2017 (2) TMI 907 - AT - Income Tax

Estimation of net profit - rejection of books accounts - Held that - Books of accounts of the assessee are audited and no particular defects were pointed out by the Ld. assessing officer which is patent and glaring. In fact he has also sustained the addition of Rs. 1 lakh for the reason that assessee has not been able to produce the stock register for diamond and stones and other minor shortcomings as mentioned in his order. The Ld. departmental representative could not point out any infirmity in the order of the Ld. Ld. 1st appellate authority. Therefore we confirm the finding of the Ld. CIT (A) in deleting the addition on account of rejection of the books of accounts by the Ld. and assessing officer and estimating the net profit. - Decided against revenue. Addition on account of the sundry creditors - Held that - CIT(A) deleted the addition when the assessee has submitted the confirmation of the sundry creditors which were duly submitted before the Ld. assessing officer during the assessment proceedings and further submitting the copies of invoices and bills for purchase from the creditors to prove the genuineness of the transactions. The assessee also produced confirmation for payments made to some of the creditors and legal notices issued by the some of the sundry creditors towards outstanding amounts and therefore there was no cessation of any liability and nothing has been written off in the books of accounts. The Ld. departmental representative could not point out any infirmity in the order of the first appellate authority in deleting the above addition. Therefore we confirm the order of the Ld. at first appellate authority in deleting the addition on account of the sundry creditors. Addition on account of unaccounted sales - Held that - CIT appeal has deleted the addition because the difference in the account has arisen due to the one transaction of 5.820 grms of the gold of Rs. 3893850/- which is wrongly shown by the party as sales instead of being accounted for issue of finished job material. For this reason the confirmation from the supplier was also submitted along with the copy of the challan and receipt vouchers as well as the labour bill for job done which had been duly forwarded to the AO during the remand proceedings AO has not made any adverse comment on the basis of any independent enquiry verification in this regard. The assessing officer has rejected the confirmation stating that it is an afterthought. The Ld. departmental representative could not point out any infirmity in the order of the Ld. CIT appeal who has deleted the above addition on the basis of the confirmation and no other adverse material brought on record by the Ld. Assessing officer. In view of this we do not find any infirmity in the order of the Ld. CIT appeal in deleting the addition. Addition on account of unaccounted purchases - Held that - As the opening stock is supported by the books of accounts and stock register which are been produced and examine by the Ld. assessing officer which has not been controlled by the Ld. assessing officer either in the assessment order or in the remand reports. No infirmity could be pointed out by the Ld. departmental representative in the order of the Ld. first appellate authority in deleting the above addition.

Summary

Issues Involved:
1. Deletion of addition on account of estimated net profit.
2. Deletion of addition on account of sundry creditors.
3. Deletion of addition on account of unaccounted sales.
4. Deletion of addition on account of unaccounted purchases.
5. Admission of additional ground by the revenue regarding the admission of additional evidence by CIT(A).

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Estimated Net Profit:
The revenue contested the deletion of Rs. 5,23,525/- added as estimated net profit due to the assessee's failure to produce complete books of accounts during the assessment and remand proceedings. The CIT(A) deleted the addition, noting that the assessee produced books of accounts and stock registers except for the stock register for diamonds/stones. The CIT(A) found no valid material defect in the books of accounts and stated that the estimation of net profit by the AO was arbitrary. However, an addition of Rs. 1,00,000/- was sustained due to minor shortcomings. The ITAT upheld the CIT(A)'s decision, confirming that the deletion of Rs. 5,23,525/- was justified as the books of accounts were audited and no significant defects were pointed out by the AO.

2. Deletion of Addition on Account of Sundry Creditors:
The revenue challenged the deletion of Rs. 45,19,950/- added due to the assessee's failure to prove the genuineness of sundry creditors. The CIT(A) deleted the addition, noting that the assessee provided confirmations, invoices, and bills during the remand proceedings, proving the genuineness of the transactions. The CIT(A) found the AO's addition arbitrary and not legally justified. The ITAT upheld the CIT(A)'s decision, confirming that the assessee had discharged its onus of proving the identity, source, and genuineness of the sundry creditors, and the addition was rightly deleted.

3. Deletion of Addition on Account of Unaccounted Sales:
The revenue disputed the deletion of Rs. 35,38,559/- added due to discrepancies in the account of M/s CVM. The AO added the difference between the debit balances in the assessee's and the party's books as unaccounted sales. The CIT(A) deleted the addition, explaining that the discrepancy was due to a transaction wrongly shown as a sale by M/s CVM instead of an issue of finished material for job work. The CIT(A) found the AO's addition unsupported by material findings. The ITAT upheld the CIT(A)'s decision, confirming that the deletion was justified based on the documentary evidence and explanation provided by the assessee.

4. Deletion of Addition on Account of Unaccounted Purchases:
The revenue appealed against the deletion of Rs. 41,41,309/- added due to unaccounted purchases. The AO made the addition based on the opening stock. The CIT(A) deleted the addition, stating that the opening stock was supported by the books of accounts and consistently valued according to the cost or market value, whichever is lower. The ITAT upheld the CIT(A)'s decision, confirming that the deletion was justified as the opening stock was backed by the books of accounts and stock register examined by the AO, who did not controvert the findings.

5. Admission of Additional Ground by the Revenue:
The revenue sought to admit an additional ground regarding the admission of additional evidence by the CIT(A). The CIT(A) had admitted additional evidence after obtaining a remand report from the AO. The ITAT rejected the additional ground, stating that proper opportunity was given to the AO to examine the additional evidence, and the CIT(A) followed the procedure under Rule 46A of the Income Tax Rules, 1962.

Conclusion:
The ITAT dismissed the appeal filed by the revenue, upholding the CIT(A)'s decisions on all grounds. The deletions of additions on account of estimated net profit, sundry creditors, unaccounted sales, and unaccounted purchases were confirmed, and the additional ground raised by the revenue was rejected.