2018 (9) TMI 1307 - AT - Income Tax

Dismissal of Appeals for Assessment Years 2010-11 & 2012-13 Due to Monetary Limit

The appeals by both the assessee and the revenue for assessment years 2010-11 & 2012-13 were dismissed. The revenue's appeals were deemed not ... Rejection of books of accounts - assessee has not included expenses related to the cartage and freight in his books of accounts - Held that:- There is no dispute with regard to the fact that the A.O. would be within his power to reject books of accounts, if he is satisfied that the books of accounts placed before him do not give the correct figure of the profit. In the present case, admittedly, the assessee has not included expenses related to the cartage and freight in his books of accounts, by this it has distorted the correct figure of profit. Therefore, in our view, the assessing officer was justified in the present case to reject the books of accounts. Ground No.1 of the assessee’s appeal is dismissed. Profit estimation - adoption of gross profit on the basis of past history - Held that:- CIT(A) has adopted the profit on the basis of past history of the assessee. The only contention of the assessee in the present year is that gross turnover of the assessee has increased, therefore, the profit cannot be estimated merely on the basis of the past history. We are unable to accept the submissions of the assessee as the Ld. CIT(A) has rightly adopted the gross profit on the basis of past history and the impact of not taking into account the expenses related to freight and cartage. This ground of appeal of the assessee is also dismissed. Issues:Appeals against CIT(A) orders for assessment years 2010-11 & 2012-13; Monetary limit for revenue appeals; Rejection of books of account under section 145(3) of the Income Tax Act; Addition of amounts to income; Estimation of profits; Grounds of appeal by the assessee; Gross profit percentage; Net profit; Past history analysis for profit estimation.Analysis:Issue 1: Monetary Limit for Revenue AppealsThe appeals by the revenue were dismissed as not maintainable due to being below the monetary limit prescribed by CBDT circular No.3 of 2018 dated 11.7.2018.Issue 2: Rejection of Books of AccountThe assessing officer rejected the books of accounts as expenses related to cartage and freight were not included in the closing stock by the assessee. The rejection was upheld by the CIT(A) as the correct figure of profit was distorted. The rejection was deemed justified under section 145(3) of the Act, as the accounts did not reflect the correct profit figure.Issue 3: Addition to IncomeThe addition to income was challenged by the assessee, arguing against the rejection of the declared profit rate. However, the CIT(A) upheld the addition based on historical profit percentages and the impact of unaccounted expenses, concluding that the profit could be estimated reasonably from past history despite an increase in gross turnover.Issue 4: Estimation of ProfitsThe CIT(A) estimated additional net profit based on past gross profit percentages, considering the impact of unaccounted expenses. The assessee's contention that profit estimation should not solely rely on past history due to increased turnover was dismissed as the CIT(A) correctly adopted the gross profit based on past trends and the impact of omitted expenses.Issue 5: Grounds of AppealThe assessee raised grounds of appeal against the rejection of books of account and the addition to income for both assessment years. The arguments and decisions for both years were similar, leading to the dismissal of the appeals based on the past history analysis and the impact of unaccounted expenses on profit estimation.ConclusionBoth appeals by the assessee for the assessment years 2010-11 & 2012-13, as well as the revenue's appeals for the same years, were dismissed based on the rejection of books of account and the upheld additions to income. The orders were pronounced on 19.09.2018.