2013 (7) TMI 518 - AT - Income Tax

Substantive addition made in the hands of one assessee and protective in the hands of the other assessee - Held that - CIT(A) held that AO has not specified any defect in the profit and loss account or in the books of account produced is contradictory and without any basis because when the AO says that assessee has not maintained any books of account, there is no question of producing any books of account by the assessee either before the AO or before CIT(A) and then how it is expected from the AO that he should point out specific defect in the books of account of the assessee. In view of this contradictory finding of CIT(A) which is without basis order of CIT(A) is not sustainable & the matter should go back to the file of CIT(A) for fresh decision after providing reasonable opportunity of being heard of both sides.

Summary

Issues:
Appeals filed by Revenue in connected cases for substantive and protective additions.

Analysis:
1. The appeals pertain to the assessment year 2007-08 against orders of the Commissioner of Income-tax (Appeals)-III. The first appeal concerns the substantive addition in the hands of one assessee and the protective addition in the hands of another assessee. The Revenue raised several grounds challenging the CIT(A)'s directions to restrict total receipts, finding of no sales suppression, treatment of individual ledger account as books of accounts, and invoking section 145 of the Income Tax Act.

2. In the second appeal, the Revenue challenged the deletion of protective addition made in the hands of an assessee AOP. The CIT(A) was criticized for not upholding the Assessing Officer's order and confirming the addition on a protective basis, despite the reduction in substantive addition in the first assessee's case.

3. Despite adjournment applications filed by a Chartered Accountant on behalf of the assessees, no one appeared on the hearing date. The Revenue contended that the assessment was done under section 144 of the Income Tax Act due to the non-production of books of accounts by the assessee. The SR-DR argued that the CIT(A) did not obtain a remand report, rendering the order unsustainable.

4. The Tribunal observed that the AO had noted the non-filing of income tax return and absence of maintained books of accounts by the assessee. The CIT(A) acknowledged the AO's justification for framing the assessment under section 144. However, the Tribunal found the CIT(A)'s subsequent finding regarding the absence of defects in the books of accounts contradictory and without basis. Consequently, the Tribunal set aside the CIT(A)'s order and remanded the matter for a fresh decision.

5. As the CIT(A)'s finding in the second case was based on the first case, the Tribunal decided to remand both cases back to the CIT(A) for a fresh decision. The orders of the CIT(A) were set aside in both cases, and the matters were restored to the CIT(A) for reconsideration. Ultimately, both appeals of the Revenue were allowed for statistical purposes.