2021 (9) TMI 1203 - AT - Income Tax

Rejection of books of account - Computation of the income by invoking provisions of section 145(3) - as per CIT-A AO is justified in rejecting the book results and computing the income by invoking provisions of section 145(3) - HELD THAT - We find no infirmity in the action of the CIT(A) in confirming the order of the AO by holding that appellant did not produce any convincing explanation with regard to non-production of all the material required for the purpose computation of income. Therefore, we confirm the order of the CIT(A) and dismiss the grounds raised by the assessee on this issue. Rejecting the loss claimed - HELD THAT - CIT(A)'s reasoning by considering the reconstructed trading account is proper and we do not find any reason to interfere with decision of CIT(A). Accordingly, we uphold the order of the CIT(A) and dismiss the ground. Addition made towards income on speculative business - CIT(A) deleted the same observing that since the said amount already brought into the constructed trading account and decided to ignore the resultant loss, the question with regard to head of that income is only academic interest - HELD THAT - We are in agreement with the CIT(A)'s observations and, therefore, the ground raised by the revenue is dismissed on this issue.

Summary

Issues involved:
1. Rejection of book results and computation of income under section 145(3) of the Income-Tax Act, 1961.
2. Disallowance of loss claimed by the appellant.
3. Treatment of income from other sources as income from speculation business.

Detailed Analysis:
1. The primary issue in this case revolved around the rejection of book results by the assessing officer and the subsequent computation of income under section 145(3) of the Income-Tax Act, 1961. The assessing officer rejected the book results and estimated the income from business at 2% of revenue from operations, resulting in a significant difference from the loss declared by the assessee. The CIT(A) partly allowed the appeal, emphasizing the need for a judicious and reasonable estimation of income. The reconstructed trading account was analyzed, and it was concluded that certain expenses could be disallowed, leading to a revised total income calculation. Both the assessee and the revenue appealed against the CIT(A)'s decision, raising various grounds challenging the rejection of book results and the computation of income.

2. Another crucial issue was the disallowance of the loss claimed by the appellant. The CIT(A) reviewed the reconstructed trading account and determined that certain expenditures lacked complete supporting evidence. Consequently, a disallowance of the loss claimed was deemed necessary to meet the ends of justice. The appellant contested this decision, arguing that the CIT(A) erred in rejecting the claimed loss. However, the tribunal upheld the CIT(A)'s decision, stating that the reasoning behind considering the reconstructed trading account was appropriate.

3. The treatment of income from other sources as income from speculation business was also a point of contention in the case. The CIT(A) dismissed the issue as academic interest since the amount in question had already been factored into the reconstructed trading account. Both the assessee and the revenue raised grounds related to this treatment, but the tribunal concurred with the CIT(A)'s observations and dismissed the revenue's appeal on this matter.

In conclusion, the tribunal dismissed both the appeals of the assessee and the revenue, upholding the decisions made by the CIT(A) regarding the rejection of book results, disallowance of claimed loss, and treatment of income from other sources. The judgment emphasized the need for producing complete and convincing evidence in response to assessment notices and upheld the principles of judicious estimation of income under the Income-Tax Act, 1961.