaration due to stock discrepancies, and low selling prices of frames post-survey. The Assessing Officer applied a GP rate of 30.04% to determine the total income at Rs. 9.10 lakhs for A. Y. 2002-03.

3. The Appellant appealed to the CIT(A), who upheld the rejection of books based on the fall in GP rate but partly allowed disallowance on salary expenses. Subsequently, the Appellant approached the Tribunal challenging the rejection of books, emphasizing the inability to provide complete sales details of defective frames sold in cash.

4. The Tribunal upheld the rejection of books, citing discrepancies in the GP rate and unsatisfactory explanations for low selling prices. The lack of supporting documents for sales and failure to furnish purchaser details led to the rejection under Section 145(3) of the Act.

5. The Appellant contended that the rejection was unjustified, primarily due to the absence of purchaser details for cash transactions. Referring to a court decision, the Appellant argued against undue influence from the Commissioner's revision order, claiming factual inaccuracies.

6. The High Court dismissed the appeal, noting sufficient material supporting the rejection of books. Factors such as the inability to provide purchaser details, fall in GP ratio, and other discrepancies justified the rejection. The Court distinguished a cited case where only lack of purchaser details led to rejection, unlike the present case with multiple grounds. The Court upheld the decisions of the Commissioner and Tribunal, finding no substantial question of law for consideration.

Conclusion:
The High Court upheld the rejection of books of account under Section 145(3) of the Income Tax Act, dismissing the appeal with no costs awarded.