2018 (12) TMI 1909 - AT - Income Tax

Rejection of books of account - estimation of profit - AO rejected books of account on the basis of lower gross profit rates - HELD THAT - As decided in own case 2018 (9) TMI 145 - ITAT LUCKNOW neither the Assessing Officer nor the ld. CIT(A) has conducted any independent enquiry regarding the same and just on the basis of guess work has observed that assessee is not bringing out full particulars. Even the judicial pronouncements are clear on the facts that in the nature of trade as like assessee cash memos for day-to-day sales are not required and that a consolidated entry in the cash book along with relevant documents of purchase of liquor are sufficient to prove the genuineness. In this view of the matter we hold that the ld. CIT(A) was not justified in confirming the rejection of the books of account and adopting the G.P. rate on the higher side - Decided in favour of assessee. Addition u/s 68 - Deposit by one of the members of the assessee AOP - one new member had introduced capital in cash - CIT(A) upheld the addition by holding that PAN address and assessment particulars were not furnished before the Assessing Officer - HELD THAT - As we find that copy of confirmation of account along with the copy of ITRs from assessment year 2008-09 to assessment year 2013-14 are placed. CIT(A) was not justified in confirming the addition made by the Assessing Officer. Accordingly the addition made by the Assessing Officer and confirmed by the learned CIT(A) is deleted. - Decided in favour of assessee.

Summary

Issues:
1. Rejection of books of account and estimation of profit.
2. Addition of capital introduced by a member.
3. Excessive addition/disallowance made by the Assessing Officer.

Analysis:
1. Rejection of books of account and estimation of profit:
The appellant contested the rejection of books of account and profit estimation by the Assessing Officer, arguing that proper books were maintained, audited, and no adverse comments were made by the Chartered Accountant. The appellant cited previous tribunal decisions in their favor for similar issues. The Department, however, supported the lower authorities' orders. The ITAT found in favor of the appellant, referencing previous tribunal decisions that upheld the acceptability of the cash book and ledger entries without the need for daily sales bills. The ITAT emphasized that the Department did not conduct an independent inquiry and rejected the rejection of books of account and the higher gross profit rate adopted by the Assessing Officer.

2. Addition of capital introduced by a member:
Regarding the addition of capital introduced by a member, the Assessing Officer added the amount under section 68 of the Act due to insufficient justification provided by the member. The CIT(A) upheld this addition citing lack of PAN, address, and assessment particulars. However, the appellant submitted confirmation of the account and ITRs of the member for several assessment years. The ITAT referred to a High Court decision stating that once the source of investment is established, the responsibility of the assessee ends. Consequently, the ITAT deleted the addition made by the Assessing Officer and confirmed by the CIT(A).

3. Excessive addition/disallowance:
The ITAT found the additions and disallowances made by the Assessing Officer and confirmed by the CIT(A) to be highly excessive. The ITAT allowed the appeal of the assessee, concluding that the rejection of books of account and the addition of capital by a member were not justified, and therefore, deleted the additions made by the lower authorities.

In conclusion, the ITAT ruled in favor of the appellant, setting aside the rejection of books of account and the addition of capital introduced by a member. The ITAT found the lower authorities' decisions to be unjustified and excessive, leading to the allowance of the assessee's appeal.