INCOME TAX OFFICER, ALIGARH vs. SANJAY SINGH, ALIGARH
Facts
The revenue filed appeals against the orders of the CIT(A) for AY 2018-19. In ITA No. 181/Agr/2023, the AO added opening capital, stock, creditors, and cash deposits, and rejected the books of accounts, estimating income at 10% of turnover. The CIT(A) deleted the addition of sundry creditors, opening stock, and cash deposit. In ITA No. 182/Agr/2023, the AO disallowed purchases from two entities involved in tax fraud and added the remaining amount after estimation. The CIT(A) held that separate addition of bogus creditors was not required when books were rejected and income was estimated.
Held
The Tribunal held that once the books of accounts are rejected and income is estimated, no separate addition for items like sundry creditors, opening stock, and cash deposits, which are part of the business and reflected in the rejected books, can be made. Such additions would amount to double taxation. The case laws cited by the CIT(A) support this view.
Key Issues
Whether the additions made by the AO on account of opening capital, stock, creditors, and cash deposits are sustainable when the books of accounts have been rejected and income estimated? Whether disallowing purchases from specific entities and making separate additions for bogus creditors is permissible after estimation of income?
Sections Cited
144, 144B
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Income Tax Appellate Tribunal, “DB” BENCH, AGRA
Before: HON’BLE SHRI SATBEER SINGH GODARA, JM & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
Manoj Kumar Aggarwal (Accountant Member)
Aforesaid appeals by revenue for Assessment Year (AY) 2018-19 arises out of separate orders of learned first appellate authority. First, we take up appeal ITA No.181/Agr/2023 which arises out of an order of learned Commissioner of Income Tax (Appeals), NFAC [CIT(A)] dated 29- 09-2023 in the matter of an assessment framed by Ld. AO u/s 144 r.w.s. 144B of the Act vide order dated 22-04-2021. At the time of hearing, none appeared for assessee. Therefore, the appeals were heard with the able assistance of Ld. CIT-DR who pleaded for restoration of assessment order. Upon perusal of case records, the appeal is disposed-off as under.
The assessee’s case was scrutinized to verify business purchases and quantitative details. In the absence of any response as forthcoming from the assessee, Ld. AO added opening capital, opening stock, sundry creditors and cash deposits to the income of the assessee. All the four items aggregated to Rs.12.84 Crores. The Ld. AO also rejected the books of accounts and estimated the income @10% of turnover which resulted into another addition of Rs.7.88 Crores.
Upon further appeal, Ld. CIT(A) substantially confirmed the assessment except for deletion of addition of sundry creditors, opening stock and cash deposit for Rs.12.73 Crores. The same was on the ground that the when income is estimated basis by rejecting the books of accounts, no further addition for these items could be made on the basis of same books of accounts as held by Hon’ble Rajasthan High Court in the case of Malpani House of Stones vs. CIT (395 ITR 385) as well as the decision of Hon’ble Gujarat High Court in the case of Vijay Trading
From the assessment order, it is quite clear that Ld. AO has rejected the books of accounts and estimated the business income of the assessee. In such a case, separate addition of sundry creditors, opening stock and cash deposit is not warranted since the same are in the course of assessee’s business only. The same are reflected in the very books of accounts which have been rejected by Ld. AO. In such a case, adding the same again would amount to double addition which is impermissible. The case laws as cited by Ld. CIT(A) duly supports this view. Therefore, we do not find any reason to interfere in the same. ITA No.181/Agr/2023 stand dismissed.
ITA No.182/Agr/2023 is directed against re-assessment order dated 31-03-2023 as passed by Ld. AO. The case was reopened on the ground that the assessee made paper purchases from two entities which were involved in Input Tax Credit fraud / evasion. Based on investigation findings, Ld. AO rejected the submission of the assessee and proceeded to disallow the purchases of Rs.225.96 Lacs as made from these two entities. After deduction of 10% estimation as made in regular assessment order, Ld. AO added the remaining amount of Rs.203.37 Lacs to the income of the assessee. The Ld. CIT(A), considering first appellate order dated 29-09-2023, held that the books were rejected and income was estimated and therefore, separate addition of bogus creditors would not be required. Aggrieved, the revenue is in further appeal before us.
Since we have confirmed first appellate order dated 29-09-2023, it would be quite logical to confirm this order also. We concur that once the books are rejected, separate addition of bogus creditors / purchases would not be required. We order so. The appeal stand dismissed.
Both appeals stand dismissed. Order pronounced u/r 34(4) of Income Tax (Appellate Tribunal) Rules, 1963. (SATBEER SINGH GODARA) (MANOJ KUMAR AGGARWAL) "ाियक सद" /JUDICIAL MEMBER लेखा सद" /ACCOUNTANT MEMBER Dated: 28-03-2025
आदेश की "ितिलिप अ"ेिषत / Copy of the Order forwarded to : 1. अपीलाथ"/Appellant
""थ"/Respondent 3. आयकरआयु"/CIT 4. िवभागीय"ितिनिध/DR 5. गाड"फाईल/GF
