2017 (5) TMI 306 - HC - Income Tax

Trading addition - G.P. estimation - AO made the additions solely on the basis of the documents seized during the course of survey - Held that - AO did not specifically reject the audited books of accounts produced by the respondent assessee. CIT(A) deleted the additions made by the Assessing Officer, which was made solely on the basis of the incriminating material documents seized. Cogent reasons have been given by the learned CIT(A) as well as the learned tribunal in deleting the additions made by the Assessing Officer. We are in complete agreement with the view taken by the learned CIT(A) as well as the learned tribunal while deleting additions made by the Assessing Officer, more particularly, when the Assessing Officer did not reject the audited books of accounts produced and relied upon by the respondent assessee. So far as the estimation of the GP at 13% on ₹ 65 lakhs is concerned, it is required to be noted that on the basis of the incriminating material, the learned CIT(A) directed to make the addition in the hands of the respondent assessee of ₹ 65 lakhs. On appreciation of evidence and on the basis of the estimation the learned CIT(A) determined the GP at 13% and the same has been confirmed by the learned tribunal. By giving cogent reasons and on estimation basis, which is permissible, when the learned CIT(A) estimated the GP at 13% of ₹ 65 lakhs, it cannot be said that any substantial questions of law arise.

Summary

Issues:
1. Common question of law and facts in Tax Appeals.
2. Justification of additions made by the Assessing Officer.
3. Deletion of additions by the CIT(A) and the Tribunal.
4. Estimation of Gross Profit (GP) at 13%.
5. Dismissal of Tax Appeals.

Analysis:
1. The judgment deals with two Tax Appeals arising from a common judgment by the Income Tax Appellate Tribunal regarding the same assessee but for different Assessment Years. The Appeals were decided collectively due to common questions of law and facts.

2. The Revenue challenged the Tribunal's decision to dismiss the Appeals and confirm the orders passed by the CIT(A). The Assessing Officer had made additions based on documents seized during a search, while the CIT(A) deleted these additions, stating they were unjustified as they were solely based on incomplete seized documents.

3. The CIT(A) held that an amount of ?65 lakhs should be assessed in the assessee's hands and estimated the GP at 13% on this amount, directing further addition of ?8.45 lakhs. Both the CIT(A) and the Tribunal confirmed this decision, emphasizing that the Assessing Officer did not reject the audited books of accounts produced by the assessee.

4. The estimation of GP at 13% on the seized amount was considered reasonable by the CIT(A) and the Tribunal. They provided cogent reasons for this estimation, which was upheld as permissible. The judgment noted that no substantial questions of law arose from this estimation.

5. After considering the arguments presented by the Revenue, the assessment orders, and the decisions of the CIT(A) and the Tribunal, the High Court concluded that the Tax Appeals were to be dismissed. The judgment upheld the decisions of the lower authorities in deleting the additions made by the Assessing Officer and confirming the estimation of GP at 13%.

This detailed analysis covers the issues raised in the judgment, providing a comprehensive understanding of the legal reasoning and conclusions reached by the High Court in this case.