2016 (3) TMI 324 - HC - Income Tax

Reopening of assessment - difference between the closing stock as shown in the books of accounts produced and in the account as shown in the document recovered from the CPU - whether figures obtained from the hard disk of the CPU must be given credence over the figures in the books of accounts produced before the AO and in particular the stock register maintained by the Assessee - Held that - ITAT has given cogent reasons as to why the case of the Revenue cannot be accepted. Inter alia, it is pointed out that no evidence was found which could substantiate the Revenue s contention that there were either purchases or sales outside the books of accounts. There was no evidence that the Assessee maintained parallel books of accounts. The contention of the Revenue that the difference in the figures of closing stock as on 31st March 2011 and the opening stock as on 1st April 2011 were due to unaccounted sales was rejected as being absurd. The ITAT observed that just one unrealistic and absurd figure of net profit is taken out from the print out of the rough document from the CPU/hard disk and adopted for assessment of total income. Such an approach cannot be approved - Decided against revenue

Summary

Issues:
- Appeal against ITAT order for AY 2001-02
- Credence of figures from hard disk/CPU over books of accounts
- Addition on account of undisclosed net profit

Analysis:
The case involves an appeal by the Revenue against an ITAT order for the Assessment Year 2001-02. The ITAT had deleted an addition made by the AO on account of undisclosed net profit. The dispute arose from a survey under Section 133A where a hard disk/CPU revealed discrepancies in stock figures leading to a notice under Section 148. The AO passed a fresh assessment order adding undisclosed net profit to the total income. The Commissioner of Income Tax (Appeals) dismissed the Assessee's appeal, but the ITAT allowed it, deleting the addition.

The Revenue contended that figures from the hard disk/CPU should be given credence over the books of accounts, specifically the stock register. However, the ITAT rejected this argument, stating that no evidence supported purchases or sales outside the books of accounts or the existence of parallel books. The ITAT found the Revenue's reasoning for the difference in stock figures to be absurd and unrealistic. The ITAT emphasized that adopting a single figure from the rough document for total income assessment was not a valid approach.

After reviewing the ITAT's order and hearing arguments, the High Court concluded that the ITAT's decision was reasonable and not perverse. The Court found no substantial question of law warranting interference and dismissed the Revenue's appeal. This judgment highlights the importance of substantiated evidence and logical reasoning in tax assessments, emphasizing the need for a valid and coherent approach in determining undisclosed income.