2014 (11) TMI 1193 - AT - Income Tax

Rejection of books of accounts - Held that - Tribunal in assessment year 2008-09, being the year of search, did not agree with the view entertained by AO and accordingly deleted the income estimated by rejecting the books of account. A.R submitted that the additions made in all the three cases under consideration in AY 2008-09 has been deleted by the Tribunal on identical reasoning. The year under consideration is the year succeeding the year of search. AO has not brought any other material on record except placing reliance on the assessment orders passed in AY 2008-09, which has since been reversed by the Tribunal. AO was not justified in rejecting the books of account and estimating the income. Accordingly, we confirm the action of the CIT(A) in all the three cases. Disallowance u/s 40(a)(ii) - assessee submitted that the assessee have already made disallowance u/s 40(a)(ii) in their respective returned incomes and hence no further disallowance is called for - Held that - We do not find any merit in the ground raised by the revenue in this regard. However, if the AO finds that any of the assessee did not make the said disallowance in the returned income, the AO is free to make the said disallowance after affording the opportunity of being heard to the Assessee. - Appeals filed by the revenue are dismissed.

Summary

Issues:
- Rejection of books of accounts and estimation of income at 1% of total turnover by AO.
- Appeal against the order passed by the ld. CIT(A) for assessment year 2009-10.
- Addition made by AO in assessment year 2008-09 and its impact on current appeals.
- Deletion of addition by ITAT in similar cases for AY 2008-09.
- Ground raised by revenue regarding disallowance u/s 40(a)(ii) of the Income Tax Act, 1961.

Analysis:

1. The primary issue in this case revolves around the rejection of books of accounts by the Assessing Officer (AO) and the subsequent estimation of income at 1% of the total turnover for the assessment year 2009-10. The AO based this decision on similar actions taken in the assessment year 2008-09 following a search and seizure operation in the case of Shri Pravin Kumar Jain Group, where accommodation bills were identified. However, the ld. CIT(A) noted that the addition made in the assessment year 2008-09 was later deleted by the Income Tax Appellate Tribunal (ITAT), leading to the restoration of the returned income. Consequently, the ld. CIT(A) allowed the appeals filed by the Assessees in all three cases, prompting the revenue to challenge these decisions.

2. The Assessee presented a copy of the ITAT's order in a related case for assessment year 2008-09, where the ITAT had deleted the addition following a detailed analysis. The Tribunal in that case emphasized the lack of concrete evidence linking the Assessee to the provision of accommodation bills, highlighting discrepancies in the AO's assessment methodology. The Tribunal's decision was based on the absence of incriminating material, the genuineness of certain financial transactions, and the failure to establish the Assessee's involvement in the alleged business. The Tribunal's ruling in the prior year's case set a precedent for the current appeals, indicating that the AO's actions lacked sufficient basis.

3. The ITAT, considering the facts and precedents, concluded that the AO's rejection of books of account and income estimation were unjustified for the assessment year 2009-10. The Tribunal highlighted the lack of new evidence or substantive reasoning by the AO beyond reliance on the reversed decisions from the previous year. The Assessee's argument that similar additions made in the assessment year 2008-09 were deleted by the Tribunal further supported the decision to uphold the ld. CIT(A)'s order in all three cases for the current assessment year.

4. Additionally, the revenue raised a separate ground concerning disallowance under section 40(a)(ii) of the Income Tax Act, 1961. The Assessee contended that they had already made the necessary disallowances in their returned incomes, negating the need for further disallowance. The Tribunal found no merit in the revenue's argument, stating that if any Assessee failed to make the required disallowance, the AO could proceed to do so after providing a fair opportunity for the Assessee to present their case.

5. In conclusion, the Tribunal dismissed all appeals filed by the revenue, confirming the decisions of the ld. CIT(A) in favor of the Assessees. The judgment highlighted the importance of substantiated evidence, adherence to legal provisions, and the necessity for fair assessments based on concrete facts and established precedents, ultimately upholding the principles of justice and due process in tax matters.