2023 (3) TMI 1569 - AT - Income Tax

Revenue's appeal dismissed over low melting gains addition as assessee maintained proper registers without defects

The Joint Commissioner of Income Tax (OSD), Circle1, Jalgaon. Versus M/s. Rajmal Lakhichand

ITAT Pune dismissed Revenue's appeal regarding addition on account of low melting gains. The assessee, dealing in old ornaments, maintained proper melting ... Addition on account of low Melting gains shown by the assessee compared to earlier financial years - HELD THAT:- As decided in own case [2022 (10) TMI 1280 - ITAT PUNE] for A.Y.2014-15 held it is a fact that assessee purchases old ornaments. The purity depends on many factors. It is very difficult to generalise the purity. We have gone through the melting gain register which was submitted in the paper book. It is observed that assessee has maintained a proper register AO has not pointed out any defect in the said melting gain / loss register. The AO has also not pointed out any defect in the books of accounts maintained by the assessee. It is also a fact that the ITAT Pune Bench in assessee’s own case for earlier year has decided this issue in favour of assessee. Therefore, we are of the opinion that the ld.CIT(A) has rightly directed the AO to delete the addition following the ITAT Pune Bench’s decision for the A.Y. 2009-10, accordingly, grounds of appeal raised by the Revenue are dismissed. ISSUES PRESENTED and CONSIDEREDThe core legal issue in this case was whether the Commissioner of Income Tax (Appeals) [CIT(A)] erred in deleting the addition made by the Assessing Officer (AO) on account of low melting gains shown by the assessee compared to earlier financial years. The Revenue sought to have the CIT(A)'s decision overturned and the AO's original assessment restored.ISSUE-WISE DETAILED ANALYSIS1. Relevant Legal Framework and PrecedentsThe primary legal framework involved is the Income Tax Act, 1961, specifically section 143(3) under which the assessment was made. The case also references previous decisions by the Income Tax Appellate Tribunal (ITAT) Pune in the assessee's own cases for earlier assessment years (AY), notably AY 2009-10 and AY 2014-15, which were pivotal in the CIT(A)'s decision to delete the AO's addition.2. Court's Interpretation and ReasoningThe Tribunal considered the precedent set by ITAT Pune in the assessee's own case for AY 2009-10 and AY 2014-15, which had similar facts and were decided in favor of the assessee. The Tribunal noted that the CIT(A) had relied on these precedents to justify the deletion of the addition made by the AO.3. Key Evidence and FindingsThe Tribunal reviewed the melting gain register maintained by the assessee, which was presented as evidence in the paper book. It was observed that the register was properly maintained, and no defects were pointed out by the AO in either the register or the audited books of accounts. The Tribunal also noted that the purity of old ornaments, which affects melting gains, depends on various factors and cannot be generalized.4. Application of Law to FactsThe Tribunal applied the legal principles from the ITAT Pune's prior decisions to the present case. It found that the AO's approach in estimating melting gains at 6% was not justified, given the lack of defects in the assessee's records and the established practice of the assessee, which had been accepted in previous years.5. Treatment of Competing ArgumentsThe Revenue's argument, as presented by the Departmental Representative, relied heavily on the AO's original assessment. However, the Tribunal found that the Revenue failed to provide any new facts or distinguishing features that would warrant a deviation from the precedent set in the assessee's earlier cases. The Tribunal also noted the Departmental Representative's acknowledgment that the issue was covered in favor of the assessee based on past decisions.6. ConclusionsThe Tribunal concluded that the CIT(A) was correct in deleting the addition made by the AO. The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision and following the ITAT Pune's precedent in the assessee's previous cases.SIGNIFICANT HOLDINGSThe Tribunal's decision preserved the principle that consistent accounting practices, when previously accepted by the tax authorities and not shown to be defective, should not be arbitrarily disregarded. The Tribunal emphasized the importance of adhering to established precedents, particularly when the facts of the case remain unchanged.Core Principles EstablishedThe Tribunal reinforced the principle that the burden of proof lies with the Revenue to demonstrate why an established accounting practice should be disregarded, especially when no defects are found in the taxpayer's records. The Tribunal also highlighted the role of consistency and the need for the Revenue to provide substantial evidence when challenging previously accepted practices.Final Determinations on Each IssueThe Tribunal dismissed the Revenue's appeal, thus upholding the CIT(A)'s decision to delete the addition made by the AO. The Tribunal's decision was based on the lack of new evidence or distinguishing facts presented by the Revenue and the reliance on established precedents in the assessee's favor.