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Facts
The assessee filed its return declaring a loss. During assessment, the AO rejected the books of accounts under Section 145(3) due to non-cooperation and estimated income at 5% of turnover, making an addition. The CIT(A) sustained this addition and an addition for unexplained cash credit/outstanding liability.
Held
The Tribunal held that the rejection of books of accounts by the AO was not justified. Consequently, the addition based on the estimation of profit at 5% was deleted. However, the addition for outstanding liabilities was sustained due to the assessee's failure to provide explanations and evidence.
Key Issues
Whether the rejection of the assessee's books of accounts and estimation of income was justified. Whether the additions for unexplained cash credit and outstanding liabilities were valid.
Sections Cited
147, 148, 143(3), 68, 145(3), 144, 131, 142(1)
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Income Tax Appellate Tribunal, “A” BENCH, KOLKATA
Before: SHRI RAJESH KUMAR & SHRI PRADIP KUMAR CHOUBEY
O R D E R
Per Rajesh Kumar, AM :
This is an appeal filed by the assessee against the order dated 05.01.2024 passed by the ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi, for the assessment year 2016-2017, on the following grounds :-
1. That the Ld. CIT (A) National Faceless Appeal Centre has erred-in-law as well as on facts by sustaining the order which is cryptic, improper and unwarranted.
2. That the Ld.CIT(A) National Faceless Appeal Centre has erred- in-law as well as in facts by sustaining the addition of Rs. 2,58,68,746/- made in respect of unexplained cash credit u/s 68 of the Income Tax Act, 1961 at Rs. 2,45,40,236/- and estimation of net profit @5% at Rs. 13,28,510/- without any reasonable basis was not justified and unsustainable which is contrary to the principles of natural justice and is otherwise bad-in-law as well as on facts
3. That the order passed by the Ld. CIT(A) National Faceless Appeal Centre being non-speaking and devoid of application of mind. It is unjustified and improper to treat advances shown in 2 the balance sheet as unexplained cash credit u/s 68 of the L. Tax Act which is not just and proper because advances were received through banking channel/route.
4. That the appellant prays that the addition of Rs. 2,58,68,746/- made in respect of unexplained cash credit u/s 68 of the I. Tax Act and estimation of net profit of Rs. 13,28,510/- be deleted in toto.
5. That the order passed by the Ld.CIT(A) National Faceless Appeal Centre by confirming/upheld the order of the Ld.AO Suri, Birbhum based on his own observation which being cryptic, unlawful as it hits the principle of natural justice.
6. That the appellant craves leave to add, amend, alter vary any other grounds apart from above of this instant appeal at the time of hearing.
2. The common issues raised by the assessee in the various grounds with are regard to sustenance of aggregate additions of Rs.2,58,68,746/- by ld CIT(A) as made by the AO in respect of unexplained cash credit u/s.68 of the Act of Rs.2,45,40,236/- as well as estimation of net profit @5% at Rs.13,28,510/- of the total turnover of Rs. 2,65,70,197/-.
3. Facts in brief are that the assessee filed its return of income on 15.10.2016 declaring total loss at Rs.98,463/-. The asessee society is engaged in the business of wholesale and retail business of fertilizer insecticides, agriculture manure, seeds, stationery, grocery and feed. During the course of assessment proceedings, despite the repeated notices from the AO issued u/s.142(1) on 14.09.2018, 30.10.2018, 14.11.2018 & 29.11.2018, there was no-compliance on the part of the assessee. Thereafter a summon was issued by the AO u/s.131 of the Act to Shri Debashish Pal, who signed the return of income in the capacity of Assistant Manager, however, the same remained non-complied and finally the assessment was made ex-parte on the basis of information available 3 with the AO. Thus finally the AO after rejecting the books of accounts u/s.145(3) of the Act applied rate of 5% on the total turnover of Rs.2,65,70,197/- and estimated the profit at Rs.13,28,510/-, The AO also added Rs.2,45,40,236/- in respect of outstanding liability in the balance sheet which could not be examined and verified for the want of evidences due to non cooperation on the part of the assessee.
4. In the appellate proceedings the assessee filed written submissions before the ld. CIT(A) submitting on the various points and furnishing the information /details only partly. The ld. CIT(A) also called for a remand report from the AO which was also furnished by the AO. The assessee was also confronted with the said remand report and finally the ld. CIT(A) restored certains issues/additions partly to the file pf the AO in respect of outstanding liability of Rs.30,310/- which comprised of professional tax(employees) of Rs.1913/- stated to be paid in next financial year, cooperative education fund of Rs.2884/- and brought forward amount of Rs.25,513/- of Bolapur Krishija Bipanan Samabay Samity Ltd. and directed the AO to decide the same after doing verification. Similarly the amounts of Rs.9700/- on account of audit fee paid in A.Y.2016-2017 and gratuity fund of Rs.3,71,496/- paid in next financial year were also restored to AO to allow after doing necessary verification. However, the ld. CIT(A) confirmed the addition party in respect of outstanding liability to the extent of Rs.2,41,78,730/- on the ground of that there was no supporting evidences furnished in the assessment proceedings or during remand proceedings or during appellate proceedings to explain the same. In respect of estimation of income, the ld. CIT(A) sustained and confirmed 4 the order of AO in which the AO estimated the income @5% on the ground that there was non-cooperation from the assessee side and, therefore, books of accounts of the assessee were rejected u/s.145(3) of the Act.
After hearing the rival contentions of the parties and perusing the material available on record, we find that the books of accounts were audited and a perusal of the said report furnished by the statutory auditors appointed by the