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TMI Blog2024 (8) TMI 1071X X X X Extracts X X X X X X X X Extracts X X X X ..... s hands five years later, the same could safely be adopted as a yardstick while estimating his income for the year before them after rejection of the books of accounts. Admittedly, as income disclosed by the assessee firm during the year under consideration is higher as in comparison to that disclosed in the aforementioned preceding years/succeeding years (i.e. average NP rate), and it is not a case that any addition/disallowance had been made by the A.O during the year under consideration by acting upon any incriminating material found in the course of survey proceedings, therefore, we are of a strong conviction that the average NP rate of 2.56% (supra) can safely be taken as a yardstick for estimating the income of the assessee firm for the year under consideration. As the assessee firm had disclosed NP rate of 2.93% during the year, i.e. A.Y.2015-16, which is higher than the average NP rate of 2.56% for the aforementioned preceding years/succeeding years, therefore, we are of the view that no adverse inferences as regards its returned income was liable to be drawn. However, as the aforesaid NP rates of the aforementioned five preceding years/succeeding years are not discernible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ressed his inability to explain the contents of the impounded documents with reference to books of accounts? (iii) Despite the admitted inability of the assessee to explain the contents of the impounded documents, Ld. CIT(A) deleted the addition even when Jansampark Advertising Marketing (P.) Ltd. [2015] 56 taxmann.com 286 (Delhi) has held that though it is obligation of Assessing Officer to conduct proper scrutiny of material, in event of Assessing Officer failing to discharge his functions properly, the obligation to conduct proper inquiry shift to Commissioner (Appeals) and Tribunal and they cannot simply delete addition made by Assessing Officer? 3. Whether on facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in deleting the addition of Rs. 1,70,05,341/-, ignoring the admitted inability of the assessee to explain the contents of the impounded documents and without utilizing the wide powers available to him under the Income Tax Act to make any such further enquiry as he thought fit, including looking at the impounded material and statements recorded in course of the survey proceedings, in terms of the ratio of SC decision in case of Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... awal? 5. On the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in concluding that there was no reason for the AO to reject the books of account, ignoring the above facts in ground 4, when even in the affidavit of retraction for this specific AY 2015-16, which is quoted in the assessment order, the assessee has clearly expressed his inability to explain the contents thereof with reference to books of accounts in the wake of impounded material? 6. Whether on facts and in the circumstances of the case and in law, the Ld. CIT(A) is correct in holding that the AO has not brought any material which has any reasonable nexus to the estimation even though estimation of net profit was determined by AO on the basis of facts of the case and on the basis of statement of the assessee? 7. Whether on facts and in the circumstances of the case in law and considering the statement dated 01.02.2016 of the assessee, the Ld. CIT(A) is correct in allowing deduction on account of bank interest amounting to Rs. 4,51,36,210/- and bank charges amounting to Rs. 3,34,448/- as these expenses are already taken into account while calculating net profit 8% of gross receipts as offere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnible from the record, Shri Sanjay Agrawal, a partner of M/s. Sanjay Agrawal, i.e. the assessee firm, in his statement recorded u/s. 131 of the Act on 01.02.2016 after, inter alia, considering the discrepancies in his books of account had agreed to disclose its net profit for A.Y. 2015-16 and A.Y.2016-17 @ 8% of its gross receipts. Thereafter, the assessee firm had e-filed its return of income for A.Y.2015-16 on 29.03.2016, declaring an income of Rs. 2,53,93,900/-. The case of the assessee firm was selected for limited scrutiny u/s. 143(2) of the Act. 6. During the course of the assessment proceedings, the A.O directed the assessee to reconcile/explain the impounded material vis-a-vis its books of accounts. In reply, it was submitted by the assessee firm that due to its inability to explain the contents of the impounded loose papers/material it had in the course of survey proceedings agreed to disclose its income @8% of the gross receipts, i.e., as was so done in the assessment framed in its case pursuant to search for A.Y. 2005-06 to A.Y. 2011-12. Accordingly, the assessee firm had failed to come forth with any specific comment as regards the loose papers/documents impounded duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for A.Y.2013-14 was determined @ 8% of its gross receipts vide his order passed u/s. 143(3) of the Act dated 19.12.2017 by losing sight of the fact that such estimation of income had thereafter been vacated by the Tribunal vide its order passed in ITA No.82/RPR/2018 dated 09.06.2022; (IV) that the A.O while estimating the income of the assessee firm had failed to place on record a comparable case of any similarly placed assessee; (V) that the A.O had not referred to any incriminating material/documents impounded during the survey proceedings which would evidence suppression of profit by the assessee firm; (VI) that the A.O had grossly erred in making addition in the hands of the assessee firm by acting upon the retracted statement of the partner that was recorded u/s. 131 of the Act; AND (VII) that now when the A.O while framing assessment in the case of the assessee firm in A.Y.2016-17 had accepted its net profit @ 2.19%, therefore, there was no justification for him to have drawn any adverse inference as regards the higher NP @ 2.90% that was disclosed by the assessee firm during the year under consideration, i.e. A.Y.2015-16. The Ld. AR based on his aforesaid contentions, submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erits of the case, based on which he had tried to support the order of the CIT(Appeals). 12. Apropos the claim of the Ld. AR that the A.O in absence of pointing out any specific defect in its duly audited books of accounts, had grossly erred in rejecting the same under sub-section (3) to Section 145 of the Act, we are unable to concur with the same. Although it is a matter of fact borne from record that the A.O had failed to point out any specific defect in the books of account of the assessee firm, but we cannot remain oblivion of the fact that the partner of the assessee firm, viz. Shri Sanjay Agrawal after admitting the discrepancies in the books of account of the assessee firm had agreed to disclose its income @ 8% of its gross receipts for A.Y. 2015-16 and A.Y. 2016-17. Apart from that, the assessee firm in the course of the assessment proceedings on being called upon by the A.O to reconcile/explain the contents of the impounded material vis- -vis its books of account, had categorically stated that as it was not in a position to offer specific comments w.r.t. contents of the loose papers/documents impounded during the course of survey proceedings, therefore, it had agreed to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arges, recoveries by way of invocation of hank guarantee, depreciation, partner's remuneration and interest and that the firm shall not agitate the assessment so concluded in appeal or otherwise with a request that no penalty or prosecution proceedings under any provision a the Income Tax Act, 1961 or under any other law for the time being in force, shall be initiated against the firm or any of its partners and also subject to-the condition that the assessment so concluded shall subsume the effect of impounded materials in entirety and no proceedings against the firm or its partners or any other family member of the partners named in the impounded material shall he initiated with reference to the contents of the impounded material and that the impounded material shall be released within a. reasonable time of one month after the conclusion of assessment proceedings as the impounded material contains original title deeds of the immovable properties urgently required by the concerned persons. It is declared that the firm reserves the right to file appeal only if it is found that the assessment has been completed without considering the aforesaid concerns or in disregard to the afo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the returned income of the assessee firm for A.Y.2016-17 worked out @ 2.19% of its gross receipts, which had been accepted by the A.O. On a careful perusal of the assessment order of the assessee firm for A.Y. 2016-17, we find that the A.O while framing the assessment had acted upon the directions received from the Addl. CIT, Range-1, Raipur u/s.144A of the Act. 15. As observed by us herein above, the A.O after rejecting books of account of the assessee firm remained under statutory obligation to have estimated its income on some logical basis. Ostensibly, the A.O had estimated the income of the assessee firm based on the offer made by him in the course of survey proceedings/ assessment proceedings, i.e. @8% of its gross receipts against which certain deduction of expenses had been allowed but the said process of estimation does not find favour with us for two-fold reasons, viz. (i) that as observed by the CIT(Appeals), now when the partner of the assessee firm had retracted his statement that was recorded by the A.O u/s. 131 of the Act dated 01.02.2016, therefore, his offer for the year under consideration that the income of the assessee firm would be disclosed @8% of its gross re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforementioned five preceding years/succeeding years which had been assessed u/s. 143(3) of the Act, no adverse inference on the said count was called for in its case. 16. Having given a thoughtful consideration to the aforesaid contention of the Ld. AR, we principally concur with him. Admittedly, the A.O after rejecting the books of account of the assessee firm u/s. 145(3) of the Act ought to have estimated its income on some logical basis. As the income of the assessee firm for the aforementioned five preceding and succeeding years had been framed u/s. 143(3) of the Act, therefore, we are of the view that the average NP rate of the aforementioned years can safely be adopted as a yardstick for estimating its income for the year under consideration. Our aforesaid view is supported by the judgment off the Hon ble High Court of Allahabad in the case of Dr. Prabhu Dayal Yadav Vs. Commissioner of Income Tax (2018) 253 Taxman 191 (Allahabad). The Hon ble High Court while disposing off the appeal for A.Y.2003-04 of the assessee before them, had observed, that as income disclosed by the assessee during the year before them was similar or comparable to the income which the department had ..... X X X X Extracts X X X X X X X X Extracts X X X X
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