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2016 (3) TMI 184 - KARNATAKA HIGH COURT

2016 (3) TMI 184 - KARNATAKA HIGH COURT - [2016] 386 ITR 702 - Trading addition - non rejection of books of accounts - ITAT deleted the addition - Held that:- Tribunal has rightly held that when the books of accounts of the assessee had not been rejected and assessment having not been framed under section 144 of the Income Tax Act the said authorities were in error in resorting to an estimation of income and such exercise undertaken by them was not sustainable. Section 145(3) of the Act lays dow .....

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, when the books of accounts are maintained by the assessee in accordance with the system of accounting, in the regular course of his business, same would form the basis for computation of income. In the instant case it is noticed that neither the Assessing Officer nor CIT(Appeals) have rejected the books of accounts maintained by the assessee in the course of the business. As such tribunal has rightly rejected or set aside the partial addition made by Assessing Officer for arriving at gross pro .....

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Appellate Tribunal, Bengaluru Bench in ITA No.986/Bang/2011 and ITA No.956/Bang/2011 dated 30.01.2014 whereunder appeal filed by the revenue is partly allowed and the appeal filed by the assessee came to be allowed. 2. Assessee is a partnership firm carrying on the business as cotton merchants and commission agents. For the Assessment year 2006-07 assessee filed its return of income on 24.10.2007 declaring the total income as Nil. On such return being selected for scrutiny assessment order came .....

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l income of the assessee out of total sundry creditors. In the course of the assessment proceedings assessing officer noticed that the gross profit declared by the assessee for the earlier assessment years and the present assessment year were at variance and as such the gross profit was adopted at 4% of the total turnover. 3. Being aggrieved by this order assessee preferred an appeal before CIT(Appeals). The appellate authority during the course of proceedings called for remand report from the A .....

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ction 44AB. It was also held that since the assessee had discharged his initial burden the Assessing Officer had not brought on record to show that these outstanding balances are not genuine. Hence, he disallowed the addition of ₹ 3,60,00,000/- made by the Assessing Officer and deleted the said addition. On the issue of Gross Profit adopted by the Assessing Officer at 4% it came to be held that assessee had maintained regular books of accounts and also stock register which are duly audited .....

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nd modification of the same by the CIT(Appeals) was erroneous. Assessee in ITA No.956/Bang/2011 contended that CIT(Appeals) erred in sustaining the gross profit addition to an extent of ₹ 5,99,101/-. The appellate Tribunal after considering the rival contentions by order dated 30.01.2014 allowed the appeal of the assessee and deleted the addition of ₹ 5,99,101/- made by CIT(Appeals) on the issue of gross profit. On the issue of sundry creditors the tribunal held that in the remand re .....

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the tribunal. Hence, these two appeals have been preferred by the revenue. 5. We have heard Sri.Ameet Kumar Deshpande, learned standing counsel appearing for the appellants and Sri.V.Chandrashekar, learned counsel appearing for the respondent-assessee. 6. It is the contention of Sri.Ameet Kumar Deshpande that Assessing Officer had issued notices to various creditors but no reply had been received and as such the burden was on the assessee to produce his creditors and discharge the onus. He woul .....

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fication which would in itself is a discrepancy justifying the addition. On these grounds he contends that the substantial questions of law is to be framed, adjudicated and answered. 7. Per contra, Sri.V.Chandrashekar, learned counsel appearing for respondent would support the order of the tribunal and contends that findings recorded by the tribunal are all questions of fact and there is no substantial questions of law involved in these appeals and he prays for rejection of the appeals. 8. Havin .....

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ts in its books and evidence in the form of bank account extracts to demonstrate that payments were made through bank account only. It was also held that assessee had maintained regular books of accounts and they were subjected to audit under section 44AB. However, the tribunal while reappreciating the evidence tendered by assessee had called for remand report from the Assessing Officer and on receipt of such remand report the sundry creditors were categorized under three categories namely; 1. W .....

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e was no dispute since the Assessing Officer himself had accepted that these creditors were genuine. Insofar as Annexure-B sundry creditors are concerned it came to be held that Assessing Officer had not issued summons under section 131 of the Act to compel their attendance and there was no break up in the remand report as to which of the creditors were served but not replied or on whom it was not served. In the factual background discussed in detail by the tribunal at paragraph 11 the said issu .....

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By reserving liberty to file any other supporting evidence to substantiate its case the issue came to be remanded by the tribunal to the Assessing Officer. 10. The facts as discussed hereinabove would clearly indicate that these are purely questions of fact and does not involve substantial question of law. 11. Insofar as the estimation of gross profit made by the Assessing Officer modified by the CIT(Appeals), tribunal has rightly held that when the books of accounts of the assessee had not bee .....

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