TMI Blog2022 (3) TMI 339X X X X Extracts X X X X X X X X Extracts X X X X ..... d regarding the period between October 1, 2009 to February 3, 2010. We find that the assessee is subjected to sales tax and excise duty and no adverse inference is on record to show that there is any difference between the sales and production figures in the audited accounts of the company. We further find on the basis of identical printout for the assessment years 2008-09 to 2010-11, the AO had raised identical queries for the assessment years 2008-09, 2009-10 and 2010-11. Although, no addition has been made in the assessment years 2008-09 and 2009-10 under identical facts and circumstances, however, we find the Assessing Officer deviated from his earlier stand and made huge addition for the impugned assessment year by rejecting the book results and extrapolating the profit which in our opinion is not justified. Since, the printouts of the hard disc clearly mentioned that forecast and since, the Assessing Officer in the two preceding assessment years has accepted the reply of the assessee and no addition has been made in the order passed under section 143(3) of the Act, therefore, following the rule of consistency, no addition can be made for the impugned assessment year, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Spiral note book (light blue colour) 1-27 4. Original hard disk laptop One 5. Original hard disk laptop One 6. Pen drive One 7. Old laptop One 8. Old laptop One 2.3. During the course of assessment proceedings, the Assessing Officer provided the cloned copy of the hard disk so seized and required the assessee to furnish various details along with explanation of seized material. In reply, vide letter dated December 5, 2011 it was mentioned by the assessee that these hard disk belongs to personal computer of Divya Mehta/Neha Mehta, contains their personal data and does not seem/contain any financial data. . . 2.4. However, the Assessing Officer was not satisfied with the explanation given by the assessee. He noted that this hard disk contains the details of various transactions of the assessee including purchase, sale, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tention in drafting the questionnaire. Your goodself has provided the assessee with annexure HD-1, which is being made as basis for taking adverse inference in the hands of the assessee during the year. Please note that the said papers contain the information of Lepro Forecasts and did not represent the actual amounts. Although your goodself has provided the assessee with the copy of the said documents taken out from the seized pen drive but the assessee has also taken printout from the said seized pen drive which clearly shows that these figures are 'Fore casts' is not appearing the printout provided by you to the assessee, which is matter of record. You are requested to please verify our submissions with the piece of document provided to us was nothing but only 'forecasts'. For your ready reference, we are enclosing the copy of printout taken form pen drive and the copy of the same paper provided to us by your goodself under annexure HD-1. 2.6. It was also submitted by the assessee that while computing the proposed addition/determination of income based on the document/information, the Assessing Officer has not considered the depreciation, lower pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of the assessee at ₹ 11,90,00,210 by computing as under : Net profit for the period April 1, 2007 to September 30, 2007 as per seized material Total Sales through end of September, 2009 ₹ 22,99,26,268 Less : Total manufacturing price (direct cost) through end of Sept, 2009 ₹ 10,07,77,865 Less : Manufacturing and overheads through end of Sept, 2009 ₹ 5,16,98,208 Net profit through end of September, 2009 ₹ 6,27,96,178 Estimated net profit for the next six months = 15,66,18,183*27.31/100 = ₹ 4,27,72,425 Net profit of the assessee for the whole assessment year is computed as under : Net profit for the first six months ₹ 6,27,96,178 Add : Net profit for the next six months ₹ 4,27,72,425 Add : Other income ₹ 3,49,25,342 Total net profit ₹ 14,04,93,9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bharat Mehta cannot be applied adversely in the case of assessee-company, in absence of any satisfaction recorded by the Assessing Officer. 3.2. Based on the arguments advanced by the assessee, the learned Commissioner of Income-tax (Appeals) deleted the addition by observing as under : 12. The other points of ground No. l relates to the veracity of the said document/information, which is claimed by the appellants mere forecast, whereas Assessing Officer considered it to be actual trans action and computed the income of the appellant after rejecting books of account under section 145(3) of the Act. This can be broadly categorized into following parts : (a) whether the said information/document recovered from pen drive/hard disk during search from the premises of appellant is a forecast or representing the actual transaction and profitability of the appellant ? (b) whether action of the Assessing Officer for rejection of books of account under section 145(3) of the Act is in accordance with law and applicable to the facts of this case ? (c) whether the Assessing Officer is correct in not accepting the trading results disclosed by the appellant which is com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to explain the entries recorded in the extracts taken from the seized hard disc. It has also not been explained as to what basis this forecast has been recorded in the computer hard disc. It is very common fact that to forecast any data, the basis data is must. In this case no such basis data was found to be recorded.' 13.2 With regard to its submission, disputing additions on a single document, the appellant company placed reliance on various case law, mentioned in its submission quoted earlier, in following cases : (i) Sahitya Housing Pvt. Ltd. v. Dy. CIT (I. T. A. No. 246/ Hyd/ 2011, dated January 24, 2014) (ITAT Hyderabad) (ii) Dy. CIT v. C. Krishna Yadav [2011] 12 taxmann.com 4 (Hyd) (iii) In the case of Asst. CIT v. Satyapal Wassan [2007] 295 ITR (A. T.) 352 (Jabalpur) (iv) In the case of CIT v. Khazan Singh and Bros. [2008] 304 ITR 243 (P H) (v) In the case of Harish Daulatram Innani v. Dy. CIT (lnv) [2008] 24 SOT 541 (Mum) (vi) In the case of CIT v. Maulikkumar K. Shah [2008] 307 ITR 137 (Guj) (vii) Dy. CIT v. M. Aja Bahu (I. T. A. Nos 1755, 1756 and 1757/ Hyd/2012)(ITAT Hyderabad Bench) (viii) CIT v. Dinesh Jain (HUF) [20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ides true picture of the profitability of the appellant, adopted the figure of ₹ 6,27,96,178 as profit for the period April 1, 2009 to September 30, 2009 and estimated net profit for next six months, extrapolating the profit percentage, with reference to the sales made between October 1, 2009 to March 31, 2010 which comes to ₹ 4,27,72,425. Accordingly, after considering the other income and decrease in the value of stock, total income is determined at ₹ 11,90,00,214. 13.6 It is observed that no enquiry has been conducted with Sh. Bharat Mehta to find out the reason for difference between the cost mentioned in the document vis-a-vis the expenditure claimed as per the books of account. It is a case of search but no other incriminating or corroborative documents were shown to have been found to establish that expenditure mentioned in seized document is true and correct. No purchase bills or bills of expenditure recovered to be said to be bogus or inflated. No cash, investment or any asset has been found to be belonging to the appellant to show as outcome of such inflation of expenditure or generation of unaccounted income. Had there been inflation in expenses or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e date of search and only applied the figure for 6 month's based on the disputed document and extrapolated the same. The Assessing Officer has not disputed the figures of sale, closing stock and production details of appellant which is subjected to sales tax and excise rules especially when major sales are towards the exports. The profitability in the preceding years in the case of appellant has not been considered. The addition has been made only on the basis of certain figures/information found from the premises of appellant-company, having its name but without any further evidence, when it is claimed to be a forecast by the appellant. 13.10 In view of the above discussions and also following various judgments, submitted during the course of appeal, it is held that the action of the Assessing Officer, treating seized document as correct and true is misplaced and not acceptable. 14. The other issue regarding rejection of books of account, it has been submitted by the appellant that the Assessing Officer has made assessment on estimate basis by rejecting books of account of the appellant under section 145(3) of the Act. It has been observed that the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd judicial pronouncements quoted, the action of the Assessing Officer to reject the books of account even without having examined the same is not found in order. Therefore, it is held that the rejection of books of account is unlawful, without application of the correct position of law as emanating from the quoted case law. 15. As discussed earlier the addition on stand alone disputed document and rejection of books of account by the Assessing Officer is not found in order, therefore other issues such as correctness of adoption of estimated income and its comparability with the case of appellant in earlier years and with similar business entities, gains lesser importance. However since the matter has been raised by the appellant, it is found appropriate to address those issues also. 15.1 The assessment has been made under section 153A of the Act in the hands of appellant for the assessment years 2004-05 to 2009- 10. The return income of appellant has been accepted in all such years meaning thereby the trading results as well as gross profit and net profit has been accepted by the assessing authority. In this regard the details of assessment of various years has been prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellate proceedings it was further agitated by the appellant that it has made reference under section 144A of the Act for the assessment years 2008-09, 2009-10 and 2010-11, before the Additional Commissioner of Income-tax, Range-5, New Delhi, upon receiving the show-cause notices. The show-cause notices for all three years are based on the similar type of document as discussed in this order, providing forecast for the different periods and not in sync with the audited accounts of the company. It was mentioned by the appellant that no such order under section 144A of the Act by the Additional Commissioner of Income-tax Range-5, disposing the application of appellant has been received. However, no additions have been made for the assessment years 2008-09 and 2009-10 on the similar facts but for the current assessment year i.e., 2010-11 the additions have been made. It is contended that since no additions were made in the assessment year 2008-09 and 2009-10 following the directions of Additional Commissioner of Income-tax under section 144A, the Assessing Officer was not justified to make the addition for the assessment year 2010-11 under appeal. 17.1 As mentioned earlier, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peals) has erred in law and on facts in holding that the Assessing Officer rejected books of account without examining books of account and thus rejection is unlawful whereas the learned Commissioner of Income-tax (Appeals) failed to appreciate that the Assessing Officer compared the actual figures given in books of account and as submitted by the assessee with the figures mentioned in the printouts of pen drive (refer page Nos. 12 and 13 and Annexure ES-1 of assessment order) before rejecting books of account. 4. That the order of the Commissioner of Income-tax (Appeals) is perverse, erroneous and is not tenable on facts and in law. 5. That the grounds of appeal are without prejudice to each other. 6. That the appellant craves leave to add, amend, alter or forgo any ground(s) of appeal either before or at the time of hearing of the appeal. 5. The learned Departmental representative strongly challenged the order of the learned Commissioner of Income-tax (Appeals) in deleting the addition made by the Assessing Officer. He submitted that the Assessing Officer had clearly brought on record that the figures of sales submitted by the assessee during the course of as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee to the notice issued by the Assessing Officer for the assessment year 2010- 11. Referring to page 222 of the paper book, he drew the attention of the Bench to the application dated December 22, 2011 for direction under section 144A of the Act for the assessment year 2010-11 filed before the Additional Commissioner of Income-tax. Referring to pages 163 of the paper book, he drew the attention of the Bench to the application dated December 22, 2011 for direction under section 144A of the Act, filed before the Additional Commissioner of Income-tax for the assessment year 2008- 09. Referring to the copy of assessment order for the assessment year 2009- 10, he submitted that the Assessing Officer has passed the order without making any addition. However, the Assessing Officer deviated from the stand taken for the assessment years 2008-09 and 2009-10 and made huge addition during the year by rejecting the book results and estimating the profit which is not justified. Referring to the following decisions, he submitted that in view of rule of consistency, the addition made by the Assessing Officer is not justified and the learned Commissioner of Income- tax (Appeals) has rightly del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... although, it is a case of search but no other incriminating or corroborative documents were found to establish that expenditure mentioned in seized document is true and correct. We find no purchase bills or bills of expenditure recovered to be said to be bogus or inflated. No cash, investment or any other asset has been found to be belonging to the assessee to show as outcome of such inflation of expenditure or generation of unaccounted income. We find merit in the finding of the learned Commissioner of Income-tax (Appeals) that had there been inflation in expenses or bogus/inflated purchases, then it should have been found during the search proceedings. Further, although, search action took place on February 4, 2010 however, the Assessing Officer has only taken the figure up to September, 2009 and nothing has been mentioned regarding the period between October 1, 2009 to February 3, 2010. 10.1 We find that the assessee is subjected to sales tax and excise duty and no adverse inference is on record to show that there is any difference between the sales and production figures in the audited accounts of the company. We further find on the basis of identical printout for the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e enough that subsequent light or ingenuity might suggest some traverse which had not been taken.' 30. Reference was also made to Parashuram Pottery Works Co. Ltd. v. ITO [1977] 106 ITR 1 (SC) and then it was held (page 329 of 193 ITR): 'We are aware of the fact that strictly speaking res judicata does not apply to Income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. On these reasonings in the absence of any material change justifying the Revenue to take a different view of the matter - and if there was no change it was in support of the assessee - we do not think the question should have been reopened and contrary to what had been decided by the Commissioner of Income-tax in the earlier proceedings, a different and contradictory stand should have been taken.' 31. It appears ..... X X X X Extracts X X X X X X X X Extracts X X X X
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