2020 (7) TMI 661 - AT - Income Tax

Estimation of income - rejection of books of accounts - GP rate estimation - assessee has prayed for filing of the additional evidences which are in the nature of gate passes/ weight slip/ bought notes/ purchase invoices/ copy of accounts which according to him goes to the root of the matter and which could not be filed before the lower authorities - HELD THAT - As in the present case the Assessee could not lead the required evidence before the lower authorities. We are of the view that the evidences which the assessee has filed now have a material bearing on the issue which is before us. We further find that assessee had also filed additional evidences before the Co-ordinate bench of Tribunal for A.Y. 2011-12 2019 (12) TMI 147 - ITAT DELHI and the same were admitted and the matter was restored to the file of AO. Ends of justice demands the admission of the additional evidences. We accordingly admitted the same. Since the evidences which have been filed by the Assessee now before us requires verification and examination by the AO, we restore the entire issue back to the file of the AO and direct him to examine the evidences filed by the assessee and examine the same and thereafter decide the issue afresh. Appeal filed by the assessee and Revenue are allowed for statistical purposes

Summary

Issues Involved:
1. Estimation of Net Profit Rate.
2. Rejection of Books of Accounts under Section 145(3).
3. Admission of Additional Evidence.

Detailed Analysis:

Estimation of Net Profit Rate:
The primary issue revolves around the estimation of the net profit rate by the Assessing Officer (AO) and the subsequent modification by the Commissioner of Income Tax (Appeals) [CIT(A)]. The AO determined the total income at ?3,30,45,680/- by estimating the net profit at 2% of the total sales of ?165.22 crores, given the lack of proper documentation from the assessee. The CIT(A), however, reduced this estimation to 1% of the total sales, thereby determining the income at ?1,65,22,880/-. The assessee contended that the CIT(A) arbitrarily estimated the net profit at 1% of sales, which was significantly higher than the declared Gross Profit (GP) rate of 0.29% and Net Profit (NP) rate of 0.055%. The assessee also argued that no comparable cases were cited by the AO while estimating the net profit rate.

Rejection of Books of Accounts under Section 145(3):
The AO rejected the books of accounts under Section 145(3) due to the inability of the assessee to produce proper books of accounts and relevant documents such as names and addresses of persons involved in transactions. The AO's decision was based on the premise that the transactions could not be independently verified, rendering the purchase, sales, and profits shown by the assessee unreliable. The CIT(A) upheld this action but modified the estimation of income.

Admission of Additional Evidence:
The assessee sought to introduce additional evidence, including gate passes, weight slips, bought notes, purchase invoices, and account copies, arguing that these documents have a direct nexus with the additions made by the AO. The assessee explained that due to the death of his previous representative and his own accident, he could not furnish these details earlier. The tribunal admitted the additional evidence, noting that similar evidence had been admitted for the assessment year 2011-12, and remitted the matter back to the AO for a thorough examination of the fresh evidence. The tribunal emphasized that justice should not be hindered due to procedural lapses and that the additional evidence was necessary for a proper adjudication of the matter.

Conclusion:
The tribunal decided to restore the entire issue to the AO for a fresh examination of the additional evidence provided by the assessee. The AO is directed to verify the new documents and reassess the income accordingly, ensuring that the assessee is given a fair opportunity to present his case. Consequently, both the appeals filed by the assessee and the Revenue are allowed for statistical purposes, with the AO required to conduct a detailed investigation based on the newly admitted evidence.