2014 (4) TMI 899 - HC - Income Tax

Refusal for best judgment assessment whether AO can refuse to do a best judgment assessment even though the assessee himself has admitted that his accounts are not full and complete? - Accounts audited u/s 44AB of the Act Rejection of books of accounts Held that - There were over 1000 sundry creditors of which the assessee had got the confirmation letters from nearly 264 parties and in respect of 84 of parties the assessee itself pleaded that the creditors were not traceable - when the assessee could produce the materials of confirmation in respect of the some of the creditors and could not produce any such evidence from 84 parties - The assessee had shifted its stand to have the assessment done to its desire which cannot be approved - the assessee had stated that they had not maintained the books of accounts particularly with reference to the stock - accounts were audited by a qualified Chartered Accountant as required u/s 44AB of the Act - With the material particulars available as to the income of the assessee it could be understood as to how the assessee could insist on a best of judgment assessment only for gaining certain tax benefits thus no substantial question of law arises for consideration Decided against Assessee.

Summary

Issues:
1. Tribunal's decision on best judgment assessment despite incomplete accounts admission.
2. Tribunal's ruling on rejecting books and not conducting best judgment assessment for audited accounts.
3. Consideration of disclosure before Settlement Commission for stock inflation in earlier years.

Analysis:

Issue 1:
The assessee, engaged in auto spares business, admitted incomplete accounts with untraceable creditors. Despite offering additional amount for taxation, the Assessing Officer invoked Section 68 for unexplained cash credit. The Commissioner of Income Tax (Appeals) upheld this decision, emphasizing the lack of evidence supporting the assessee's claims. The Income Tax Appellate Tribunal noted the contradictory stance taken by the assessee, leading to the dismissal of the appeal. The High Court found the assessee's shifting positions and lack of substantial evidence detrimental to their case, ultimately dismissing the Tax Case (Appeal) at admission.

Issue 2:
The Tribunal's decision regarding rejecting books and not resorting to best judgment assessment for audited accounts under Section 44AB was a focal point of contention. The Assessing Officer, based on the audited report, treated unconfirmed creditors as unexplained cash credit under Section 68. The Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal supported this stance, highlighting the absence of concrete evidence to substantiate the assessee's claims. The High Court criticized the assessee's attempt to manipulate the assessment process for tax benefits, emphasizing the importance of maintaining accurate accounts despite audit requirements.

Issue 3:
The consideration of full and true disclosure made before the Settlement Commission regarding stock inflation in earlier years was a critical aspect. The assessee had approached the Settlement Commission for other assessment years, offering additional income. However, the Commissioner of Income Tax (Appeals) and subsequent authorities did not find this disclosure relevant to the assessment year in question. The High Court noted the lack of justifiable grounds in the questions of law raised by the assessee, ultimately leading to the dismissal of the Tax Case (Appeal) without costs.

In conclusion, the High Court's judgment emphasized the importance of maintaining accurate accounts, providing substantial evidence, and avoiding contradictory stances during tax assessments. The dismissal of the appeal underscored the need for consistency, transparency, and adherence to legal requirements in income tax matters.