2013 (7) TMI 1139 - AT - Income Tax

Summary

Issues involved:
The Revenue challenges the deletion of an addition made to the income of the assessee, while the assessee cross-objects to the notice issued u/s 147 of the Act.

Revenue's Appeal:
The Revenue contested the deletion of an addition of Rs. 77,10,534 by the CIT(A), arguing that the payments to farmers for cotton purchases were made from undisclosed sources and not on the date of purchases as required by Mandi Rules. The Senior DR contended that the payments were made later and were not supported by evidence. The assessee claimed that the purchases were made from farmers in Maharashtra and payments were made at a later date.

The Assessing Officer found discrepancies in the assessee's payment records to farmers, leading to the addition to income. The CIT(A) deleted the addition, stating that no complaints were made by farmers to the Mandi Samiti for non-payment on the same day. However, the CIT(A) noted that the assessee failed to provide names and addresses of the farmers, which would be expected in such business transactions. The CIT(A) concluded that the addition should not have been entirely deleted, as payments were indeed made.

The ITAT modified the lower authorities' orders, rejecting the books of accounts and computing the net profit at 5% of gross sales to end the litigation and safeguard both parties' interests.

Assessee's Cross Objection:
The assessee challenged the reopening of assessment u/s 147/148 of the Act. The CIT(A) upheld the proceedings, and the assessee cited various legal precedents in defense. The Senior DR supported the CIT(A)'s decision.

The ITAT found that the case was reopened based on a report from the Investigation Wing, and there was no change of opinion from the original assessment. The ITAT noted that the amended provision under Explanation 3 to section 147 widened the Assessing Officer's powers to reopen assessments. As there was a reasonable belief that income had escaped assessment, the ITAT dismissed the assessee's cross objection.

In conclusion, the Revenue's appeal was partly allowed, and the assessee's cross objection was dismissed. The order was pronounced in open court on 17.7.2013.