2010 (10) TMI 45 - HC - Income Tax

Rejection of books of account - Comparing yield with other assessee - Held that - The assessee has given sufficient explanation of the consumption which was not comparable to the yield of M/s. Khurana Paper Mill. The adhoc addition of Rs.1.25, 000/- was also justified as corresponding to the yield percentage. - CIT(A) and ITAT were right in quashing the order of AO in which AO has rejected the books of accounts

Summary

Issues:
Delay condonation application in appeal filing explained and allowed; Challenge to ITAT order on ad hoc addition and fresh evidence under Rule 46-A of IT Rules.

Delay Condonation Application:
The delay of two days in filing the appeal was sufficiently explained and condoned. The appeal was heard after the delay condonation application was allowed.

Challenge to ITAT Order:
The Commissioner of Income Tax Department challenged the ITAT order upholding the ad hoc addition and the view on fresh evidence under Rule 46-A of IT Rules. The High Court found no error in the ITAT order on the questions raised by the Commissioner.

Assessment Details:
The company declared a loss and agricultural income under Section 143(1)(a) in the assessment year 1994-95. The Assessing Authority rejected the account books and computed the income, including additional income due to suppressed production and cash credit.

CIT (Appeals) Findings:
CIT (Appeals) found the company's accounting method proper and detailed, with valid reasons for assessing the company. The findings highlighted the meticulous maintenance of accounts, gross profit substantiation, and statutory audit compliance.

Addition of Income:
CIT (Appeals) disagreed with the addition of income based on low yield, as the comparison with another company was not justified. An ad hoc addition was made, and the reasons for the addition were deemed sufficient by the Tribunal.

Unexplained Cash Credit:
Regarding the unexplained cash credit, the CIT (Appeals) found that the deposit was dealer's security reflected in the balance sheet. A fresh confirmation letter was submitted during the appeal proceedings, justifying the credit.

Tribunal Decision:
The Tribunal upheld the CIT (Appeals) decision, finding the reasons for additions justified and the explanations sufficient. The Tribunal dismissed the appeal, stating that no fresh evidence was submitted under Rule 46-A of the IT Rules.

Dismissal of Income Tax Appeal:
The High Court dismissed the Income Tax Appeal, agreeing with the CIT (Appeals) and Tribunal findings. The Court found no grounds for interference, especially regarding the ad hoc addition and the acceptance of additional evidence during the appeal proceedings.