2015 (1) TMI 359 - AT - Income Tax

Tribunal upholds CIT (A) decision on income addition & investment verification under Income Tax Act

ACIT, Circle 22 (1), New Delhi Versus Shri Madan Raajgarhia

The Tribunal upheld the CIT (A)'s decision to delete the addition to the assessee's income for a lower rate of gross profit declared, based on evidence ... Deletion of addition – Rejection of books of accounts u/s 145(3) – Violation of provisions of section 40A(3) or not – Held that:- The assessee was engaged in an exclusive dedicated transport services to M/s. Gujarat Ambuja Cements Ltd. and an agreement dated 31.03.2002 was entered into - The transportation was being done of cement, clinker etc. etc. to various destinations from the factory premises at Rabriyawas, Rajasthan - CIT(A) rightly admitted additional evidences and forwarded the same to the AO for examination - These evidences were confirmations from the transporters - CIT(A) has also considered these confirmations and has also test checked the accounts of the transporters to verify the claim that cash payments for individual truck loads does not exceed ₹ 20,000/- per day - revenue has failed to controvert the factual finding of CIT (A) - assessee contended that because of fall in the gross profit on account of increased competition in the market - due to inability to make adequate profits from the business, the assessee has shut down the transport business w.e.f. 31.01.2010 – relying upon Vinod Kumar Pramod Kumar vs. ITO [1999 (12) TMI 117 - ITAT JODHPUR] wherein it has been held that minor variation in the gross profit declared in the year under consideration as compared to previous years by itself cannot justify any addition - CIT (A) has rightly deleted the addition – Decided against revenue. Addition on claim of exemption u/s 54 deleted – Sale of residential house and investment in new residential house - Held that:- The payments for the purchase of new residential unit were during the period 24.01.2006 to 26.11.2009 - assessee has received possession of the new house on 26.11.2009 - The original asset was sold on 04.06.2007 - Thus, the investment in the new residential house was made during the allowable period of three years from the date of transfer of the long term capital asset - The reliance was also placed on the CBDT’s Circular No.672 dated 16.12.1993 – thus, the order of the CIT(A) is upheld – Decided against revenue. Issues:1. Addition to income for lower rate of gross profit declared by the assessee.2. Deletion of additions made by the Assessing Officer.3. Claim of exemption under section 54 of the Income Tax Act.Analysis:Issue 1: Addition to income for lower rate of gross profit declared by the assessee- The appeals filed by the revenue were against the order of CIT (Appeals) regarding the addition to the income of the assessee due to a lower rate of gross profit declared.- The Assessing Officer rejected the books of account under section 145(3) of the Income-tax Act, 1961.- The revenue contended a violation of section 40A(3) of the Act.- The assessee provided transportation services to a company and faced scrutiny for various financial discrepancies.- The CIT (A) considered additional evidence, including confirmations from transporters, to support the assessee's claims.- Various legal precedents were cited to support the CIT (A)'s decision to delete the addition.- The Tribunal upheld the CIT (A)'s decision for both Assessment Years 2007-08 and 2008-09 based on the evidence and legal arguments presented.Issue 2: Deletion of additions made by the Assessing Officer- The Assessing Officer made additions based on the average profit margin and exemption of capital gain under section 54 of the Act.- The CIT (A) deleted the addition under section 54 after verifying the investments made by the assessee in a new residential house.- Detailed payment records and possession proofs were submitted by the assessee to support the claim.- The Tribunal upheld the CIT (A)'s decision, stating that the investments were made within the allowable period as per section 54.- The Tribunal also referenced a relevant CBDT circular to support the decision.Issue 3: Claim of exemption under section 54 of the Income Tax Act- The Tribunal dismissed the general nature of the ground in both Assessment Years.- The appeals filed by the revenue were ultimately dismissed, upholding the decisions of the CIT (A) on both issues.This detailed analysis covers the key issues and the Tribunal's decision on each aspect of the legal judgment.