2015 (6) TMI 1177 - AT - Income Tax

Rejection of books of accounts - Net profit estimation at 5% of the total turnover - Held that - FAA had mentioned that the assessee had produced certain details including bank statements before AO,during the assessment proceedings, that the AO had passed an ex-parte order. If the assessee s books of account were audited and an audit report was filed along with the return of income,then it cannot be said the assessee was not maintaining the books of account. Considering the peculiar facts and circumstances of the case,we have admitted the additional evidence produced before us by the assessee. We are of the opinion that in the interest of justice the matter should be restored back to the file of the AO for fresh adjudication. The effective ground of appeal filed by the assessee is allowed in favour of the assessee in part.

Summary

Issues:
1. Rejection of book results and estimation of net profit at 5% of total turnover.
2. Failure to furnish complete purchase bills and details of material purchased.
3. Discrepancy in maintaining books of account and non-cooperation during assessment proceedings.
4. Admissibility of additional evidence and restoration of the matter to the Assessing Officer for fresh adjudication.

Issue 1: Rejection of book results and estimation of net profit at 5% of total turnover
The Assessing Officer (AO) rejected the book results of the assessee, engaged in manufacturing M.S. Wires, and estimated the net profit at 5% of the total turnover under section 145(3) of the Income Tax Act. The AO observed discrepancies in the purchase bills, payments made for purchases, and lack of details regarding parties involved in transactions. The AO considered the bills produced by the assessee as potentially bogus and concluded that the books of account were either not maintained or not as per accounting standards.

Issue 2: Failure to furnish complete purchase bills and details of material purchased
During the assessment proceedings, the AO highlighted the failure of the assessee to provide complete purchase bills, payment details for materials purchased, and complete information about parties involved in transactions. The AO also noted that purchases were made in cash, raising doubts about the authenticity of the bills presented. Consequently, the AO estimated the net profit at 5% of the total turnover based on these discrepancies.

Issue 3: Discrepancy in maintaining books of account and non-cooperation during assessment proceedings
The First Appellate Authority (FAA) upheld the AO's decision, stating that the assessee did not maintain proper books of account and failed to cooperate during the assessment process. The FAA found that while some details were provided by the assessee, crucial information such as complete books of account were not produced. Citing a previous judgment, the FAA supported the AO's estimation of net profit at 5% of turnover and dismissed the appeal filed by the assessee.

Issue 4: Admissibility of additional evidence and restoration of the matter to the Assessing Officer for fresh adjudication
The assessee submitted additional evidence before the Appellate Tribunal, arguing that the documents ignored by the AO and FAA were crucial for the case. The Tribunal, after reviewing the material and considering the interests of justice, admitted the additional evidence and directed the matter to be sent back to the AO for fresh adjudication. The AO was instructed to provide a fair hearing to the assessee and the latter was directed to present all relevant documents and books of account. The Tribunal partially allowed the effective ground of appeal in favor of the assessee, resulting in the partial success of the appeal.

In conclusion, the Appellate Tribunal allowed the appeal partly, emphasizing the importance of maintaining accurate records, cooperation during assessments, and the admissibility of additional evidence in ensuring a fair adjudication process.