2016 (7) TMI 1583 - AT - Income Tax

Rejection of books of accounts - net accretion method adopted by the AO for determining the total income - HELD THAT - In the present case also, the Ld. CIT (A) following its earlier finding in the case of Shri. Hitesh S. Mehta for A.Y. 2013 (12) TMI 244 - ITAT MUMBAI on the same issue, has rejected the books of account produced by the assessee. Since the identical issue has already been decided by the coordinate Bench, we respectfully following the finding of the coordinate bench direct the Ld. CIT(A) to compute the income of the assessee as per books of accounts. Ground no. 3 is accordingly allowed for statistical purpose. Determination of the total income by considering net accretion to various assets - HELD THAT - Since, we have directed the Ld. CIT(A) to compute the taxable income as per books of account of the assessee, we delete the additions contested. Undisclosed investment - HELD THAT - As we have directed the Ld CIT(A) to determine income on the basis of books of account. Since the AO has determined certain investments as undisclosed investments on the basis of material collected by him and since they were not compared with the books of accounts and the assessee was not provided with the opportunity to explain her case, we set aside this issue to the file of Ld. CIT(A) with the direction to cause compare the alleged undisclosed investments with the books of account. CIT (A) may get a remand report from AO in this regard. If any investment is found not recorded in the books of account, to seek explanation from the assessee and take appropriate decision after providing adequate opportunity to the assessee. Disallowance of deduction on account of interest expenditure - HELD THAT - Following the decision of Co-ordinate Bench we restore this ground of appeal back to the file of the AO with the direction to follow the direction of the Tribunal passed in SHRI HITESH S. MEHTA, 2013 (11) TMI 1650 - ITAT MUMBAI

Summary

Issues Involved:

1. Validity of the assessment order under Section 147 of the Act.
2. Compliance with principles of natural justice.
3. Determination of income based on final books of account versus net accretion method.
4. Determination of total income considering net accretion to various assets.
5. Correct quantity of purchase and sale of shares.
6. Determination of shareholdings based on seized data.
7. Determination of unaccounted investments.
8. Valuation of unaccounted investments.
9. Disallowance of deduction on account of interest expenditure.
10. Disallowance of deduction of other expenses.
11. Deduction under Section 48 of the Act.
12. Alternate working of total income.
13. Levy of interest under Sections 234A, 234B, and 234C of the Act.

Detailed Analysis:

1. Validity of the assessment order under Section 147 of the Act:
The appellant did not press Ground No. 1, and it was dismissed as not pressed.

2. Compliance with principles of natural justice:
Ground No. 2 was not adjudicated separately as it was deemed general in nature, similar to a previous case (Hitesh S. Mehta).

3. Determination of income based on final books of account versus net accretion method:
The ITAT directed the CIT(A) to compute the income as per the books of account, rejecting the net accretion method. This decision followed the precedent set in the case of Hitesh S. Mehta.

4. Determination of total income considering net accretion to various assets:
Grounds 4, 5, and 6 were allowed. The ITAT deleted the additions contested under these grounds, directing the CIT(A) to compute the taxable income as per the books of account.

5. Correct quantity of purchase and sale of shares:
This issue was included in Grounds 4, 5, and 6, which were allowed, and the CIT(A) was directed to compute income based on the books of account.

6. Determination of shareholdings based on seized data:
Ground No. 6 was allowed. The ITAT directed the CIT(A) to compute the taxable income based on the books of account, deleting the additions based on seized data.

7. Determination of unaccounted investments:
Ground No. 7 was allowed. The ITAT set aside the issue to the CIT(A) to compare the alleged undisclosed investments with the books of account and provide the assessee an opportunity to explain.

8. Valuation of unaccounted investments:
Ground No. 8 was consequential to Ground No. 7 and was allowed. The CIT(A) was directed to determine the value based on the books of account.

9. Disallowance of deduction on account of interest expenditure:
Ground No. 9 was restored to the AO to follow the directions of the Tribunal in a previous case (Hitesh S. Mehta), and it was allowed for statistical purposes.

10. Disallowance of deduction of other expenses:
Ground No. 10 was allowed. The ITAT directed the CIT(A) to compute the income as per the books of account, allowing all expenses debited in the books.

11. Deduction under Section 48 of the Act:
Ground No. 11 was consequential to Ground No. 3 and was allowed. The AO was directed to compute the income as per the books of account.

12. Alternate working of total income:
Ground No. 12 was consequential to Ground No. 3 and was allowed. The AO was directed to compute the income as per the books of account.

13. Levy of interest under Sections 234A, 234B, and 234C of the Act:
Levy of interest was deemed mandatory but consequential.

Conclusion:
The appeal was partly allowed for statistical purposes, with directions for the CIT(A) and AO to compute the income based on the books of account and provide the assessee opportunities to explain and rebut evidence as necessary. The decision followed precedents set in the case of Hitesh S. Mehta.