2020 (11) TMI 865 - AT - Income Tax

Rejection of books of accounts - Profit estimation - enhancement of profit ratio to 25% as against profit ratio declared by the assessee to the tune of 20% - HELD THAT - The assessee on its part has not filed complete details , nor stock records were filed as well balance sheet were not filed. The authorities below have detailed in their orders about non submission of records by the assessee. The details called for by the Bench has also not been filed for the profits declared in the preceding years and its acceptability by Revenue for those years. It is important to compare profit ratio declared by the assessee in the earlier years and the acceptability of the same by the Department in those years Assessee was directed by the Bench to file complete details of the profit ratios of the preceding years declared by the assessee and its acceptability by Revenue for those years , but the same is not filed before us rather details of succeeding years are filed - we are remitting the matter back to AO for fresh enquiry as to profit declared by the assessee in the earlier three years and its acceptability by Revenue and if the same were accepted by Revenue in those three years and similar business is carried on by the assessee in the impugned ay, then in that situation, the AO is directed to adopt average of the profits for the last three years or the profits declared by the assessee for the impugned ay which ever is higher - in case suppression is detected by AO keeping in view peculiar/specific facts(evidences) and circumstances in the year under consideration, then the onus is on the AO to bring on record profit earned by other persons in the similar businesses, and then based upon the same, the profit of the assessee be computed by Revenue for impugned ay. Thus, the matter is remitted back to the AO for denovo determination of the issue on merits. Additions being made with respect of income from business of PAAN alleged to have been carried out by the assessee - assessee has demonstrated before the authorities below that the business of PAAN were carried out by his father and not by the assessee - HELD THAT - The Revenue is not able to demonstrate with evidence that the assessee was engaged in the business of PAAN also and income from the business of PAAN has not been declared by assessee in the return of income filed by assessee with Revenue. The powers of the ld. CIT(A) are co-terminus with the power of the AO and he could have made detailed enquiry to unravel the truth , but no concrete evidence/findings are brought on record to rebut contentions of the assessee that business of PAAN was carried out by his father from the same shop outlet in Civil Lines, Allahabad and the same has been offered for taxation by his father - since no material/evidence is available on record to prove that business of PAAN was carried out by assessee, we hereby delete the Addition made by the AO on account of business of PAAN which was later confirmed by the CIT(A). - Decided in favour of assessee. Addition with respect to advance discount given by M/s Pepsico in the month of August 2007 to the assessee - HELD THAT - There is no justification offered by the assessee in not offering to tax the said amount of ₹ 5,00,000/- in ay 2008-09 - there is no concrete argument backed with any evidence submitted by learned counsel for the assessee as to why the additions upheld by learned CIT(A) be not confirmed by us and under these circumstances we find that there is no justification that the said amount of ₹ 5,00,000/- should not be brought to tax in the hands of the assessee for impugned ay 2008-09 . Thus we hold that ₹ 5,00,000/- is taxable in the hands of the assessee for the impugned ay 2008-09 under consideration and hence we confirm this additions as were made AO which were later confirmed by learned CIT(A) , and dismiss these ground of assessee.

Summary

Issues Involved:
1. Non-acceptance of book results and enhancement of gross profit rate.
2. Addition of income under the head "Business of Paan."
3. Taxability of advance discount received from M/s Pepsico India Holding Pvt. Ltd.

Detailed Analysis:

1. Non-acceptance of Book Results and Enhancement of Gross Profit Rate:
The assessee contended that the CIT(A) erred in not accepting the book results supported by regular books of accounts, leading to an unjustified enhancement of the gross profit rate from 22% to 25%. The AO observed that the assessee, engaged in the business of cold drinks and 'Masala Drinks', did not maintain proper books of accounts, leading to the rejection of the books under Section 145(3) of the Income-tax Act, 1961. The AO enhanced the profit margin to 25%, which was confirmed by the CIT(A). The Tribunal noted that the assessee did not provide complete details of profit margins for preceding years or their acceptability by the Revenue. Consequently, the matter was remitted back to the AO for fresh enquiry into the profit margins declared in the preceding three years and their acceptance by the Revenue. If accepted, the AO is directed to adopt the average profit of the last three years or the profit declared for the impugned year, whichever is higher. These grounds of appeal were allowed for statistical purposes.

2. Addition of Income under the Head "Business of Paan":
The AO alleged that the assessee was also engaged in the business of Paan, leading to an addition of ?60,000/-. The assessee demonstrated that the Paan business was carried out by his father, who was regularly assessed to tax. The Tribunal found that the Revenue did not provide concrete evidence to prove that the assessee was engaged in the Paan business. As the authorities failed to rebut the assessee's contention with evidence, the addition of ?60,000/- was deleted. The assessee succeeded on these grounds.

3. Taxability of Advance Discount Received from M/s Pepsico India Holding Pvt. Ltd.:
The assessee received an advance discount of ?5,00,000/- from M/s Pepsico in August 2007, which was not offered to tax in AY 2008-09. The assessee conceded before the CIT(A) that the amount was taxable for the impugned assessment year. The Tribunal found no justification for not taxing the amount in AY 2008-09 and confirmed the addition of ?5,00,000/-, dismissing the related grounds of appeal.

General Grounds:
Grounds 8 and 9 were general in nature and dismissed as no specific arguments were offered by the assessee.

Conclusion:
The appeal was partly allowed. The Tribunal remitted the issue of profit margin back to the AO for a fresh determination and deleted the addition related to the Paan business. However, the addition of ?5,00,000/- received as an advance discount was confirmed.