TMI Blog2015 (5) TMI 1191X X X X Extracts X X X X X X X X Extracts X X X X ..... , however, does not find reflection in the assessee s balance sheet as at that date, while those that do (from five parties) are very old, so that the A.O. had failed to, and which he was duty bound to, carry verification as to the genuineness of those liabilities. A failure to make proper enquiry, called for under the circumstances, renders an order per se erroneous insofar as it is prejudicial to the interest of the Revenue. Non inclusion of the income arising by way of miscellaneous sales and royalty - non-verification of unsecured loan/s -A.Y. 2009-10 - HELD THAT:- The rejection of the assessee s accounts does not imply discarding all and every information therein or contents thereof. We have already clarified, on the basis of the decisions by the apex court, that estimation of profit upon rejection of the book results would not preclude addition in respect of unexplained credit/s appearing in those accounts, though there could be reasons for telescoping the two additions. Similarly in Shyam Bihari vs. CIT [ 2012 (8) TMI 420 - PATNA HIGH COURT] has clarified for allowance of depreciation separately. True, the same is a statutory allowance, subject to being allowed even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly arbitrary and based on surmises conjecture only. Hence, the order is liable to be cancelled. [(*) 8%, for A.Y. 2009-10] 2. The only issue; the assessee not pressing it s Gd. 3 for A.Y. 2008-09 during hearing, is toward the non-maintainability of the assumption of jurisdiction u/s.263 in-asmuch as the Assessing Officer (A.O.) had, while framing the impugned assessment/s, correctly not made any addition with regard to unexplained sundry creditors/unsecured loans, as he had, rejecting the assessee s books of account, estimated its assessee s income invoking section 145(3) of the Act. How could he, then, fall back on the same accounts to make an addition u/s.68 of the Act, the ld. AR, the assessee s counsel, would asseverate. Explaining the assessee s case, it was submitted by the ld. Authorized Representative (AR), that the assessee is a contractor, who carried his assessment for A.Y. 2008-09 in appeal. No issue with regard to the credits impugned u/s. 68, or any other, save that of estimation of income, was taken up in appeal by the assessee contesting its assessment for that year before the first appellate authority, and who vide his order dated 21.11.2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y tenable as well. We may clarify this by way of an example. The assessee s books of account disclose an income of ₹ 10 (say) on a turnover of ₹ 100 (say), i.e., disclose a profit rate of 10%. The A.O. estimates the same at 15% (say). The assessee s books, thus, exhibit a total expenditure of ₹ 90/-, i.e., either against the goods consumed or services availed qua the reported turnover. To the extent unpaid, a liability in its respect, being undischarged as at the year-end, would find reflection in the assessee s books as sundry creditors. That is, would arise qua the expenditure claimed (₹ 90/-), which stands excluded in computing the income of ₹ 10/- . The liability (₹ 90/-) and profit (₹ 10/-) components are thus mutually exclusive and distinct. To say, therefore, that no unproved liability could be considered as income under the circumstance of the book results being ignored and income, consequently, estimated, is misconceived. When it is said that the books of account are rejected, it only implies their being found as not reliable for the purpose of determination of income of the relevant business/profession. That does not and could not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to be given due regard and, circumstances admitting, allowed credit for. The onus to establish the existence of such circumstances though would always be on the assessee. It is, thus, wholly incorrect in law to say that there could be no invocation of section 68 where the income is determined u/s. 145(3) r/w section 144. The matter stands also discussed at some length by the tribunal in the case of Sai Construction vs. ITO [2009] 31 DTR 33 (Ctk), again, with reference to the two decisions by the apex court cited supra. No ground for assailing section 263 on this score, thus, obtains. The argument of the A.O. s view being a possible view also would not survive in view of the settled law. The decisions cited before the tribunal, and which moved it, would be also in view thereof be of no avail. In fact, the decision by the apex court in Indore Malwa United Mills (supra) is on another issue; the hon ble court therein only exhorting for consideration of all the relevant materials by the assessing authority, while the decision in Aggarwal Engineering Co. (supra) is rendered without considering and de hors the binding judicial precedents by the apex court cited supra. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) non-verification of unsecured loan/s : ₹ 2,27,000/- Our observations shall apply equally to the issues arising, albeit unaddressed, for this year as well. In this regard, the aspects stated at para 3.2(a) above would require some clarification. The rejection of the assessee s accounts does not imply discarding all and every information therein or contents thereof. We have already clarified, on the basis of the decisions by the apex court, that estimation of profit upon rejection of the book results would not preclude addition in respect of unexplained credit/s appearing in those accounts, though there could be reasons for telescoping the two additions. Similarly, the hon ble high court in Shyam Bihari vs. CIT [2012] 345 ITR 283 (Pat) has clarified for allowance of depreciation separately. True, the same is a statutory allowance, subject to being allowed even where no charge in its respect stands booked in accounts. However, the cost of acquisition or improvement of the relevant assets and, in turn, the WDV of the relevant block of assets, would only be in terms of the books of account. Why, profit, be it trading or net, is estimated normally on the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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