2023 (9) TMI 1616 - HC - Income Tax

Estimation of income - addition @ 8% in the absence of necessary evidence and records produced by the assessee - HELD THAT - The books of accounts were produced in a soft copy. Random verification was carried out of the bills of exchange expenses etc. which revealed that there was no adverse finding given by the AO in the remand report and therefore in the considered opinion of the CIT(A), AO had ignored the details furnished by the assessee when the details were available and the estimated income at 8% was merely on the basis of surmises and conjectures. ITAT correctly held AO has verified the records produced including books of account, bills, vouchers, bank accounts and also summoned various trade creditors and found the same to be in order. The Assessing Officer also verified the job work charges, payment of expenses etc. and found to be in order. Based on the above Remand Report, the Ld. CIT(A) has deleted the addition made by the Assessing Officer. Thus the appeal filed by the Revenue is an unnecessary exercise and frivolous appeal - Decided against revenue.

Summary

Issues:
1. Justification of the Income Tax Appellate Tribunal in deleting the addition without proper evidence.
2. Error by the Income Tax Appellate Tribunal in not following a Co-ordinate Bench decision.

Detailed Analysis:
Issue 1:
The Tax Appeal was filed under Section 260A of the Income Tax Act against the Order of the Income Tax Appellate Tribunal. The assessing officer estimated the profit of the assessee at 8% of its turnover from operations due to lack of necessary evidence and records produced by the assessee. The CIT(A) found that the Assessing Officer had ignored the details furnished by the assessee, which were available, and the estimated income at 8% was based on surmises and conjectures. The Tribunal agreed with the CIT(A) and noted that the Assessing Officer verified the records produced, including books of account, bills, vouchers, and bank accounts, and found them to be in order. Based on the Remand Report, the CIT(A) deleted the addition made by the Assessing Officer, leading to the dismissal of the appeal with no costs.

Issue 2:
The substantial questions of law raised in the appeal questioned the justification of the Income Tax Appellate Tribunal in deleting the addition without appreciating the lack of necessary evidence and not following a Co-ordinate Bench decision in the assessee's own group case. The Tribunal found that the Assessing Officer had verified all relevant documents and found them in order, leading to the deletion of the addition. The findings were considered concurrent and based on factual circumstances, indicating no substantial question of law involved, resulting in the dismissal of the appeal.

Overall, the judgment highlighted the importance of providing necessary evidence and records to support income estimation and the significance of verifying all relevant documents before making additions. The decision emphasized the need for proper justification and adherence to established precedents in tax matters.