2017 (11) TMI 364 - AT - Income Tax

Rejection of books of accounts - working unrecorded sales out of books of accounts - Held that - Assessing Officer had noted down certain crucial aspects in not accepting revised chart and therefore, it is wrong to say that the revised chart was not considered by the authorities below. We further find that the assessee had various units located in various parts of the country and all the units of the assessee are excisable units and the mistakes even if committed by Accountant can be verified with the records which has not been done by the authorities below. The Assessing Officer has particularly noted that quantum of raw material inputs as per Excise Register Form No. RQ-23A has not been entered in the Stock Register. He has further held that purchase quantum does not tally with the quantum issued as per excise register. The Hon ble Tribunal on the other hand had held that assessee had submitted explanation for wrong chart obtained from excise records and stock register. Therefore, we deem it appropriate to remit back issue to the office of Assessing Officer, who should re-adjudicate the additions on the basis of figures to be obtained excise records and stock record. The difference if any between the original chart and revised chart should be explained by assessee in the light of excise records maintained by it - matter remanded back.

Issues Involved:
1. Rejection of Books of Accounts under Section 145(3) of the Income Tax Act.
2. Consideration of Revised Chart Submitted by the Assessee.
3. Validity of Additions Made by the Assessing Officer.
4. Proper Maintenance and Verification of Excise and Stock Records.

Issue-wise Detailed Analysis:

1. Rejection of Books of Accounts under Section 145(3):
The Assessing Officer (AO) rejected the books of accounts under Section 145(3) of the Income Tax Act due to variations in production ratios, raw material consumption, scrap generation, invisible loss, and negative losses over two months. The AO observed that the revised figures submitted by the assessee were manipulated and not reliable. The Tribunal initially held that the books of accounts could not be rejected as the revised figures were correct but not considered by the authorities. However, the High Court remanded the case back to the Tribunal for a detailed examination of the material and evidence on record.

2. Consideration of Revised Chart Submitted by the Assessee:
The assessee submitted a revised chart to correct mistakes made by its accountant. The AO did not accept this revised chart, noting that the source of the revised figures was not entered into the stock register. The Tribunal initially ruled in favor of the assessee, stating that the revised chart was not considered by the authorities for reasons best known to them. However, the High Court found that the Tribunal did not provide detailed reasons for deleting the additions and remanded the case for a fresh decision.

3. Validity of Additions Made by the Assessing Officer:
The AO made additions based on unrecorded sales derived from the discrepancies in the raw material consumption and production figures. The AO observed that the revised figures were manipulated and rejected the books of accounts. The Tribunal initially deleted the additions, stating that the revised chart was correct and should have been considered. The High Court remanded the case, noting that the Tribunal did not examine the evidence in detail.

4. Proper Maintenance and Verification of Excise and Stock Records:
The AO noted that the quantum of raw material inputs as per Excise Register Form No. RQ-23A was not entered in the Stock Register. The purchase quantum did not tally with the quantum issued as per the excise register. The Tribunal initially ruled in favor of the assessee, stating that the books of accounts were audited and no defects were reported. The High Court remanded the case, directing the AO to re-adjudicate the additions based on excise records and stock records, and to verify the differences between the original and revised charts.

Conclusion:
The Tribunal, in its revised order, remitted the case back to the AO for re-adjudication based on excise records and stock records. The AO was directed to verify the differences between the original and revised charts and provide the assessee with sufficient opportunity to explain the discrepancies. Both the appeals filed by the assessee and the Revenue were allowed for statistical purposes.

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