2017 (2) TMI 506 - AT - Income Tax

Rejection of books of accounts - estimation of profit at a certain percentage of the gross receipts - Held that - The defect as pointed out by the Assessing Officer regarding the failure of the assessee to furnish the complete details of sundry creditors not being material or sufficient enough to justify the rejection of books of account maintained by the assessee as held by the Hon ble Guwahati High Court in the case of Madnani Construction Corporation P. Limited (2006 (12) TMI 79 - GAUHATI HIGH COURT), we are of the view that the ld. CIT( Appeals) is fully justified in deleting the addition made by the Assessing Officer by estimating the income of the assessee from the business of execution of works contract by applying higher G.P. rate of 5.15%. Accordingly, we uphold the impugned order of the ld. CIT( Appeals) giving relief to the assessee on this issue and dismiss this appeal filed by the Revenue. - Decided in favour of assessee

Summary

Issues:
1. Reversal of assessing officer's decision to reject books of accounts and estimate profit.
2. Observing insufficiency of specific findings for rejecting books of accounts.
3. Non-furnishing of details of sundry creditors as reason for rejecting books of accounts.

Analysis:

Issue 1: Reversal of assessing officer's decision
The Revenue appealed against the order of the Commissioner of Income Tax (Appeals) challenging the rejection of books of accounts and estimation of profit at a certain percentage of gross receipts. The Assessing Officer rejected the books of account due to incomplete details of sundry creditors, leading to an estimated income determination. The CIT(A) found merit in the assessee's case, citing that the accounts were audited and no adverse remarks were present, indicating correctness. The CIT(A) relied on case law and ruled in favor of the assessee, deleting the addition made by the Assessing Officer.

Issue 2: Insufficiency of specific findings
The CIT(A) observed that the Assessing Officer did not provide specific deficiencies in the accounts warranting the application of section 145 of the Act. The CIT(A) emphasized that without evidence of incorrectness in the books of account, rejection under section 145(3) was unjustified. The CIT(A) referenced case law to support the assessee's contention that the onus is on the Assessing Officer to prove inaccuracies in the books of account.

Issue 3: Non-furnishing of details of sundry creditors
The failure of the assessee to provide complete details of sundry creditors led to suspicion but did not justify invoking best judgment powers. The CIT(A) admitted the complete creditor details submitted by the assessee under Rule 46A of the Income Tax Rules, considering the reasons for non-furnishing during assessment proceedings. The Tribunal upheld the CIT(A)'s decision, stating that the defect regarding creditor details was not material enough to reject the books of account.

In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision to delete the addition made by the Assessing Officer. The judgment emphasized the importance of providing specific findings, the burden of proof on the Assessing Officer, and the admissibility of additional evidence under Rule 46A.