2018 (12) TMI 123 - AT - Income Tax

Rejecting books of accounts - holding the purchases shown by the assessee as bogus - Held that - Admittedly, assessee s method of accounting has been accepted in preceding AY and in our opinion, unless there is contrary material available on record method consistently followed by assessee cannot be rejected without any basis. We therefore agree with observation of CIT (A) that accounts regularly maintained in course of business have to be taken as correct unless there are strong and sufficient reasons to indicate that they are unreliable. We therefore uphold the view of CIT(A) in accepting books of account of assessee. Insofar as addition regarding estimation of sales, job work income and other income, it is observed that Ld.A.O. has not given any reason for estimation. CIT(A) has recorded that even during remand proceedings A.O. has not made any enquiries and no comments have been given regarding books of accounts maintained by assessee. It is very much categorical to observe that sales has not been doubted by A.O. AO observed therein that, mere filing PAN numbers or assessment particulars, VAT returns and copy of sales tax RC etc., do not establish identity of persons. He further notes that actual and true identity of persons or company was business undertaken by them. PAN numbers/registration of VAT are allotted on basis of application, without actual defacto verification of identity or ascertaining actual nature of business activity, and therefore cannot be blindly accepted. On further perusal of the remand report it is observed that AO himself has not taken up any steps to verify these details. In our considered opinion moment assessee filed various details regarding sellers, onus shifts upon AO to verify the same at his end. Further it is observed that assessee has been having a progressive profit ratio from the preceding assessment years. - decided against revenue.

Summary

Issues:
Appeal against deletion of addition made by Assessing Officer on account of purchases shown as bogus, Admission of additional evidence by CIT(A) in violation of Rule 46A, Grounds for appeal by the appellant.

Analysis:
1. The appeal was filed by the Revenue against the order passed by the Ld.CIT(Appeals)-7, Delhi for the Assessment Year 2010-11. The main issue was the deletion of an addition of ?7,15,83,975 made by the Assessing Officer by rejecting the books of accounts and considering the purchases shown by the assessee as bogus.
2. The Assessing Officer noted that the assessee failed to produce books of accounts for verification of purchases and did not provide details of the entities from whom purchases were made. The AO considered the purchases unsupported by genuine bills and estimated net profit unreasonably at 25% of sales and 40% on job work.
3. The CIT(A) allowed the claim of the assessee and deleted the addition, leading to the Revenue's appeal. The Senior DR argued that the purchases lacked genuine bills and the entities were non-existent, not carrying out genuine business activities. The Revenue contended that the details provided by the assessee were not verifiable, justifying the addition made by the AO.
4. On the contrary, the AR submitted various documents during assessment proceedings, including confirmations from parties, ledger accounts, purchase bills, and bank statements. The AR argued that the purchases were made on the strength of duly issued tax invoices and that the observations regarding purchases being bogus lacked basis.
5. The ITAT upheld the CIT(A)'s decision to admit additional evidence under Rule 46A and accepted the books of account maintained by the assessee. The ITAT also noted that the AO did not provide reasons for the estimation of sales and job work income, and failed to make necessary enquiries during the remand proceedings.
6. The ITAT found no infirmity in the CIT(A)'s view and upheld the decision, dismissing the grounds raised by the Revenue. The appeal filed by the Revenue was ultimately dismissed, affirming the CIT(A)'s order.