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Issues involved: Appeal filed by income tax department u/s 260-A of the Income Tax Act, 1961 against ITAT order for Assessment Year 2007-08. Questions of law pressed on:
1. Whether deletion of addition of Rs.1,42,93,157/- on account of extra profit without regular books of account is justified? 2. Whether AO's rejection of books of account u/s 145(3) justifies deletion of the addition? 3. Whether AO's judgment based on best of judgment principle is valid when books of account are rejected? 4. Whether estimation of extra profit without stock register is justified? 5. Whether ITAT erred in ignoring section 292C presumption regarding documents found during search? Judgment Details: The search operation under section 132 of the Income Tax Act was conducted on various premises leading to the assessment. The AO observed lack of regular books of accounts during the search. Despite production of books later, they were not supported by basic documents, and day-to-day accounts were not maintained. The AO rejected the books u/s 145(3) and estimated income with an addition of Rs.19,34,764/-. The CIT (A) disagreed with the AO's addition based on a flat profit rate of 15% and found it beyond the scope of Section 153A. The Tribunal noted the absence of material justifying the 15% profit enhancement. It criticized the AO for not following guidelines or providing justifications for the estimation. Comparing GP rates with similar businesses, the Tribunal found the AO's enhancement unjustified, especially in the absence of incriminating material during the search. The Tribunal dismissed the appeal, stating that the questions raised were not substantial enough to warrant admission. The appeal by the income tax department was thus dismissed in limine.
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