2017 (1) TMI 1775 - AT - Income Tax

GP Estimation - AO completed the assessment by estimating the gross profit of the assessee on the ground that the assessee has not cooperated and have not produced the books of accounts - FAA confirmed the action of the A.O. - HELD THAT - Assessee was not granted sufficient opportunity to demonstrate its case. From the assessment order it is clear that the assessment proceedings commenced on 5.2.2014 and thereafter a show cause notice was given on 11.2.2014. The assessee appeared on 14.2.2014 and 21.2.2014 and furnished certain details. Yet another show cause notice was given on 25.2.2014 which was replied to by the assessee on 4.3.2014. The assessment order was passed on 19.3.2014. The assessee contradicts the claims of the A.O. that he was not willing to produce the books of accounts. In fact, he submits that the books of accounts were produced before the A.O. on 22.5.2013. The details of events are given in the paper book. The detailed reply of the assessee to the query of the A.O. dt. 22.5.2013 demonstrates that the assessee has made his submissions in response to the queries from the Revenue. These have not been considered by the authorities below - assessment should be set aside to the file of the A.O. for fresh adjudication in accordance with law. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues involved:
Appeal against assessment order for A.Y. 2011-12, estimation of gross profit, sufficiency of opportunity granted to assessee.

Analysis:
1. Estimation of Gross Profit:
The assessee, engaged in trading, showed a decrease in GP rate from the preceding year. The AO estimated the gross profit due to non-cooperation and failure to produce books of accounts. The First Appellate Authority upheld this action. The appellant contended that such estimation was arbitrary and contrary to facts presented during assessment proceedings. The appellant argued that compliance was made with the law, and the AO's method of estimating income lacked legal significance. The Tribunal found that the assessee was not given sufficient opportunity to present its case adequately. The assessment proceedings timeline revealed that the assessee did provide details and produced books of accounts, contradicting the AO's claims. The Tribunal opined that the assessment should be set aside for fresh adjudication to ensure natural justice principles were upheld.

2. Sufficiency of Opportunity Granted:
The Tribunal noted that the assessee was not granted adequate opportunity to demonstrate its case. Despite providing details and producing books of accounts, the assessment order was passed without considering the submissions made by the assessee. The Tribunal emphasized the importance of following natural justice principles and set aside the assessment for fresh adjudication by the AO. The appeal was allowed for statistical purposes, highlighting the need for fair and thorough assessment procedures in line with legal provisions.

This detailed analysis of the judgment addresses the issues involved comprehensively, focusing on the estimation of gross profit and the sufficiency of opportunity granted to the assessee during the assessment proceedings.