2015 (10) TMI 1084 - AT - Income Tax

Rejection of books of accounts u/s 145(3) - estimation of profit of the business - Held that - Books of accounts along with the register, which gives the entire details of day-to-day purchase, production/consumption and sales have been not only maintained but were also filed before the AO as well as CIT(A). Another reason for justifying the application of estimation of GP rate by the Tribunal, was that the assessee has failed to submit detail in respect of sale of milk to the tune of ₹ 12,54,254/-. Here, in this year, there is no such material that assessee has failed to submit any details in support of sale of milk. On the contrary, the assessee had stated before the AO as well as CIT(A) that bulk sale have been made through account payee cheques and secondly, day-to-day sales have been recorded, were also produced before the AO. No specific defect or discrepancy has been highlighted by the AO nor any enquiry has been made. Further, we have also called for the records and books of account of the assessee to see the nature of entry and recording of transactions. Therefore, under such facts and circumstances prevailing in this year, the finding of the Tribunal in the earlier years will not apply in the impugned assessment year. Otherwise also, if the assessee s books of accounts were not found properly maintained in the earlier years then, it cannot be ipso facto presumed that the books of accounts are defective or not properly maintained in this year also. The principles of res judicata will not apply in such matters. Had it been so, then in assessee s own case, for the assessment years 2009-10 & 2010-11, the department has not only accepted the books of account and book result but also its income from sale of milk. If in the subsequent year, the factum of sale of milk have been accepted then with the same logic, the finding of the assessment year 2006-07 and 2007-08 that there is no sale of milk, cannot be held to be applicable in the impugned assessment year, i.e. A.Y. 2008-09. Each year have to be examined independently based on facts and materials on record, because, the matter pertaining to rejection of books of accounts are factual issues, which need to be examined every year. Thus, in view of our above finding, we hold that books of account and the book result, as shown by the assessee should be accepted and consequentially the estimation of the undisclosed income of ₹ 8,30,742/-, as submitted by the CIT(A) is deleted. Unexplained cash - Addition u/s 69A - AO noted that during the course of search action at the residence of the Director Jasvinder Bajaj, a cash of ₹ 8,34,000/- were found - Held that - Cash was found from the residence of the Director Jasvinder Bajaj, wherein a sum of ₹ 7,34,000/- was found and ₹ 39,500/- was found from another Director, Shri Swaranjit Bajaj. At the time of search, it was claimed that there was cash in hand in the names of various persons including that of the assessee company, which aggregated at ₹ 32,72,780/-. The reply of the assessee as filed before the AO has not been properly rebutted or examined. Further, from the statement of cash balance of various persons, it is seen that, the availability of cash as per their books maintained and claimed by the assessee appears to be correct. In all the personal Balancesheets and cash balance as appearing in the cash-book belonging to the family members of the Directors and Director themselves sufficient cash was available, therefore, under these circumstances same cannot be added in the hands of the assessee company, because the amount has not been found from the premises of the assessee company but from the residence of the Directors and the family members. Accordingly, we hold that no addition on account of unexplained cash can be made in the hands of the assessee company u/s 69A of the Act and hence, addition of ₹ 8,73,500/- is deleted - Decided in favour of assessee.

Issues Involved:
1. Rejection of Books of Accounts under Section 145(3) of the Income Tax Act.
2. Addition of Rs. 8,30,742/- as Estimated Undisclosed Income.
3. Addition of Rs. 8,73,500/- under Section 69A of the Income Tax Act.
4. Interest Charged under Sections 234A, 234B, and 234C of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Rejection of Books of Accounts under Section 145(3) of the Income Tax Act:
The primary issue was whether the books of accounts of the assessee were rightly rejected under Section 145(3) due to alleged bogus sales of milk to suppress production and sales of higher-margin products. The AO based the rejection on statements from the Director and employees during a search operation, indicating no maintenance of inward, production/consumption, and outward registers. The AO also noted discrepancies in sales records and statements from salesmen denying milk sales from retail outlets. However, the assessee contended that detailed records of milk purchase and sales were maintained and provided, including sales through cheques to established parties. The Tribunal found that the assessee had maintained comprehensive records, including stock registers and sales invoices, which were not properly examined by the AO or CIT(A). Consequently, the Tribunal held that the books of accounts and book results should be accepted, rejecting the AO's reasons for rejecting the books.

2. Addition of Rs. 8,30,742/- as Estimated Undisclosed Income:
The AO estimated undisclosed income based on the rejection of books of accounts and discrepancies in gross profit rates. The CIT(A) upheld this addition, citing the lack of documentary evidence for milk sales. The assessee argued that detailed records were provided, including sales to parties through cheques and day-to-day purchase and sales records. The Tribunal noted that the AO and CIT(A) did not properly examine the provided records, which showed detailed and corroborated sales of milk. The Tribunal emphasized that each assessment year should be examined independently and found no basis for the estimated addition of Rs. 8,30,742/-, leading to its deletion.

3. Addition of Rs. 8,73,500/- under Section 69A of the Income Tax Act:
During the search, cash of Rs. 8,34,000/- was found at the residence of the Director. The AO added this amount as unexplained cash under Section 69A, which was upheld by the CIT(A). The assessee contended that the cash found was part of the cash balance maintained by the group, including the company and family members, totaling Rs. 32,72,780/-. The Tribunal found that the cash balance claimed by the assessee was supported by the books of accounts of the individuals and the company. Since the cash was found at the residences of the Directors and not the company, the Tribunal held that the addition could not be made in the company's hands, leading to the deletion of the Rs. 8,73,500/- addition.

4. Interest Charged under Sections 234A, 234B, and 234C of the Income Tax Act:
The assessee contested the interest charged under Sections 234A, 234B, and 234C. The Tribunal noted that the levy of interest under these sections is mandatory and consequential. Therefore, the Tribunal dismissed this ground of appeal.

Conclusion:
The appeal was partly allowed, with the Tribunal accepting the books of accounts and book results, deleting the additions of Rs. 8,30,742/- and Rs. 8,73,500/-, while upholding the interest charged under Sections 234A, 234B, and 234C. The judgment emphasized the need for proper examination of records and independent assessment of each year's facts.

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