2022 (4) TMI 588 - AT - Income Tax

Rejection of books of accounts - estimation of business income - CIT directed the AO to estimate the income @ 3% of stock put to sale - HELD THAT - With regard to rejection of books of accounts by the AO, since the assessee has been provided various opportunities but has not provided the required documents by AO, as noted by the AO in the assessment order, we are inclined to uphold the order of AO on this ground. Estimation of income - cost of goods put to sale - We find that the issue is covered in favour of the assessee, as submitted by the Ld. AR, wherein the Hyderabad Bench of the Tribunal in the case of M/s. Balaji Wines vs. ITO 2018 (10) TMI 1944 - ITAT HYDERABAD Tribunal directed the AO to estimate the net profit @ 3% of the cost of goods put to sale.

Summary

Issues Involved:
- Appeal against the order of the Ld. CIT (A) regarding rejection of books of account and estimation of business income for AY 2013-14.

Detailed Analysis:

1. Rejection of Books of Account:
The assessee, engaged in the liquor trading business, filed the return of income for AY 2013-14 but failed to provide details for expenses claimed and stock register during the scrutiny assessment. Consequently, the Ld. AO rejected the books of account and estimated the business income at 5% of stock put to sale. The Ld. CIT (A) partly upheld this decision, leading to the appeal before the Tribunal. The Tribunal, after considering the submissions, upheld the rejection of books of account due to the assessee's failure to provide necessary documents, thus supporting the Ld. AO's order on this ground.

2. Estimation of Business Income:
Regarding the estimation of income, the Ld. AR cited a Hyderabad Tribunal case directing the AO to estimate net profit at 3% of the cost of goods sold under similar circumstances. The Tribunal referred to previous decisions where income was estimated at 3% of the cost of goods sold, emphasizing the need for case-specific estimations. Following the precedent and principles of consistency, the Tribunal directed the Ld. AO to estimate the net profit at 3% of the cost of goods put to sale, allowing the assessee's appeal on this ground. The Tribunal dismissed general grounds raised by the assessee, ultimately partly allowing the appeal for statistical purposes.

3. Withdrawal of Twin Appeal:
In a separate appeal (ITA No. 15/Viz/2020), the Ld. AR admitted that it was inadvertently filed against the same orders as in the first appeal (ITA No. 14/Viz/2020). Consequently, the Ld. AR requested to treat the second appeal as withdrawn, leading to its dismissal. Therefore, ITA No. 14/Viz/2020 was partly allowed for statistical purposes, while ITA No. 15/Viz/2020 was dismissed as withdrawn.

In conclusion, the Tribunal's judgment addressed the rejection of books of account, the estimation of business income, and the withdrawal of a twin appeal, providing detailed reasoning and following legal precedents to arrive at a decision in each aspect of the case.