2019 (6) TMI 1115 - AT - Income Tax

Tribunal dismisses revenue's appeal, finding AO's conclusions unreliable, lacking evidence. Books rejection unjustified.

DCIT-9 (2) (1), Mumbai Versus M/s. Best Paper Mills Pvt. Ltd. And (Vice-Versa) And M/s. Best Paper Mills Pvt. Ltd. Versus DCIT-9 (2) (1), Mumbai

DCIT-9 (2) (1), Mumbai Versus M/s. Best Paper Mills Pvt. Ltd. And (Vice-Versa) And M/s. Best Paper Mills Pvt. Ltd. Versus DCIT-9 (2) (1), Mumbai - TMI Issues Involved:1. Validity of reassessment proceedings under Section 147.2. Deletion of addition on account of suppression of yield.3. Reliability of statements recorded during survey under Section 133A.4. Rejection of books of accounts.Detailed Analysis:1. Validity of Reassessment Proceedings under Section 147:The assessee contested the validity of reassessment proceedings initiated by the Assessing Officer (AO) under Section 147, which were based on the findings for AY 2011-12. The Commissioner of Income-Tax (Appeals) [CIT(A)] upheld the reassessment, stating that the AO had specific information of suspected purchases and tangible material at the time of issuing notice under Section 148. Since the revenue’s appeal on merits was dismissed, the issue of reassessment became academic and was not further deliberated. Consequently, the assessee’s appeals on this ground were dismissed as infructuous.2. Deletion of Addition on Account of Suppression of Yield:The AO added Rs. 1097.13 Lacs to the income of the assessee for AY 2011-12, alleging suppression of yield. The CIT(A) deleted this addition, noting several key points:- The AO’s addition was based on statements recorded during a survey under Section 133A, which lacked corroborative evidence.- The AO failed to point out specific defects in the books of accounts, which were duly audited.- The AO’s estimation of yield at 87% was arbitrary and not supported by any expert opinion or technical evidence.- The assessee provided technical reports from government bodies (CPPRI & SRI) supporting the yield reflected in the books, which the AO did not counter with any technical evidence.- The CIT(A) observed that no incriminating material regarding unaccounted cash, purchases, sales, or investments was found during the survey.3. Reliability of Statements Recorded During Survey under Section 133A:The AO relied heavily on statements made by the assessee’s employees and Managing Director (MD) during the survey. However, the CIT(A) and the Tribunal found these statements to be unreliable as they were not supported by any documentary evidence. The MD’s statement indicating a yield of 83.44% was corroborated by the actual yield on the date of the survey. The Tribunal emphasized that statements recorded under Section 133A do not have evidentiary value unless corroborated with circumstantial evidence or cogent material. This principle was supported by judicial precedents, including the decision of the Hon’ble Madras High Court in CIT vs. S. Khader Khan and the Hon’ble Supreme Court.4. Rejection of Books of Accounts:The AO rejected the assessee’s books of accounts, alleging that the yield was understated by inflating purchases. The CIT(A) and the Tribunal found this rejection unjustified because:- No specific discrepancies or defects were pointed out in the books, which were audited.- The AO’s estimation of yield was arbitrary and not based on any sound basis or technical evidence.- The suppliers confirmed the genuineness of sales to the assessee and were regularly filing their tax returns.- No discrepancies were found in the physical stock of raw material or finished goods during the survey.Conclusion:The Tribunal upheld the CIT(A)’s decision to delete the addition on account of suppression of yield, finding that the AO’s conclusions were based on unreliable statements and lacked corroborative evidence. The rejection of the books of accounts was also deemed unjustified. Consequently, the revenue’s appeals were dismissed, and the assessee’s cross-objections were rendered infructuous.