×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
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This appeal is preferred by the revenue against the order of Ld. CIT(A) – XX, Kolkata dated 27.08.2014 on the following grounds:
“1 .On the facts and circumstances of the case, the Ld. CIT(A) erred in restricting the addition to the extent of 10% of the expenditure claimed through self-made vouchers for the post survey period.
2. On the facts and circumstances of the case, the Ld. CIT(A) erred in holding that there was no specific defect pointed out by the AO while rejecting the books of account.
3. On the facts and circumstances of the case, the Ld. CIT(A) erred in holding that expenses claimed during post survey investigation were supported with relevant documents, whereas no such bills/vouchers were found during the course of survey and bill produced were contradictory of the statements made by the partners.
4. On the facts and circumstances of the case, the Ld. CIT(A) had erred in relying on the G.P./N.P declared in earlier years, whereas in the year under consideration the N.P was estimated on the basis of facts deducted and established during the course of survey.”
2. The relevant facts of the case giving rise to this appeal are that the assessee is a partnership firm which is engaged in the business of trading in G.I. pipes, fittings and mill stores hardware. The return of income for the year under consideration was filed by it on 28.09.2010 declaring a total income of Rs. 1,12,83,818/-. A survey u/s 133A was carried out in the case of the assessee on 10th February, 2010. As per the books of account found during the course of survey, the net profit of the assessee’s business for the period 01.04.2009 to 10.02.2010 was found to be Rs. 2,10,82,772/ After making adjustment to the said profit on account of opening stock, closing stock and unrecorded purchases and other expenses, the net profit for the pre-survey period was worked out by the survey team at Rs. 2,26,17,483/-. In the return of income filed for the year under consideration, the total income of only Rs. 1,12,83,818/- was declared by the assessee which was inclusive of interest and other income amounting to Rs. 44,35,590/-. The AO, therefore, found that the business income for the entire year was declared by the assessee only at Rs. 68,80,220/- while the same for the pre-survey period i.e. 01.04.2009 to 10.02.2010 was worked out at Rs.2,26,17,483/-. He also found that huge expenditure was claimed by the assessee under various heads during the post survey period from 11.02.2010 to 31.03.2010 which
was 72% of the total expenses claimed by the assessee for the year under consideration whereas the sale of the assessee during the post survey period was only 21% of the total annual sales. According to the AO, the book results shown by the assessee for the year under consideration were not reliable and he required the assessee to explain as to why the same should not be rejected and assessment should not be completed as per the provisions of section 145(3). In reply, it was submitted by the assessee that substantial expenditure on account of purchases and other expenses had remained unrecorded in the books of account for the pre-survey period and this fact was clearly pointed out by the partner of the assessee firm in his final statement recorded after the survey. It was submitted that the said expenditure was duly supported by relevant vouchers / bills and the same were produced before the Assessing Officer at the time of recording of the final statement of Shri Prabhat Kedia, a partner of the assessee firm. It was also submitted on behalf of the assessee that other income of Rs. 44,03,598/- was inclusive of reimbursement of incentive received from M/s. Tata Steel Ltd. and the same constituted the business income of the assessee.
3. The explanation offered by the assessee was not found acceptable by the AO. According to him, the substantial expenditure claimed to be not recorded in the books of account for the pre-survey period was supported mainly by self-made vouchers and the same was not brought to the notice of the survey team which was present at the assessee’s premises for more than 18 hrs. He held that the unrecorded vouchers found during the course of survey were acceptable, but the self-made vouchers which were not found during the course of survey and submitted by the assessee later could not be accepted. To arrive at this conclusion, the AO relied on the statement of Shri Dilip Kedia recorded during the course of survey where he had stated that the books of accounts were updated till date barring few entries related to purchases and expenses which were to be recorded.
The AO held that there was a contradiction in the stand taken by the assessee during the course of assessment proceedings and the statement recorded during the course of survey. He, therefore, rejected the books of account of the assessee and estimated the income of the assessee by applying a net profit rate of 4% on the total turnover of Rs. 2,69,68,320/- which resulted in the addition of Rs. 1,56,84,502/- to the total income of the assessee.
4. The addition of Rs. 1,56,84,502/- made by the AO was challenged by the assessee in the appeal filed before the Ld. CIT(A) and after considering the submissions made by the assessee as well as the material available on record, the Ld. CIT(A) restricted the said addition to the extent of 10% of the expenditure claimed by the assessee through self-made vouchers for the following reasons given in his impugned order:
“After careful consideration of the appellant’s abovementioned working on apportionment of impugned expenses between the pre-and post-survey periods, I am of the view that the apportionment of expenses pertaining to pre and post survey periods has to be done after considering all the expenses pertaining to pre-survey period which were not recorded in the books of account at the time of survey and vouchers of which were submitted at the time of post-survey investigation and at the time of recording of the final statement of the partner.
Further, the preliminary statement recorded during the course of survey has to be considered in totality rather than taking just bits and parts out of it to frame the assessment order. As such the preliminary statement of