2021 (2) TMI 642 - AT - Income Tax

Rectification of mistake - adoption of turnover - adopting the admitted turnover, as against that per the assessment order, since rectified u/s. 154, is that rejecting the books of account, the AO had estimated the turnover and net profit of the assessee s liquor business based on incriminating documents - grievance before us is only with regard to the turnover and not the net profit rate, estimated by the AO at 4% as against the returned 3.6% - HELD THAT - Only issue qua turnover is whether the same stands estimated by the AO, and which, where so, would only be on the basis of some material, we find no reference to any material, or in fact any discussion qua the estimation of the turnover, in the assessment order, and toward which we have perused it in its entirety. CIT-DR, Ms. Neerja Pradhan, on being questioned in the matter by the Bench, fairly conceded that the incriminating material found during search was in respect of undisclosed investments and cash, for which separate additions and for other years, has been made by the AO per the impugned assessment order, which is a combined one for seven years. This is indeed the case. In fact, the show cause to the assessee by the AO, is only as to the estimation of the net profit rate, proposed by him at 8% of the turnover, and not qua turnover, even as stated at para 4.1 of the impugned order. CIT(A) is thus clearly in the wrong when he says that the AO had estimated the turnover based on seized documents/material. The adopted figures for these years by the AO (at para 14.2 of the assessment order) is in complete agreement with that as per the assessee s audited accounts, clarifying the basis on which the AO has taken the turnover figures for all the three years, i.e., the audited accounts furnished by the assessee. There is accordingly no manner of any doubt that the turnover for AY 2010-11, as stated at para 14.2 of the assessment order, has been mistakenly so, and rightly rectified by the AO on being moved u/s. 154. In fact, where not so, the sharp and quantum reduction in the turnover for the subsequent two years, i.e., vis-a-vis AY 2010-11, ought to have itself engaged the mind of the Revenue authorities, which is not the case. Clearly, the AO made no attempt to estimate the turnover for the relevant years and, as it appears, being also confirmed by the ld. CIT-DR, there was no material with him for the same. No hesitation in allowing the assessee s Gd. 3 before us for adoption of the turnover at ₹ 1,05,87,289 in estimating the assessee s liquor business income. We are, when we do so, conscious that the turnover as per the assessee s audited accounts is at ₹ 105.72 lacs. So, however, the admitted turnover for this year is at a marginally higher figure, which we find also stated in the same sum at Gd. 2 before the ld. CIT(A), so that the same is hereby directed to be adopted. We decide accordingly.

Summary

Issues:
- Appeal against assessment under section 153A read with section 143(3) of the Income Tax Act, 1961
- Dismissal of the assessee's appeal contesting assessment
- Estimation of turnover and net profit rate for liquor business
- Rectification of business income
- Rejection of books of account
- Concealment of income and penalty proceedings

Analysis:

1. The appeal was directed against the Order by the Commissioner of Income Tax (Appeals) dismissing the assessee's appeal contesting her assessment under section 153A read with section 143(3) of the Income Tax Act, 1961 for Assessment Year 2010-11. The main issue pressed before the Appellate Tribunal concerned the non-cognizance of the rectification dated 10.01.2019 revising the assessee's business income.

2. The background of the case involved a search action under section 132 of the Act, incriminating documents being found and seized, and the assessment being framed for multiple assessment years. The Assessing Officer estimated the liquor business income of the assessee due to the failure to produce books of account during assessment proceedings.

3. The assessee moved an application under section 154, claiming a lower turnover for her liquor business, which was accepted by the AO. However, the CIT(A) did not accept this revised estimate, leading to the dismissal of the appeal on various grounds, including the addition of undisclosed net profit.

4. The primary issue revolved around the estimation of turnover and net profit rate by the AO. The CIT(A) upheld the AO's estimation based on incriminating documents and non-production of books of account by the assessee. However, upon detailed examination, the Appellate Tribunal found no material or discussion regarding the estimation of turnover in the assessment order.

5. The Tribunal concluded that the turnover for the relevant year had been mistakenly estimated by the AO and was rightly rectified upon being moved under section 154. The absence of material for turnover estimation and the discrepancy in turnover figures for subsequent years supported the assessee's claim for adoption of a specific turnover amount.

6. Consequently, the Appellate Tribunal allowed the assessee's appeal partially, directing the adoption of the turnover at a specific amount based on audited accounts. Other grounds of appeal were dismissed as not pressed, leading to the partial allowance of the assessee's appeal.

This comprehensive analysis highlights the key issues and the Tribunal's detailed examination of the facts and legal arguments presented in the case.