2022 (8) TMI 965 - HC - Income Tax

Addition on account of low GP in manufacturing activity as well as trading activity as compared to previous years - Assessment made invoking provisions of section 145(3) - HELD THAT - The concurrent findings were recorded by the Appellate Authority as well as the Income Tax Appellate Tribunal in holding that the invocation of section 145(3) of the Act and the consequential addition in respect of gross profit by the Assessing Officer was not proper. The findings arrived at were based on the material before the Appellate Authority in the appeal proceedings. The material was appreciated and therefrom the Commissioner of Income Tax (Appeals) could justify fall in the gross profit. The addition was accordingly directed to be deleted by the Appellate Authority and was confirmed by the Tribunal. The finding recorded based on appreciation of materials and documentary evidence are in the realm of finding of fact. No substantial question of law.

Summary

Issues:
Challenge to judgment and order of Income Tax Appellate Tribunal under section 260A of the Income Tax Act, 1961 regarding addition on account of low gross profit in manufacturing and trading activities.

Analysis:
1. Substantial Questions of Law Proposed by Appellant Department:
- The appellant department raised two substantial questions of law challenging the deletion of addition made on account of low gross profit in manufacturing and trading activities without producing complete books of accounts and supporting evidence during assessment proceedings.
- The first question pertained to the justification of deleting the addition without appreciating the non-production of complete books of accounts and supporting evidence.
- The second question questioned the upholding of the order without providing an opportunity for further submission on the assessee's claim.

2. Assessment and Addition of Gross Profit:
- The Assessing Officer made an addition of Rs. 4,87,61,536/- in the total income due to a decline in manufacturing and trading activities compared to previous years.
- The Assessing Officer estimated gross profit based on the average of preceding three years and added the amount to the total income.
- The Commissioner of Income Tax (Appeals) observed that the appellant had furnished all relevant details during the appellate proceedings, including complete books of accounts and supporting evidence.

3. Appellate Authority and Tribunal Findings:
- The Appellate Authority and the Income Tax Appellate Tribunal concurred in holding that the invocation of section 145(3) of the Act and the consequent addition by the Assessing Officer were not justified.
- Both authorities found that the appellant had provided complete details and supporting documents during the appellate proceedings, which were not available during the assessment stage.
- The Tribunal noted an increase in turnover during the year and concluded that the addition of profit made by the Assessing Officer was rightly deleted.

4. Conclusion:
- The concurrent findings of the Appellate Authority and the Tribunal were based on the material before them and the appreciation of documentary evidence.
- The Tribunal concluded that the addition on account of low gross profit was not justified and upheld the deletion made by the Appellate Authority.
- The appeal was dismissed as it did not raise any substantial question of law, and the view of the Appellate Authority and the Tribunal required no interference.