2018 (5) TMI 1968 - AT - Income Tax

Bogus purchases - estimation of profit - HELD THAT - No cogent and convincing reason to reduce the profit ratio on the sale and purchase @ 1%. The AO has rejected the books of account on seeing the facts and circumstances of the case and assessed the income of the assessee @ 3% on sale and purchase. CIT(A) reduced the the same @ 1.5% of profit on sale and purchase. No distinguishable material has been produced before us to which it can be assumed that the same is liable to be reduced to the extent of 1% profit on sale and purchase. The assessment has been effected on the basis of the estimation basis by rejecting the books of account. The order of subsequent years passed by AO nowhere seems to binding upon us. Each year is the different year and facts of each year is liable to be considered on seeing the facts and circumstances of the case separately. We found no justifiable ground to interfere with the order passed by the CIT(A) in question. Therefore these issues are decided in favour of the revenue against the assessee. Addition on unexplained share transaction - HELD THAT - Profit on sale and purchase of share was adopted @ 3% in view of the statement made by the Shri M.B. Joshi director of the appellant company. However at the time of hearing before the CIT(A) the assessee contended that the income @ 3% is on the higher side. No comparable prices were produced on record. The CIT(A) assessed the income on the basis of other transaction @ 1.5% therefore he found reasonable to assess the profit ratio on account of sale and purchase oh shares @ 1.5%. No distinguishable material is on record. The assessment was based on the estimation basis. We nowhere found any material to interfere the finding of the CIT(A) on record. Therefore we confirmed the finding of the CIT(A) on this issue and decide these issues in favour of the revenue against the assessee.

Summary

Issues:
1. Rejection of books of account and estimation of income at 3% of aggregate purchases and sales.
2. Consideration of purchase and sales bills leading to double computation of income.
3. Estimation of income at 3% on transactions of shares.
4. Disallowance of expenditure incurred for business purposes.
5. Acceptance and disregard of director's averments.

Analysis:

Issue 1:
The assessee challenged the rejection of books of account and income estimation at 3% of purchases and sales. The AO assessed income based on a search action revealing accommodation bills issuance without actual goods delivery. The CIT(A) reduced the estimation to 1.5%. The ITAT upheld the CIT(A)'s decision, emphasizing the absence of material to reduce it further to 1%.

Issue 2:
The AO considered certain purchase and sales bills twice, leading to double computation of income. The CIT(A) confirmed the addition to a certain extent. The ITAT reviewed the case, noting the absence of justifiable grounds to interfere with the CIT(A)'s decision, ruling in favor of the revenue.

Issues 3 and 4:
The assessee contested the confirmation of addition to the extent of 1.5% on unexplained share transactions. The CIT(A) partially allowed the appeal, reducing the estimated income to 1.5% of the transaction amount. The ITAT found no material to interfere with the CIT(A)'s finding, confirming the decision in favor of the revenue.

Issue 5:
The AO's estimation of income at 3% disregarding the prior year's 1% estimation was challenged. The CIT(A) upheld the AO's decision. The ITAT dismissed the appeal, considering the findings in line with the previous appeal.

In conclusion, the ITAT upheld the CIT(A)'s decisions on various issues, emphasizing the lack of substantial material to alter the income estimations. The appeals filed by the assessee were dismissed, and the orders were pronounced on 29.05.2018.