TMI Blog2014 (10) TMI 173X X X X Extracts X X X X X X X X Extracts X X X X ..... situation - the only addition made by the AO by estimating the sales of the assessee and by applying net profit rate of 2.5% whereas in the reasons recorded by the AO for reopening the assessment, the basis of reopening was that in course of search conducted by CBI, cash of around ₹ 79.95 lac and FDR of ₹ 74 lac were found – there was no reason to interfere in the order of CIT(A) – Decided against revenue. Undisclosed investment in FDRs – Held that:- The assessment was completed by the AO u/s 143(3)/144 of the Act because required evidences were not produced by the assessee before the AO in spite of providing sufficient opportunities - CIT(A) has estimated the net profit rate at 0.8% on the basis of profit rate of earlier years i.e. AY 2007-08, 2008-09 and 2009-10 but CIT(A) has not obtained any remand report and the matter should go to CIT(A) for a fresh decision after obtaining remand report from the AO - the order of CIT(A) is set aside and the matter is remitted back to the AO for fresh adjudication – Decided in favour of revenue. Estimation of net profit from business – Applicability of section 44AF – Addition u/s 68 - Held that:- The CIT(A) has decided the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x that has escaped assessment and while computing the assessment, no addition for income escaping assessment has been made and therefore the AO ceased to have jurisdiction to proceed with the reassessment and thereby allowing relief to the assessee. 2. That the Id. CIT(A)-II, Lucknow has erred on facts and circumstances of the case and in law by not appreciating the facts and material on record and observing that reasons (recorded for reassessment) give rise to conjectures and surmises in so far as income escaping assessment has not been identified by the AO. 3. That the AO was justified in estimating gross sales/turnover of the assessee for the year under consideration as the source of cash and FDRs had a certain and definite nexus with his business and it consonance with the reasons recorded by the AO. 4. The Ld. CIT(A)-II, Lucknow has allowed relief completely ignoring the fact that the CBI's search in assessee's premises was in connection with investigations relating to diversion and illegal sale of foodgrains meant for distribution under various schemes to poor/Public distribution System etc. During the course of assessment proceedings the assessee could not i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... caped assessment and while completing the assessment, no addition for any income escaping assessment has been made. The addition made is in respect of estimation of income by rejecting the books of accounts. Applying the decisions of Hon'ble Bombay High Court and Hon'ble Delhi High Court supra I am of the opinion that once the AO accepts the objection of the assessee and does not assess the income which was the basis of the notice, it is not open to him to assess income under some other issue independently. In view of above, the addition of ₹ 18,43,787/- made by the AO is deleted as the reasons for which the notice was issued were not correct, and therefore the AO ceased to have jurisdiction to proceed with the reassessment. The appellant gets relief accordingly. 5.1 From the above Para from the order of CIT(A), we find that a clear finding is given by the CIT(A) that no addition was made by the Assessing Officer for any income escaping assessment as has been alleged in the reasons recorded by the Assessing Officer for reopening. He has also given a finding that the addition was made in respect of estimation of income by rejecting the books of account. He has foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of foodgrains from farmers etc. are also not possessed by the assessee. All these material leads to strengthen the suspicion that the assessee illegally purchased foodgrains (belonging to various schemes for poor/Public Distribution System etc.) from unknown sources (under investigation by CBI). Prima facie the cases relied by the Ld. CIT(A)-II, Lucknow are not comparable and they pertain to normal business conditions when the assessee has earned extra profit margin by adopting and using unfair and illegal business practices. 3. That the Ld. CIT(A)-II, Lucknow has erred on facts and circumstances of the case and in law by applying the ratio of case law of the Hon'ble ITAT, Lucknow in the case of M/s Tej Pratap Singh Vs.ITO in ITA No 330/L/2009 dated: 30.10.2009 as the facts of this case different than the case cited and there was no past history of the assessee to be taken into account and all past cases of the assessee were completed u/s 143(1) of the Income Tax Act, 1961. Besides, the Id. CIT(A)-II, Lucknow has assigned no reasons as to why he is not accepting his own judgment in appeal no. 11/112/ITO/Gonda/LKO/11-12 dated 07.09.2012 in the case of Sri Ram Lallan Shukla, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mation of net profit from the business. 2. That the Ld. CIT(A)-II, Lucknow has erred on facts and circumstances of the case and in law by observing that provisions of section 44AF of the Income Tax Act, 1961 are squarely applicable in the case of respondent when the respondent itself disclosed its net profit from the P L A/c. The AO was therefore justified in estimating the net profit. 3. That the Ld. CIT(A)-II, Lucknow has erred on facts and circumstances of the case and in law by deleting the addition of ₹ 1,00,000/- made by the A.O. on account of fresh capital introduced and observing that the capital introduced was out of the cash available as cash in hand in the personal consolidated balance sheet. 4. That the Id. CIT(A)-II, Lucknow has erred on facts and circumstances of the case and in law by deleting the addition of ₹ 10,50,000/- on account of cash deposit on 11.03.2011 and 22.03.2011 as the same is out of cash available as per cash book and by accepting the fresh submission made by the respondent that ₹ 1,91,930/- out of the total cash deposits is from maturity of a life insurance policy from ICICI prudential without asking for a remand report in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decided the issue without obtaining any remand report from the Assessing Officer. We also find that an addition of ₹ 12,50,801/- was made by the Assessing Officer u/s 68 of the Act. The CIT(A) has held that the Assessing Officer is not justified in invoking the provisions of section 68 of the Act because the amount was found credited in the bank account of the assessee and not in the books of account of the assessee. He has also noted that the nature and source of deposit in the bank account of the assessee is to be examined with reference to section 69 of the Act. Thereafter, CIT(A) has noted various dates of deposit of amount in the bank account. Thereafter he has given a finding that the assessee received maturity proceeds of ₹ 1,91,930/- from ICICI Prudential Life Insurance in respect of investment of ₹ 50,000/- each in three financial years i.e. assessment year 2004-05, 2005-06 and 2006-07. Admittedly, these facts were never brought by the assessee before the Assessing Officer. The CIT(A) has also noted that the assessee has filed extract of cash book maintained for its business activities and he has given a finding that the deposits in the bank account are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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