2021 (3) TMI 1097 - AT - Income Tax

Estimating income shown u/s 44AD as supported by return filed under VAT - estimate of the CIT(A) being without any material, ignoring the correct position of the case i.e. neither books of accounts are kept nor auditing was done and returns were even farzi for taking loan from bank - addition is sustained by the ld. CIT(A) based on the findings of the ld. CIT(A) in assessee's own case for assessment year 2010-11 2018 (9) TMI 1759 - ITAT DELHI wherein the profit @ 5% on the turnover was estimated - HELD THAT - In para No. 8 the co-ordinate bench held that assessee should be given an opportunity to substantiate evidence to the satisfaction of the AO regarding the turnover and expenses with respect to the profit and loss account and the balance sheet as it as stated that those were farzi version of accounts. Considering the totality of the facts of the case the matter was restored back to the file of the Assessing Officer with a direction to grant one final opportunity to the assessee to substantiate his case directing the assessee to produce the books of accounts and audit report failing which the Assessing Officer shall pass an appropriate order as per law. In the present case the addition is also based on the order of the CIT (Appeals) for assessment year 2010-11. This order has now been restored back to the ld. AO for that year. When additions are confirmed on the basis of the order of ld. CIT(A) for earlier years which has already been sent back to the ld. AO for fresh decision, there is no reason that why this year should also not be restored back to the file of the ld. AO for fresh assessment. SO, we also set aside this appeal with similar direction to the file of the Assessing Officer. Rejection of books of accounts - Addition of 5% of gross sales - HELD THAT - In the return of income the assessee has filled up the figures only with some of the items, therefore, it is apparent that no books of accounts were maintained. During the assessment proceedings, the Assessing Officer did not dispute the turnover or the expenses as well as the cash on hand and amount of debtors. The only addition was with respect to the discrepancy in the opening stock. In assessment year 2010-11 AO rejected the books of accounts and made the addition whereas in the impugned year he has not disturbed the trading results of the assessee which has turnover of only ₹ 9,45,132/-. The Assessing Officer has merely added the difference in the opening stock as well as the closing stock. The stock of the assessee as on 1.04.2009 was ₹ 2,01,23,560/-. The stock as on 31.03.2009 was shown at only ₹ 4,10,130/-. Therefore, the assessee has shown excess opening stock of ₹ 1,97,13,430/-. The Assessing Officer also did not care to consider that whether the assessee is having the above stock as actual stock with the assessee and if so what is the source of investment for the above stock. The Assessing Officer has not even examined the source of stock nor was such stock found during the course of survey on 17.09.2013 and 29.09.2013. No purchase vouchers or details were also found during the course of survey. In view of this, we do not find any infirmity in the order of the ld. CIT (Appeals) and thus, the solitary ground of appeal of the ld. Assessing Officer is dismissed.

Summary

Issues:
1. Estimation of income against the income shown under Section 44AD
2. Rejection of books of accounts and invoking Section 145(3) of the Income Tax Act
3. Addition of investment in purchase of house property
4. Disallowance under Section 80C of the Act
5. Appeal against the order of the Commissioner of Income Tax (Appeals) for assessment year 2009-10

Issue 1: Estimation of income against the income shown under Section 44AD

The appellant filed an appeal against the order of the Commissioner of Income Tax (Appeals) for assessment year 2012-13, contesting the estimation of income at ?72,38,608 against the income of ?5,30,660 shown under Section 44AD. The appellant argued that the estimation was without any material basis. The assessing officer had made various additions to the income, including disallowances and additions for investment in a house property. The CIT (Appeals) upheld the addition of ?72,38,608 based on the profit rate applied in the appellant's case for the previous assessment year. However, the Tribunal set aside the appeal and directed the Assessing Officer to grant the appellant an opportunity to substantiate the evidence regarding turnover and expenses, considering the accounts were deemed farzi. The Tribunal emphasized the need for the appellant to provide accurate income details with supporting material.

Issue 2: Rejection of books of accounts and invoking Section 145(3) of the Income Tax Act

In the same appeal for assessment year 2012-13, the Assessing Officer rejected the books of accounts and invoked Section 145(3) of the Income Tax Act. This led to the disallowance of 20% of all expenditures and additional income assessments. The appellant contested that the accounts prepared by the Chartered Accountant were bogus. The Tribunal noted that the matter for the previous assessment year had been sent back to the Assessing Officer for a fresh decision. Considering this, the Tribunal set aside the appeal for assessment year 2012-13 and directed the case to be returned to the Assessing Officer for a fresh assessment, emphasizing the need for accurate income reporting with substantial evidence.

Issue 3: Addition of investment in purchase of house property

The Assessing Officer made an addition of ?46,26,000 for investment in the purchase of a house property. The appellant claimed that the payment was made from an overdraft account, but this contention was rejected due to insufficient information provided. The Tribunal, in alignment with the direction to reevaluate the evidence, set aside the appeal for assessment year 2012-13, emphasizing the necessity for the appellant to present accurate income details with substantial supporting material.

Issue 4: Disallowance under Section 80C of the Act

An additional disallowance of ?8,000 was made under Section 80C of the Act. The Tribunal's decision to set aside the appeal for assessment year 2012-13 and direct the case back to the Assessing Officer for a fresh assessment included the requirement for the appellant to provide precise income information with cogent material to support the claims made.

Issue 5: Appeal against the order of the Commissioner of Income Tax (Appeals) for assessment year 2009-10

In a separate appeal for assessment year 2009-10, the Department contested the order of the Commissioner of Income Tax (Appeals) regarding the addition of 5% of gross sales. The CIT (Appeals) restricted the addition, leading to the deletion of a substantial amount. The Assessing Officer was aggrieved and filed an appeal. The Tribunal upheld the decision of the CIT (Appeals) based on the lack of maintained books of accounts by the appellant and the absence of supporting evidence for the additions made by the Assessing Officer. Consequently, the Tribunal dismissed the appeal of the Assessing Officer for assessment year 2009-10.

This detailed analysis covers the various issues addressed in the legal judgment, providing a comprehensive understanding of the Tribunal's decisions and the arguments presented by the parties involved.