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Facts
The assessee's appeal was against the order of the National Faceless Appeal Centre (NFAC) for AY 2018-19. The Assessing Officer (AO) made an addition of Rs.26,02,448/- by rejecting the assessee's books of accounts due to failure to prove purchases and movement of goods. The AO estimated profit at 1% of turnover.
Held
The Tribunal noted that the assessee failed to substantiate its claims with documentary evidence before the authorities below. The AO's rejection of books and estimation of profit at 1% was deemed reasonable and concurred with by the Commissioner, leading to the dismissal of the appeal.
Key Issues
Whether the rejection of the assessee's books of accounts and estimation of business profit at 1% by the AO and confirmed by the CIT(A) is justified for non-substantiation of purchases and movement of goods.
Sections Cited
250, 147, 144B, 148, 143(1)(a), 143(3), 272A(1)(d), 143(2), 142(1), 156
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI NARENDER KUMAR CHOUDHRY
Per : Narender Kumar Choudhry, Judicial Member:
This appeal has been preferred by the Assessee against the order dated 14.09.2024, impugned herein, passed by the National Faceless Appeal Center (NFAC)/ Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) under section 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2018-19.
Notice sent to the Assessee for the date of hearing on 06.01.2025 has been returned back by the Postal Department with the remarks “left”, meaning thereby the Assessee is not situated at the address mentioned in Form no.36. However, in order to afford one more opportunity, this Court has adjourned the case to 15.01.2025 with the direction that the notice be issued through email and the Assessee be informed telephonically. However, in spite of doing the same, the Assessee on the next date of hearing i.e. on 15.01.2025 made no compliance. Therefore, this Court is inclined to decide the instant case on the basis of orders passed by the authorities below and the material available on record and hearing the Ld. D.R.
The Assessing Officer (in short “the AO”) vide assessment order dated 25.03.2023 u/s 147 r.w.s. 144B of the Act has made the addition of Rs.2602448/- by holding as under:
“Since the assessee failed to prove the purchase booked in his book by providing delivery note or other evidences in support of actual movement of good, the books of the assessee are rejected. But the assessee claims that the market average in the business of your fabrics is only 0.7% to 1% and states that the estimation of income at 8% is without any basis and does not support market trends. The claim of the assessee is considered and accepted. Accordingly, the income of the assessee is estimated of 1% of the total receipt of Rs.26,02,44,803/- which works out to be Rs.26,02,448/- and the assessment is completed u/s 143(3) r.w.s. 147 r.w.s 144B of the Act as under:
Final computation of taxable income:
SI Description Amount (in No. INR) 1 Income as per Return of Income filed Rs.51 ,250/- u/s 148 2 Income as computed u/s 143(1)(a) - 3 Variation: as discussed above Rs.26,02,448/ - 4 Total Income/ Loss determined as per Rs.26,53,698/ the above proposal -
5. Assessed under section 143(3) r.w.s. 147 r.w.s 144B of the Act. Penalty proceedings u/s 270A has to be initiated for under reporting if income. Penalty proceedings u/s 272A(1)(d) has to be initiated for non-compliance of notice issued u/s 143(2) dated 06.10.2022 and 142(1) dated 18.01.2023, 28.02.2023. Computation of income and demand notice u/s 156 is attached.”
4. The Assessee, being aggrieved, challenged the said addition by filling 1st Appeal before the Ld. Commissioner, who though afforded four opportunities to the Assessee, however, the Assessee except seeking adjournment on one occasion i.e. on 26.08.2024, made no compliance and therefore in the constrained circumstances the Ld. Commissioner affirmed the decision of the AO in making the addition of Rs.26,02,448/- @ 1% of the total receipt of Rs.26,02,44,803/- mainly on the reason that the Assessee has not filed any submissions/documents during the appellate proceedings despite various opportunities given to him. The Assessee could not provide any proof of movements of goods in respect of purchase shown from M/s. Ridgewood Industries Pvt. Ltd. Further, information was received from Commissioner of CGST and Central Excise, Bhiwandi that M/s. Ridgewood Industries Pvt. Ltd. provided accommodation entries to the Assessee. The AO has rejected the books of accounts and computed the business profit @ 1% of the turnover, which is very reasonable.
This Court has given thoughtful considerations to the peculiar facts and circumstances of the case, as the Assessee failed to substantiate its claim before the authorities below by producing any submission/documentary evidence and the proof of movements of goods qua purchase shown from M/s. Ridgewood Industries Pvt. Ltd. and the AO thus rejected the books of account and computed the business profit @ 1% and therefore this Court is in concurrence with the Ld. Commissioner that the business profit @ 1% is very reasonable.
On the aforesaid considerations the appeal of the assessee is liable to be dismissed, however, with liberty to the Assessee to seek recall of this order on establishing the plausible and genuine cause for non-prosecution of this appeal.
In the result, the appeal filed by the Assessee stands dismissed.
Order pronounced in the open court on 15.01.2025.