2010 (12) TMI 1169 - AT - Income Tax

ITAT decision emphasizes natural justice in tax assessments, adjusts gross profit rate, upholds depreciation disallowance.

The ITAT partly allowed the assessee's appeals, directing the Assessing Officer to reconsider the addition of unexplained unsecured loans under section ... - Issues involved: Appeal against order of Commissioner of Income Tax (Appeals)-I, Surat u/s 143(3) of the I.T. Act, 1961 - Addition of unexplained unsecured loans u/s 68 - Partial confirmation of addition on account of low gross profit - Disallowance of depreciation on computers.Issue 1 - Unexplained unsecured loans u/s 68:The Assessing Officer made an addition of Rs. 67,45,000 under section 68 for unexplained unsecured loans. The creditors were sister concern/associated concern of the assessee and confirmation with PAN was provided. Due to loss of books of accounts in flood, detailed account information was unavailable. The assessee obtained bank statements to verify transactions, which were not submitted to the Assessing Officer. The ITAT set aside the lower authorities' decision, directing the Assessing Officer to consider the new evidence and decide the issue afresh, citing the need for natural justice. The ITAT also referred to relevant case laws supporting the assessee's position.Issue 2 - Low gross profit addition:The assessee disclosed turnover with a GP rate of 8.27%, which was lower than the previous year's 10.55%. The Assessing Officer rejected the books of accounts and applied a GP rate of 11%, later reduced to 10.55% by the CIT(A). The ITAT noted a significant increase in turnover and directed application of a GP rate of 9% instead of the declared 8.27%, considering the circumstances and the lack of produced books of accounts.Issue 3 - Disallowance of depreciation on computers:The assessee claimed depreciation on computers at 60% but failed to provide evidence of purchase. The Assessing Officer disallowed the claim, which was upheld by the ITAT due to lack of evidence supporting the purchase of computers.In conclusion, the ITAT partly allowed the assessee's appeals, emphasizing the importance of providing necessary evidence and following due process in tax assessments.