TMI Blog2015 (9) TMI 447X X X X Extracts X X X X X X X X Extracts X X X X ..... the scope of assessment expands to the original jurisdiction as well as jurisdiction conferred u/s.153A and in other words, the A.O may conclude the assessment based on the findings of the search and also on the basis of any material existing or brought on record of the A.O. In view of the above, the ground raised in this regard is not entertained. - Decided against assessee. Approval of the Joint Commissioner as mandated u/s. 153D is absent and hence the assessment is bad in law as per assessee - Held that:- It is not clear whether the appellant literally means that under the provisions of section 153D prior approval of the Jt. Commissioner is required, whereas in this case prior approval of the Addl. Commissioner of Income Tax is obtained. It is relevant to mention that Section 2(28C) of the Act defines the Jt. Commissioner as a person appointed to be Joint Commissioner of Income-tax or an Addl. Commissioner of Income-tax under sub section 1 of section 117 of the Act. In view of the above, the ground of appellant is hereby dismissed. - Decided against assessee. - ITA Nos.3163 to 3168/Mum/2015 - - - Dated:- 25-8-2015 - SHRI R.C.SHARMA,J. For The Assessee : Shri Satish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case the appellant submits that the order passed by the Learned CIT(A) is bad in law as the. said order is passed against the principles' of natural justice. (ii) The assessment are made on assumption basis is not based on facts and is bad in law. (iii) The appellant further craves leave to add, alter or amend his Grounds of Appeal during the course of appeal. 3. Briefly stated the facts of the case are that the assessee is a firm constituted of three partners being Mr. Subhash Deshmukh, Mrs. Anu Wadhawani and Mrs. Lata Deshmukh. This firm runs a wine shop under the name and style of M/s La Sonia Wines. There was search and seizure action u/s 132 of the Act was conducted in the case of Shri Subhash Deshmukh and his other group companies alongwith the residential premises on 28.03.2011 and on subsequent dates. During the course of search proceedings, disclosure of ₹ 75,00,000/- was made by the assessee, though no warrant was issued in the name of the appellant. Notice u/s 153C of the Act was issued on 15.06.2012 requiring the assessee to file the return of income for all the six assessment years. In response to notice u/s 153C of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 009-10 2010-11 2011-12 Sales 11289203 14822740 16511490 15941080 19494500 23304050 24133710 Net profit 139512 148484 226753 165350 300616 169896 7778760 Net profit as %of sales 1.23 1.00 1.37 1.03 1.54 0.72 32.23 5.2 The AO mentioned that the assessee offered additional income in the year of search only. Hence, it cannot be said that there was no suppression of income in the preceding years. It is mentioned that the assessee could not explain the drastic variation in net profit rate. It is mentioned that Section 44AF also envisages a profit rate of 5% on turnover in the retail trade cases referred therein. The AO mentioned that considering the fact that the sales are not verifiable, it will not be unreasonable to compute the profits at the rate of 5% of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raja Shree Umed Mills 192 ITR 565- (Raj.). The said view was followed by the Hon'ble Tribunal in Mewar Textile Mills 64 TT J (Jp.) 502. 3) It is submitted that the assessee is subjected to tax audit and when no infirmities are pointed out in the audit, there is no warrant to make an addition for N.P. rate on the basis of conjectures surmises. As held by the Hon'ble jurisdictional High Court, the books of account have to be accepted unless, on verification, they disclosed any faults or defects, which cannot be reasonably and satisfactorily explained by the assessee {See: R. B. Jessaram Fatehchand 75 ITR 33 (Bom.)}. 4) It is submitted that the Ld. AO failed to bring on record any comparative instances of profit rate so as to justify the addition. Further, it is settled position that profit rate addition can only be made on the basis of the assessee's own figures and that too for earlier years and not subsequent years. 5) The appellant further submits that the assumption of 5% net profit is only in the case where the conditions of Section 44AF of the Act are satisfied. In the case of the appellant since the turnover is above 40 lacs the provisions of Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for the assessment year 2011-12. 5.5 Further the assessee raised the ground that the AO did not reject books of account and in spite of that he took 5% profit on turn over. The assessee further mentioned that books of accounts were properly maintained u/s.44AA and audited u/s.44AB. When this ground was raised before the ld. CIT(A), he mentioned as under :- 8.4 In the case of the appellant the AO did not use the word the books of account are rejected , however, he proceeded to estimate the income at reasonable net profit rate, based upon the higher net profit rate disclosed by the appellant for the assessment year 2011-12 consequent to the findings in the search. The very fact that the AO had proceeded to estimate the income which is different from the income as shown in the books of account, by itself indicates, that the AO had not relied upon the results of the books of account but on the contrary estimated the income based upon the material available on record. Though the word rejection of the books of account was not used by the AO but his action ultimately means that the books of account have been rejected. Even if it is assumed that the AO failed to reject the boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the above section, rejection of books of accounts is necessary by the AO, if he decides to adopt other profit percentage and further as per Section 145(3), assessment under that situation has to be made u/s.144 only. Further for the rejection of books of accounts, books of account have to be examined and a specific defect u/s.145(3) has to be pointed out. 5.8 It is surprising that the AO did not reject books of account and the ld. CIT(A) rejected it without verifying the books of accounts. By simply mentioning that I reject the books of account , it cannot be rejected. 5.9 We have considered these grounds carefully. We are of the considered opinion that neither the AO nor the CIT(A) examined the books of accounts. Both of them did not pin point any defects in the books of account. Further selling its products in cash is not against the law. A different percentage of profit cannot be adopted only because the assessee makes cash sale. We, therefore, delete the addition made by the AO. These grounds of the assessee are allowed. 6.1 In regard to Ground No.3, the assessee contended that the addition made by the AO is bad in law as no incriminating material was found durin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 (1) of the Act, the assessment made u/s.153A of the Act for the first time, the issue of change of opinion does not arise. It appears that in the case of appellant no assessment was completed either u/s.143 (3) or u/s.147 or under any other provisions of the Act except processing of the return of income u/s.139 (1) of the Act. Since no assessment was made in this case for the assessment years 2005-06 to 2010-11 prior to the assessment u/s.153C of the Act which is the first assessment for the years under consideration, the scope of assessment expands to the original jurisdiction as well as jurisdiction conferred u/s.153A and in other words, the A.O may conclude the assessment based on the findings of the search and also on the basis of any material existing or brought on record of the A.O. In view of the above, the ground raised in this regard is not entertained. 6.3. We do not want to interfere with the findings of the ld. CIT(A) and accordingly, this ground of assessee is dismissed. 7.1. In regard to Ground No.4, assessee contended that the approval of the Joint Commissioner, as mandated u/s. 153D is absent and hence the assessment is bad in law. It was further submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X
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