2018 (9) TMI 783 - AT - Income Tax

Best adjustment assessment - estimation of income - Limited Rejection of book results under section 145 - Held that - We are conscious of the fact that in various authoritative pronouncements, it has been propounded that in making a best judgment assessment, the Assessing Officer must not act dishonestly or vindictively or capriciously. It is also pertinent to mention that judgment is a faculty to decide matter with wisdom, truly and legally. Judgment does not depend upon the arbitrary, caprice of an adjudicator, but on settled and invariably principles of justice. Thus, in a best judgment, even if, there is an element of guess work, it should not be a wild one, but shall have reasonable nexus to the available material and circumstances of each assessee. The assessee could have easily made the job of AO more easier if he has submitted details showing commission received by him from the mobile companies. That would eliminate the guess-work for estimating the profit. But instead of agitating the issue upto the level of second appellate authority, this very easy step was not taken by the assessee. In the absence of any details, we are of the view that the ld.CIT(A) has rightly exercised his discretion of estimating the profit. We find that no error in the order of the ld.CIT(A). Thus, ground of appeal is rejected. It is pertinent to observe that profit has been estimated qua sale of mobile recharge vouchers only. This is a limited rejection of books on one issue, which has been upheld by the CIT(A). With regard to the regular source of business i.e. trading in pan masala and gutkha, books have not been rejected. The profit declared by the assessee has been accepted. The closing balance difference on that activity requires to be added separately. The ld.CIT(A) has rightly confirmed this addition. We do not find any merit in this ground of appeal. It is rejected. Penalty u/s 271B - Held that - We find that penalty under Section 271B of the Act is imposable under the Act, if any person fails to get his accounts audited in respect of any previous year and fails to furnish report thereof to the AO. The threshold limit as provided under the Act, require the assessee to compulsorily get his accounts audited before the specific date. Admittedly turnover of the assessee is more than ₹ 40 lakhs and the assessee did not get his accounts audited. Since the assessee failed to comply with the statutory requirement without any valid reasons, the order imposing the penalty deserved to be confirmed. We do not find any error in orders of both the Revenue authorities below, which we confirm and this appeal of the assessee is dismissed.

Summary

Issues:
1. Challenge to orders of ld.CIT(A)-IV, Rajkot confirming additions under sections 143(3) and 271B for the assessment year 2008-09.
2. Estimation of profit in mobile vouchers and rejection of book results under section 145 of the Income Tax Act, 1961.
3. Confirmation of addition of &8377; 5,58,260 for undisclosed profits from trading in mobile vouchers.
4. Confirmation of addition of &8377; 35,000 due to differences in balance as per books and bank account for pan masala, gutkha transactions.
5. Confirmation of penalty of &8377; 72,928 imposed under section 271B for failure to get accounts audited.

Analysis:

1. The assessee contested the orders of ld.CIT(A)-IV, Rajkot, challenging the additions made under sections 143(3) and 271B for the assessment year 2008-09. The Tribunal consolidated both appeals due to the inter-related nature of the facts presented.

2. The primary issue revolved around the estimation of profit in mobile vouchers and the rejection of book results under section 145 of the Income Tax Act, 1961. The AO rejected book results and estimated a profit of &8377; 5,58,260 based on undisclosed transactions related to mobile recharge vouchers. The ld.CIT(A) upheld this addition after considering the submissions and facts of the case.

3. The Tribunal analyzed the provisions of Section 145, emphasizing the method of computing income based on the accounting standards followed by the assessee. It was noted that in cases of inability to deduce true income, the Assessing Officer could reject book results and estimate income based on best judgment. The Tribunal upheld the estimation of profit by the AO, considering the lack of documentary evidence provided by the assessee to support a lower profit margin.

4. Another issue involved the confirmation of an additional &8377; 35,000 due to discrepancies in balance between the books maintained by the assessee and the bank account for pan masala and gutkha transactions. The Tribunal upheld this addition, stating that it was separate from the estimation of profit in mobile vouchers.

5. The final issue pertained to the confirmation of a penalty of &8377; 72,928 imposed under section 271B for the assessee's failure to get accounts audited despite the turnover exceeding &8377; 40 lakhs. The Tribunal affirmed the penalty, noting the statutory requirement for audit compliance and the lack of valid reasons for non-compliance by the assessee.

In conclusion, the Tribunal dismissed all appeals, upholding the orders of the ld.CIT(A)-IV, Rajkot regarding the additions made under sections 143(3) and 271B for the assessment year 2008-09.