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2016 (10) TMI 922 - AT - Income TaxRejection of the books - claim of expenditure on the basis of self-made vouchers - receipt of on-money - Held that - When the AO has verified the primary details showing the incurrence of expenditure, then the assessee failed to submit those details and failed to reconcile the expenditure. The moment the assessee has accepted receipt of on-money of more than ₹ 2.13 crors then, factually it would have been inferred by the AO that expenditure might have been incurred out of books. He was required to examine the details of expenditure. In this exercise, he found that the details relating to the expenditure were not maintained methodologically and scientifically. Therefore, he made reference about these labour register, other details and other expenditure. The CIT(A) instead of pointing out any incidence as to how this expenditure are to be termed as rightly debited by the assessee, simply observed that books of accounts cannot be rejected on ground that labour payments made by the assessee on self-made vouchers. This is an inference of fact in a particular situation. It is not a ratio of law. The ld.CIT(A) miserably failed to appreciate the facts in right perspective. Therefore, on detailed analysis of the facts considered by the AO, and the manner in which ld.CIT(A) has appreciated them in the finding recorded in para.43, we are of the view that the ld.CIT(A) has failed to appreciate the facts in right perspective and erred in upholding the book results of the assessee. Ground no.1 is allowed and rejection of the books at the end of the AO is restored. Quantification of the GP - Held that - Exercise made by the AO was not correct. The ld.CIT(A) has rightly pointed out actual difference of fall in the GP should be ₹ 69,90,011/-, and this is the reason, the Revenue has also taken this amount in its ground of appeal.
Issues Involved:
1. Acceptance of the book results of the assessee. 2. Deletion of the addition on account of suppression of income on shop sales. 3. General grounds of appeal. Issue-Wise Detailed Analysis: 1. Acceptance of the Book Results of the Assessee: The primary issue was whether the books of accounts of the assessee were reliable and should not have been rejected by the Assessing Officer (AO). The AO had rejected the book results and estimated the Gross Profit (GP) at 14%, resulting in a GP addition of ?1,37,99,000/-. The CIT(A) disagreed with the AO, accepting the assessee's contention that there were no specific defects in the books that would prevent the AO from computing the true income of the assessee. The Tribunal noted that the AO must point out defects in the accounts and seek explanations. If the assessee fails to explain, the AO can compute the income according to his estimation. The Tribunal found that the CIT(A) failed to appreciate the facts correctly and upheld the AO's rejection of the books. 2. Deletion of the Addition on Account of Suppression of Income on Shop Sales: The AO observed a decline in the GP rate from 14% in the previous year to 8.49% and questioned the reasons for this decline. The assessee provided several explanations, including incorrect GP calculation due to the inclusion of bank interest and differences in the sale rates of shops and flats. The AO found these explanations insufficient and factually incorrect, noting that shops were sold during the year, contrary to the assessee's claims. The CIT(A) pointed out a mistake in the AO's calculation, stating that the correct difference in GP should be ?69,90,011/- instead of ?1,37,99,000/-. The Tribunal agreed with this correction and restored the addition of ?69,90,011/-. 3. General Grounds of Appeal: Grounds 3 and 4 were considered general and did not require specific findings. The Tribunal focused on the inter-connected grounds 1 and 2, addressing the reliability of the books of accounts and the correct quantification of the GP addition. Conclusion: The Tribunal allowed the appeal of the Revenue partly, restoring the rejection of the books by the AO and the addition of ?69,90,011/- on account of the suppression of income on shop sales. The order was pronounced on 7th October 2016 at Ahmedabad.
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