2023 (6) TMI 440 - AT - Income Tax

Revenue appeal dismissed, CIT(A) order upheld after proper verification of books & evidence. Rejection of accounts unjustified. (A)Order

The appeal of the Revenue was dismissed, and the order of the CIT(A) was upheld. The CIT(A) properly verified and examined the books of account, ... Rejection of books of accounts - best judgement assessment - only objection raised by the AO is non-filing of the tax audit report - CIT- A deleting the addition - HELD THAT:- It is only a case where accounts were not correct or incomplete or method of accounting employed by the assessee is not such as to enable the AO to determine the income properly then can resort to the provisions of section 145(3) or 144 of the Act. In the absence of any major discrepancies or defects in the books of accounts the rejection of the books of account only for want of tax audit report is not justified. AO while computing the total income has rejected the claim of loss for want of tax audit report and other details and even refused to entertain the CA for want of power of attorney though the reply along with balance sheet and other details as well as statutory audit report were filed before the AO. AO even did not allow the brought forward loss which were allowed in the preceding year to be carry forward and therefore, it shows that the AO has passed the assessment order by ignoring the undisputed facts available before him and rather contrary to the fact so far as the brought forward loss of Rs. 2.55 crores which was subsequently accepted by the AO in the remand proceedings. Assessee stated that it has produced books of account along with vouchers and when the AO has not considered the books of account and vouchers but rejected the books of account of the assessee the same were produced before the ld. CIT(A) and therefore, there is no violation of Rule 46A of the Income Tax Rules. CIT(A) has confirmed these facts while passing impugned order that the record was brought before the AO but it was not considered. Thus, AO misconducted himself while passing the assessment order and therefore, the record which was already filed before the AO was rightly considering by the CIT(A) while passing the impugned order. No error or illegality in the impugned order of the Ld. CIT(A) same is upheld. Decided in favour of assessee. Issues Involved:1. Delay in filing the appeal.2. Deletion of addition by CIT(A) and admission of additional evidence.3. Non-consideration of AO's request for extension of time for remand report.4. Ignoring the remand report by CIT(A).5. Allowance of appeal on rejection of books of account under Section 145 of the IT Act, 1961.Summary:1. Delay in Filing the Appeal:The appeal was filed with a delay of 499 days. The delay was condoned based on the Hon'ble Supreme Court's judgment in the case of Suo-moto Cognizance of extending the Limitation, reported in 441 ITR 722 (SC). The period from 15-03-2020 till 28-02-2022 was excluded for the purposes of limitation due to the impact of the COVID-19 pandemic.2. Deletion of Addition by CIT(A) and Admission of Additional Evidence:The Revenue contested the deletion of Rs. 5,20,37,486/- out of the total addition of Rs. 5,38,80,806/- by the CIT(A), arguing that additional documents were admitted in violation of Rule 46 of the I.T Rules, 1962. The assessee had filed its return declaring a loss of Rs. 13,43,58,600/-, which was not accepted by the AO, who completed the assessment u/s 144, rejecting the books of account. The CIT(A) called for a remand report and deleted the majority of the additions after verification of the additional evidence.3. Non-Consideration of AO's Request for Extension of Time for Remand Report:The AO requested an extension of time for filing the final remand report, citing busyness with time-barring assessments. However, the CIT(A) proceeded without obtaining the said remand report, which was contested by the Revenue.4. Ignoring the Remand Report by CIT(A):The AO's remand report dated 11.11.2016 mentioned that the assessee was entitled to set off earlier losses amounting to Rs. 2,55,25,774/-, but the CIT(A) allowed the loss of Rs. 13,43,58,600/- without specific findings. The CIT(A) called for a second remand report and verified the books of account, supporting vouchers, and other details. The AO raised objections regarding the non-filing of the tax audit report and certain disallowances, which were addressed by the assessee.5. Allowance of Appeal on Rejection of Books of Account under Section 145 of the IT Act, 1961:The AO rejected the books of account u/s 145(3) due to non-compliance with notices and summons. The CIT(A) found that the AO did not point out any serious defects in the books of account and noted that the statutory audit report was filed. The CIT(A) allowed the claim of loss and deleted the additions, except for a disallowance of Rs. 18,43,320/-. The rejection of books of account was found to be unjustified without pointing out specific defects.Conclusion:The appeal of the Revenue was dismissed, and the order of the CIT(A) was upheld. The CIT(A) was found to have properly verified and examined the books of account, supporting vouchers, and other evidence before deleting the majority of the additions made by the AO. The rejection of books of account by the AO was deemed unjustified, and the CIT(A)'s decision to allow the claim of loss was upheld.