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2018 (7) TMI 2085 - HC - Income TaxAddition u/s 68 - HELD THAT - CIT(A) observed that the AO in his remand report has only commented partially on certain matters and thereafter invoking his co-terminus powers examined the relevant facts and related documentation having a bearing on the matter especially the nature of deposits in the bank accounts and payments towards purchase of chicken feed and chicken by the assessee. After detailed examination the ld CIT(A) has accepted the submission of the assessee that out of cash deposits of 4, 37, 07, 862 in his bank accounts an amount of 3, 40, 35, 960 represents sale of poultry products which has also been reported in the audited financial statements. The said finding of the ld CIT(A) remain uncontroverted before us and the same is hereby confirmed. Difference of opening cash and debtor balances - AR submitted that assessee was engaged in the business from last so many years and was regularly filing ITRs the financials of year 2010-11 was duly audited by a Chartered Accountant third party confirmation from the debtors and cash book was duly submitted and books of accounts for the preceding years was maintained and the income was reported u/s 44AD - HELD THAT - As per auditor s report we find that the auditors have categorically stated that this is the first year of audit opening balance are taken as certified by the proprietor with due confirmation from the bank statement . Given that we are of the view that matter will require examination of the said contentions so raised by the ld AR and accordingly the matter to this limited extent is remanded back to the file of the AO. Rejection of books of accounts u/s 145(3) - HELD THAT - This is the first year where the assessee has carried out the exercise of maintenance of formalized books of accounts and got them audited. At the same time we find that there are adequate documentation to support the purchase and sales made during the year in terms of ledgers invoices and purchase confirmations. Further no specific defect has been highlighted by the ld CIT(A) in respect of other expenses claimed by the assessee. Given the peculiarity of the facts and circumstances of the case we are of the view that the ld CIT(A) was not correct in rejection of books of accounts and estimating the net profits in hands of the assessee relating to the impunged assessment year. Book results and net profit so declared by the assessee is hereby accepted except for verification of opening balances of cash and debtors for which the matter is being setaside to the file of the AO. In the result sole ground of revenue s appeal is dismissed ground no. 2 of assessee s appeal is allowed for statistical purposes and ground no. 3 of the assessee s appeal becomes infructuous in view of results declared as per books of accounts being accepted. Addition of agriculture income as income from other sources - HELD THAT - During the course of hearing the ld. AR submitted that the necessary evidence regarding agriculture income were never demanded by the either AO or by the ld. CIT(A). However the same are being submitted now in form of copy of jamabandi and proof of agriculture income and the same may kindly be admitted. The ld DR fairly submitted that the matter may be remanded to the AO for verification. In light of the same the evidence in support of agriculture income is admitted and the matter is remanded back to the file of the AO to examine the same a fresh after providing reasonable opportunity to the assessee. The ground is thus allowed for statistical purposes. Considering the interest income as income from other sources - HELD THAT - From perusal of assessment order we noted that the AO has brought to tax income from other sources as per return of income amounting to 90, 256. However there is no finding that said figures includes the figure of 48, 231. Hence the matter is remanded back to the file of the AO to examine the same and where it is found that the figure of 90, 256 already includes the figure of 48, 231 allow the necessary relief to the assessee as the same income cannot be brought to tax twice. In the result the ground of appeal is allowed for statistical purposes Disallowance of deduction u/s 80C - AR submitted that evidence regarding investment eligible for deduction u/s 80C were never demanded by AO or ld. CIT(A) and the addition evidence regarding said investment in form of LIC receipt and tuition fees has now being submitted and the same may kindly be admitted - HELD THAT - DR fairly submitted that the matter may be remanded to the AO for verification. In light of the same the evidence in support of deduction under section 80C is admitted and the matter is remanded back to the file of the AO to examine the same a fresh after providing reasonable opportunity to the assessee. The ground is thus allowed for statistical purposes.
Issues Involved:
1. Deletion of addition under Section 68 as unexplained bank deposit. 2. Acceptance of books of accounts despite variance with presumptive income. 3. Justification of rejection of books of accounts under Section 145(3). 4. Exemption from maintaining stock register and proper bills/vouchers under Section 44AA. 5. Overruling CIT(A) findings on non-maintenance of proper books of accounts. 6. Acceptance of net profit rate declared by the assessee. Issue-wise Detailed Analysis: 1. Deletion of Addition under Section 68: The appellant challenged the Tribunal's decision to delete the addition of ?4,39,72,094/- as unexplained bank deposit under Section 68. The Tribunal upheld the CIT(A)'s decision, which considered the evidence provided by the assessee, including audited financial statements and bank reconciliation statements. The CIT(A) admitted these as additional evidence under Rule 46A after seeking a remand report from the AO. The AO partially verified the evidence, confirming ?26,29,818 as correct inter-transfer entries but did not address other cash deposits and RTGS payments. The CIT(A) thus conducted a fresh examination and accepted that ?3,40,35,960 represented sales of poultry products, which was reported in the audited accounts. The Tribunal found no error in CIT(A)’s findings and confirmed the deletion of the addition. 2. Acceptance of Books of Accounts: The appellant contended that the Tribunal erred in accepting the books of accounts despite discrepancies with the presumptive income declared under Section 44AD. The Tribunal noted that the assessee had submitted audited financial statements and other supporting documents during the appellate proceedings. The CIT(A) admitted these additional evidences after a remand report from the AO. The Tribunal found that the CIT(A) had appropriately examined the nature of deposits and payments, concluding that the majority of cash deposits were sales proceeds. The Tribunal thus upheld the acceptance of the books of accounts. 3. Rejection of Books of Accounts under Section 145(3): The appellant argued that the Tribunal unjustifiably upheld the rejection of books of accounts under Section 145(3). The CIT(A) had rejected the books due to substantial cash purchases without proper bills/vouchers and the absence of a stock register. The Tribunal, however, found that the assessee provided sufficient documentation for purchases and sales, including ledgers and invoices. Given the nature of the business and the informal setup, the Tribunal concluded that the rejection of books was not warranted and accepted the net profit declared by the assessee, except for the verification of opening balances. 4. Exemption from Maintaining Stock Register and Proper Bills/Vouchers: The appellant questioned whether the Tribunal could exempt the assessee from maintaining a stock register and proper bills/vouchers under Section 44AA. The Tribunal acknowledged that while maintaining comprehensive records is ideal, the nature of the assessee’s business and its rural setup made it challenging. The Tribunal noted that the assessee had provided adequate documentation for purchases and sales and that non-maintenance of a stock register alone was insufficient to reject the books of accounts. 5. Overruling CIT(A) Findings on Non-Maintenance of Proper Books of Accounts: The appellant contended that the Tribunal overruled the CIT(A)'s findings on the non-maintenance of proper books of accounts without fresh evidence. The Tribunal found that the CIT(A) had partially verified the evidence and that the assessee had submitted sufficient documentation during the appellate proceedings. The Tribunal thus upheld the acceptance of the books of accounts, except for the verification of opening balances. 6. Acceptance of Net Profit Rate Declared by the Assessee: The appellant argued that the Tribunal’s acceptance of a net profit rate of 1.75% was per incuriam, violating judicial precedence. The Tribunal noted that the assessee had declared a net profit rate of 14.99% in the ITR, but subsequent audited statements showed a lower rate. The Tribunal found that the CIT(A) had appropriately examined the evidence and circumstances, including the nature of the business and the informal setup, and concluded that the net profit rate declared by the assessee was acceptable. Other Findings: - The Tribunal remanded the issue of agricultural income and interest income to the AO for verification, as the necessary evidence was submitted during the appellate proceedings. - The Tribunal also remanded the issue of deduction under Section 80C for verification by the AO. Conclusion: The Tribunal upheld the CIT(A)’s findings, accepted the books of accounts and net profit rate declared by the assessee, and remanded specific issues for further verification. The appeal was dismissed, and no substantial question of law was found to arise.
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