2019 (4) TMI 55 - AT - Income Tax

Estimation of GP - rejection of books of account - addition on account of low gross profit - restricting the GP rate @ 5% to NP rate @ 2.3% by CIT(A) - HELD THAT - CIT(A) observed that in assessee s own case for the assessment year 2007-08 had approved application of net profit rate @3.3% for estimation when there was evidence of unrecorded transactions. Considering other factors, Ld. CIT(A) applied the rate @ 2.3% on the entire turnover. Considering all admittedly the turnover which the basis of show cause notice of Excise Department has been set aside by the CESTAT, therefore the component is not available now for estimating the profit. We, therefore, direct the AO to adopt a net profit @3.3% on the turnover excluding the turnover as determined by the Excise Authorities. Ground of the appeal of the Revenue is partly allowed. Addition on account of Central Excise, addition on account of VAT and undisclosed investment - HELD THAT - We find that the CESTAT vide its order 2018 (10) TMI 82 - CESTAT NEW DELHI has set aside the order passed by the Commissioner of Central Excise and Service Tax, therefore, the action of the Assessing Officer is not justified. Accordingly, we confirm the order of the CIT(A) in deleting the addition Addition on account of unaccounted business of the assessee - AO on the basis of show cause notice of the Excise Department reached to a conclusion that the assessee was engaged in the business of unaccounted sales out of its books of account and therefore, some investment would also have been made by the assessee for the alleged unaccounted business confirmed by CIT - HELD THAT - We find that the CESTAT vide 2018 (10) TMI 82 - CESTAT NEW DELHI has set aside the order passed by the Commissioner of Central Excise and Service Tax, therefore, the action of the Assessing Officer is not justified. Accordingly, we confirm the order of the ld. CIT(A). Thus, ground of the appeal of the Revenue is dismissed. Rejection of books of account - assessee had not followed the provisions of Section 145 - HELD THAT - Assessing Officer discussed the contents related to the show cause notice, cash payments towards purchase of scrap and also cash payment to the transporter on the same day, statements of Smt. Neera Banasal and Mayank Bansal, unexplained investment and valuation of closing stock and g.p. rate etc. in detail in the assessment order. While deciding ground no.1 of the appeal of the Revenue, we have partly allowed the ground of the appeal of the Revenue discussing the facts of present issue. Considering the material and rival submissions available on record, we find the ld. CIT(A) was justified in approving the action of the Assessing Officer. - Decided against assessee

Issues Involved:
1. Restriction of addition made on account of estimated GP
2. Deletion of addition made on account of excise duty and VAT tax
3. Deletion of addition made on unexplained investment for unaccounted turnover
4. Jurisdiction of Assessing Officer under CASS
5. Rejection of books of account
6. Addition on account of low gross profit

Analysis:

1. Restriction of addition made on account of estimated GP:
The Revenue appealed against the CIT(A)'s decision to restrict the GP rate to NP rate. The CIT(A) applied a net profit rate of 2.3% on the total turnover, excluding the turnover determined by the Excise Authorities. The Tribunal considered the facts and found that the turnover based on the show cause notice of the Excise Department had been set aside by CESTAT. Therefore, the Tribunal directed the AO to adopt a net profit rate of 3.3% on the turnover, excluding the turnover determined by the Excise Authorities. The Revenue's appeal on this ground was partly allowed.

2. Deletion of addition made on account of excise duty and VAT tax:
The Revenue challenged the addition of excise duty and VAT tax collected on the estimated turnover calculated by the Excise Department. The Tribunal noted that CESTAT had set aside the order passed by the Commissioner of Central Excise and Service Tax, rendering the AO's action unjustified. Consequently, the Tribunal confirmed the CIT(A)'s decision, dismissing the Revenue's appeal on this issue.

3. Deletion of addition made on unexplained investment for unaccounted turnover:
The Revenue contested the deletion of the addition of 5 crores on account of unaccounted business by the CIT(A). The Tribunal observed that CESTAT had set aside the order of the Commissioner of Central Excise and Service Tax, indicating that the AO's action was unwarranted. Consequently, the Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal on this ground.

4. Jurisdiction of Assessing Officer under CASS:
The assessee raised concerns about the jurisdiction of the Assessing Officer under CASS. However, during the proceedings, the assessee did not press these grounds, leading to their dismissal.

5. Rejection of books of account:
The Assessing Officer rejected the books of account, alleging non-compliance with Section 145 of the Income Tax Act. The CIT(A) upheld the AO's decision after considering various aspects related to the show cause notice, cash payments, statements of individuals, unexplained investments, and valuation of closing stock. The Tribunal found the CIT(A)'s approval of the AO's actions justified, dismissing the assessee's appeal on this ground.

6. Addition on account of low gross profit:
The issue of addition on account of low gross profit was addressed while deciding the Revenue's appeal related to the GP rate. The Tribunal set aside the CIT(A)'s decision on this issue, leading to the dismissal of the assessee's appeal.

In conclusion, the Tribunal partly allowed the Revenue's appeal and dismissed the assessee's appeal, addressing various issues related to estimated GP, excise duty, VAT tax, unexplained investment, jurisdiction under CASS, rejection of books of account, and low gross profit.

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