Tribunal quashes Rs. 2.74 crore addition by AO under Section 68, citing lack of evidence

The tribunal quashed the addition of Rs. 2,74,00,000/- under Section 68 made by the AO and allowed the appeal. It held that the rejection of books and addition were based on surmises, with no substantial evidence. The cash deposits were part of the declared turnover, emphasizing the need to consider all relevant documents and past history.

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Issues Involved:
1. Confirmation of assessment order by CIT(A) NFAC.
2. Decision without considering the request for adjournment.
3. Decision without considering vital documents.
4. Passing a non-speaking order.
5. Rejection of books of accounts under Section 145(3).
6. Confirmation of AO's action based on surmises and conjecture.
7. Addition of cash deposited in bank accounts.
8. Ignoring the past history of the appellant.
9. Application of Section 68 resulting in double taxation.
10. Addition under Section 68 despite rejection of books under Section 145(3).
11. Rejection of books of accounts without serving show cause notice.

Summary:

Issue 1: Confirmation of Assessment Order by CIT(A) NFAC
The CIT(A) NFAC confirmed the assessment order passed by the AO, which assessed the total income at Rs. 2,82,17,200/- against the returned income of Rs. 8,17,200/-. The AO made an addition of Rs. 2,74,00,000/- alleging inflated sales to cover unaccounted money.

Issue 2: Decision Without Considering Request for Adjournment
The CIT(A) NFAC erred by deciding the appeal without considering the appellant's request for adjournment filed on 11.08.2022.

Issue 3: Decision Without Considering Vital Documents
The CIT(A) NFAC ignored vital documents such as the cash book, purchase bills, ledger, and VAT returns submitted by the appellant during the assessment proceedings, violating the principles of natural justice.

Issue 4: Passing a Non-Speaking Order
The CIT(A) NFAC passed a non-speaking order, which is against the law, even if the assessee was not represented before it.

Issue 5: Rejection of Books of Accounts Under Section 145(3)
The CIT(A) NFAC confirmed the AO's action of rejecting the books of accounts by invoking Section 145(3) without pointing out any specific defect in the books of account.

Issue 6: Confirmation of AO's Action Based on Surmises and Conjecture
The CIT(A) NFAC confirmed the AO's action based on surmises and conjecture without any evidence contrary to the contention of the assessee, which was duly supported by documents.

Issue 7: Addition of Cash Deposited in Bank Accounts
The CIT(A) NFAC confirmed the addition of Rs. 2,82,17,200/- being cash deposited in bank accounts without appreciating that the said cash was part of the cash account submitted with the submissions made and was sourced from sales duly accepted by the VAT department.

Issue 8: Ignoring the Past History of the Appellant
The CIT(A) NFAC ignored the past history of the appellant, where similar cash deposits were accepted by the department in previous assessment years.

Issue 9: Application of Section 68 Resulting in Double Taxation
The CIT(A) NFAC ignored the position of law that provisions of Section 68 cannot be applied in respect of income from a source which has already been taxed, resulting in double taxation.

Issue 10: Addition Under Section 68 Despite Rejection of Books Under Section 145(3)
The CIT(A) NFAC erred in confirming the order of the AO, ignoring the position of law that no addition under Section 68 can be made where books of account had been rejected by the AO under Section 145(3).

Issue 11: Rejection of Books of Accounts Without Serving Show Cause Notice
The AO erred in rejecting the books of accounts under Section 145(3) without serving the show cause notice as embedded in Section 144 read with Section 145(3).

Conclusion:
The tribunal quashed the addition of Rs. 2,74,00,000/- made by the AO under Section 68 and allowed the appeal of the assessee. The tribunal held that the AO's rejection of books of accounts and the addition made were based on surmises and conjectures without any substantial evidence, and the cash deposits were part of the declared turnover. The tribunal emphasized the importance of considering all relevant documents and past history in such cases.

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