2019 (4) TMI 699 - AT - Income Tax

Assessments u/s 153A - no incriminating material found during the course of search - HELD THAT - In the given facts the AY 2009- 10 will come under the category of completed and non abated assessment and the A.O can make additions in such assessments only on the basis of incriminating material found during the course of search. In the case of the assessee as there is no incriminating material found during the course of search A.O could not make any addition on the basis of information called during the course of assessment proceedings and therefore Ld. CIT(A) has rightly held the impugned proceedings u/s 153A r.w.s. 143(3) of the Act as invalid. Rejection of books of accounts - estimation of Gross Profit on sale of gold and silver bullion - HELD THAT - Books of accounts and stock records are consistently been maintained by the assessee in the similar fashion. Audited reports by the Auditor under the Companies Acts and Income Tax Act are placed on records. No error is pointed out by the Auditors. A.O has made a general observation that the assessee is having huge amount of cash purchases and cash sales but has not placed or referred to any evidence on record to prove that the assessee is indulged into unaccounted sales and purchases. All the expense are vouched. Ld. A.O has merely followed the order of his predecessor of previous years for making the impugned addition. It is well settled principal that before rejecting the book results, discrepancies should be pointed out in the regular books of accounts by the AO. Therefore we are of the considered view that CIT(A) has correctly allowed the assessee s appeal by holding that the book results should be accepted and that the action of the A.O rejecting books of accounts and making the addition for low Gross Profit on sale of gold bar and sale of silver bar is devoid of any merit and uncalled for. No inconsistency in the finding of Ld. CIT(A) and the same deserves to be confirmed. Accordingly Grounds of the revenue s appeal for Assessment Year 2012-13 stands dismissed.

Summary

Issues Involved:
1. Validity of proceedings under Section 153A in the absence of incriminating material.
2. Rejection of books of accounts under Section 145(3).
3. Estimation of gross profit on sale of gold and silver bullion.

Detailed Analysis:

1. Validity of Proceedings under Section 153A:
The core issue was whether the proceedings under Section 153A were valid in the absence of incriminating material found during the search. The search was conducted on 25.11.10, and no incriminating material was found for the Assessment Year 2009-10. The assessee argued that since the assessment year in question was a completed and non-abated assessment, any additions could only be made based on incriminating material found during the search. The CIT(A) and the Tribunal upheld this view, citing judicial precedents such as the jurisdictional ITAT’s decision in Kalani Bros and the case of Anant Steels Ltd. The Tribunal concluded that the additions made by the AO were not based on any incriminating material and thus, the proceedings under Section 153A were invalid.

2. Rejection of Books of Accounts under Section 145(3):
For the Assessment Year 2012-13, the AO rejected the books of accounts and estimated the gross profit on sales of gold and silver bullion. The CIT(A) and the Tribunal found that the AO’s rejection of the books was not justified as the assessee maintained regular books of accounts and quantitative records, which were audited and found to be in order. The Tribunal noted that the AO had not pointed out any specific discrepancies or defects in the books of accounts. The Tribunal upheld the CIT(A)’s decision to accept the book results and reject the AO’s estimation of gross profit.

3. Estimation of Gross Profit on Sale of Gold and Silver Bullion:
The AO had made additions based on the estimation of gross profit on the sale of gold and silver bullion for the Assessment Year 2012-13, following the methodology adopted for previous years. The CIT(A) and the Tribunal found that the AO’s approach was arbitrary and not supported by any evidence of unaccounted sales or purchases. The Tribunal emphasized that the AO must point out specific discrepancies in the books of accounts before rejecting them and making estimations. The Tribunal confirmed the CIT(A)’s decision to delete the additions made by the AO on account of estimated gross profit.

Conclusion:
The Tribunal dismissed the revenue’s appeals for both Assessment Years 2009-10 and 2012-13, upholding the CIT(A)’s findings that the proceedings under Section 153A were invalid in the absence of incriminating material and that the AO’s rejection of books of accounts and estimation of gross profit were unjustified. The assessee’s cross-objections were dismissed as infructuous.