2015 (8) TMI 1097 - HC - Income Tax

Rejection of books of accounts - adopting net profit rate of 8% of the gross turnover - ITAT deleted the addition - Held that - ITAT has while affirming the decision of the CIT(A), noted that the non-maintenance of stock registers cannot be a ground for rejection as it depends upon the nature of the business. The books of accounts maintained by the Assessee were duly audited and, therefore, the onus is shifted to the Revenue to show that the accounts were incomplete or incorrect. The ITAT has in the impugned order referred to several decisions to emphasise that the estimate of the net profit rate by the AO had to be on the basis of some evidence. The ITAT and the CIT (A) have concurrently held that the AO failed to consider the fact that there was a substantial increase in the contract receipts the net profit shown by the Assessee in the AY in question in comparison with the contract receipts for each of the earlier years. Since the orders of the CIT (A) and the ITAT proceeded on facts and have not been shown to be perverse, the Court is of the view that no substantial question of law arises in relation to the above issue. Unexplained withdrawal made by the Assessee from its current account and the bank cash deposits made in its saving account - CIT(A) partly allowed the Assessee s appeal - Held that - The Court finds that the CIT(A) has partly allowed the Assessee s appeal on this ground and has sustained an addition of ₹ 11,97,790/-. The ITAT has concurred with the above decision. In the circumstances, this Court is not inclined to frame a question of law on this issue as well. - Decided against revenue.

Summary

Issues:
1. Deletion of addition of Rs. 43,01,460 based on net profit rate.
2. Withdrawal from current account and bank cash deposits discrepancy.

Analysis:
1. The first issue in the judgment involves the deletion of an addition of Rs. 43,01,460 by the Assessing Officer (AO) based on the net profit rate of 8% of the gross turnover. The Income Tax Appellate Tribunal (ITAT) affirmed the decision of the Commissioner of Income Tax (CIT) and noted that non-maintenance of stock registers cannot be a ground for rejection, depending on the nature of the business. The Assessee's audited books of accounts were considered, shifting the onus to the Revenue to prove incompleteness or inaccuracy. The ITAT emphasized that the AO's net profit rate estimate must be evidence-based, considering a substantial increase in contract receipts compared to previous years. As the CIT (A) and ITAT decisions were fact-based and not shown to be unreasonable, the Court found no substantial question of law on this issue.

2. The second issue raised by the Revenue pertains to discrepancies between the withdrawal made by the Assessee from its current account and the bank cash deposits in its savings account. The CIT (A) partially allowed the Assessee's appeal and sustained an addition of Rs. 11,97,790. The ITAT supported this decision, leading the Court to decline framing a legal question on this matter. Ultimately, the appeal was dismissed by the Court.