AI Drafter 
TaxTMI 
TaxTMI 
2022 (12) TMI 933
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....resuming that the AO has made ad-hoc addition under various heads on account of non-compliance of various notices, whereas fact is that no ad-hoc addition has been made, rather it has been made on account of complete failure of the assessee as it has furnished no explanation and on evidence of such sundry creditors and advances from the customers, hence it is not a case of ad-hoc addition. Ld. CIT(A) therefore has based his judgments on surmises, conjectures and presumption ignoring the reasons given by the AO. 3. The Ld. CIT(A) has wrongly presumed that estimation of income has been done u/s 144 whereas has failed to explain the sundry creditors and advances from the customers, and has submitted no evidences thereof 4. The Ld. CIT(A) is not justified in deleting the addition of Rs3,52,49,419/- on account of commission expenses, not verifiable by the A.O. due to non-production If books of account by the assessee during assessment proceedings. 5. The Ld. CIT(A) is not justified in deleting the addition of Rs.1,12.02.665- on account of professional/consultancy by the assessee during assessment proceedings. 6. The Ld. CIT(A) has stated that following his not....
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....nses and (iii) Consultancy fees. Accordingly, the AO assessed the total income of the assessee at Rs. 25,40,01,710/- as against the return of income of Rs. 3,34,610/- . The assessee challenged the action of the AO before the CIT(A) and explained that the current liabilities shown in the books of accounts are representing the aggregate amount of sundry creditors, advance from customers against booking and the amount of TDS payable. It was further explained that the brokerage / commission expenses are paid to the agents/brokers who help the assessee company in its business of real estate development at the initial stage of the business. 5. Similarly, the assessee explained that the expenses shown under the head consultancy fees in fact, represents the site development expenses. Thus, these are the necessary business expenditure as the site development is the basic requirement of the business of the assessee. The CIT(A) asked to assessee to produce the relevant documentary evidence, books of accounts and after considering these records produced by the assessee the additions made by the AO have been deleted by the CIT(A) while passing the impugned order. 6. Aggrieved by the impug....
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....impugned order but it is stated in the impugned order that only text checking was done. 9. Hence, the Ld. DR has submitted that the impugned order of the CIT(A) is not sustainable and liable to be set aside. He is pointed out that the CIT(A) has proceeded on the basis of the wrong presumption of the fact and citing the irrelevant provisions such as 145(3) of the Income Tax Act whereas, the AO has not made any ad hoc addition or disallowance while passing the impugned order but when the assessee has not responded to the notices issued by the AO nor appeared or filed any evidence in support of the claims than the AO was left with no option but to pass the assessment order under Section 144 of the Income Tax Act by disallowing the claim of current liability, expenses on account of commission and consultancy fees. 10. The Ld. DR has further contended that the CIT(A) has cited the irrelevant judicial precedents in respect of the rejection of books of account under Section 145(3) as well as ad hoc disallowance or estimation of the income by the AO whereas, in the case of the assessee there is no ad hoc disallowance or estimation of the income by the AO. Therefore, all those decisio....
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.... a total income of Rs. 3,34,613/-. The case was selected for scrutiny assessment u/s 143(3) of the IT Act through CASS for limited scrutiny on the following reason:- (i) Whether Sales Turnover/receipts has been correctly offered for tax. (ii) Whether deduction claimed on account of business expenses is admissible. (iii) Whether the current liabilities shown are genuine. Accordingly notice U/s 1432) was issued on 19.09.2017 through email/registered post and property served upon the assessee fixing the date of compliance on 22.09.2017.No compliance was made .Notice u/s 142(1) dated 26.10.2017 was issued through registered post fixing the date of compliance on 07.11.2017. No compliance was made. Consequently penalty proceedings u/s 271(1)(b) of the Income Tax Act, 1961 was initiated and show cause notice was issued through registered post/email on 10.11.2017 fixing the date of compliance on 16.11.2017 .No compliance was made A penalty order u/s 271 (1) (b) of the Income tax Act, 1961 dated 20.11.2017 was passed Imposing Rs. 10,000/-. Final Show cause notice dated 04.12.2017 was issued through registered post /email, fixing the date of compliance on ....
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....n by the assessee, commission expenses of Rs. 3,52,49,419/- and consultancy fees which was explained by the assessee as site development expenses of Rs. 1,12,02,665/-. These additions were made by the AO for want of any explanation, supporting evidence or record produced by the assessee. Though, the AO has not disturbed the sales and purchases shown by the assessee however, the current liability and expenditure claimed by the assessee were disallowed in toto. Therefore, the disallowance of the entire current liabilities representing the sundry creditors and advance from the purchasers as well as the expenses is also not justified. 14. The CIT(A) has deleted the entire additions made by the AO as under: "Decision: I have gone through the facts and written submission filed along with the details filed enclosed therein. The Assessing Officer made adhoc addition under various heads by passing an order u/s 144 of the Act for the reason that the appellant did not produce before AO any books of account and bills and vouchers for verification of expenses claimed. Appellant also did not comply with notices u/s 142(1). It is a fact that AO made the addition without rejec....
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....any adhoc addition as per Best of AO's Judgment. The AO is required to analyse various other parameters which have the effect on the income of the appellant for the relevant period, before drawing any conclusion on the merit of such claim. However, it is the duty of the AO to pin point the malice and bring it out in the Assessment Order by marshaling the facts encompassing the same. It is legally valid proposition that once the AO reaches a conclusion that books of a/c are not available or not produced knowingly for the best reasons known to appellant for verification then book results are liable to be rejected, then a fair estimate of income is required to be made on the basis of material available on record or some extraneous material like net profit rate of comparable cases or appellant's history. It is a fact in this case that the books of a/c were not produced and the bills and vouchers pertaining to all the expenses were not made available for verification before the AO, but the AO did not invoke S. 143(3) and did not reject the books of accounts and went on to form 'Best Judgment' u/s 144 of IT Act absolutely without any basis. The Hon'ble Allaha....
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....rovision is also given u/s.145 (3) where the AO has been given the power to estimate the income, in case he is not satisfied with the correctness or completeness of the account, to make an assessment u/s.144 of the Act. In the present case, the AO estimated the Income based on the information obtained from KSBCL authorities disclosing the percentage of profit on sale fixed by the Karnataka government. It is not the case of the AO that the books were not properly maintained. Not even a word has been whispered by the AO that the books were not in accordance with the method of accounting or were incorrect/incomplete. In our view, the laws commands us to set aside the assessment made on the basis of estimation, if the AO made the estimation without rejecting the books of account. "In the matter of Anil Kumar (supra), the Hon'ble jurisdictional High Court has held as under: "11.... Section 145(3) of the Act lays down that the Assessing Officer can proceed to make assessment to the best of his judgment under section 144 of the Act only in the event of not being satisfied with the correctness of the accounts produced by the assessee. In the instant case the Assessing....
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....e best judgment assessment is contrary to process laid down in statute. During the appellate proceedings the appellant produced the complete books of accounts for F.Y. 2014-15 relevant vouchers and supporting documents including copy of sale deed along with copy of agreements as under:- a) Cash Book & Bank Book b) Complete Ledger Including Party Ledger, Expenditure Ledger. c) Sale/Purchase Register, Stock Register including other subsidiary register. d) Copy of agreement, sale deed and other supporting bills and vouchers. Without commenting on the correctness of these books and supporting evidence produced during the appellate proceedings, it can still be appreciated that the books of accounts are being maintained which were subject to two audits during the year as evident from the audit report submitted by appellant. AO could have used it as a good material to base his assessment. In the case of Tolaram Daga Vs. CIT reported in (1966) 59 ITR 632(Gau) wherein their lordships have observed and held as under:- "It would appear that the accounts of the firm which had been produced in the case had been accepted and....
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....ice was not done to the assessee. It was not possible for the assessee's to produce the original account books, which were destroyed in fire. There was, however, other material mainly consisting of the auditors' reports were material, But the question of law is well settled and is not capable of being disputed and does not, therefore, call for reference. The Tribunal has stated that, though, ordinarily, the adjustments relating to expenses should have been made by the assessee in the accounts of the year to which the adjustments relates and noting a subsequent year, it is often inevitable that such adjustments relating to earlier years have to be made in subsequent years. This is specifically so, when the business, as of the assessee, is of giant proportions and the branches are farflung. The Tribunal has also very properly relied upon the auditor's report to draw the proper inference from the same". In the present case, the AO has estimated the income without any basis or any available information obtained from any independent source and disregarding the facts available in the audit report filed with the return of income. As held by Hon'ble Court ....
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....e CIT(A) duly acknowledged the fact that the assessee did not produce the books of account, bills and vouchers as well as other relevant records before the AO despite the notices issued under Section 142(1) of the Income Tax Act and thereby, the assessee has failed to prove its claim on account of current liabilities as well as the expenditures and particularly to establish that these expenses are incurred wholly and exclusively for the business of the assessee. Therefore, instead of allowing the assessee to discharge its primary onus in support of these claims, the CIT(A) on its own ask the assessee to produce the complete books of accounts, relevant vouchers and supporting documents including the copy of sale-deeds/agreements. The CIT (A) has stated that without commenting on the correctness of the books of accounts and supporting evidence produced during the appellate proceedings as the books of accounts are audited, the AO could have used it a good material to base his assessment. While making this observation the CIT(A) has completely ignored the fact that when there was no response or participation of the assessee in the assessment proceedings, the question of considering the....
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.... objector/ assessee to produce complete books of accounts and other records (in compliance to which cross objector placed complete books of account, sale deeds, agreements, supporting bills and vouchers) which were examined also, so the relief allowed by the ld. CIT(A) in the appellate order under consideration is fully correct, based on sound footings and duly supported by various case laws. 4. . BECAUSE the ld. Assessing Officer not having disputed the audit statement of accounts for the year under consideration including purchases made by the cross objector/ assessee during the year, disallowance of Rs.25.51,250/-forming part of the 'Current Liabilities' is wholly unjustified, accordingly relief allowed by Ld. CIT(A) in his appellate order dated 25.02.2020 does not at all suffers from any infirmity. 5. BECAUSE the TDS payable aggregating to Rs.34.43,109/- forming part of Current Liabilities as on 31.03.2015 was duly supported by the challans, amounts having been deposited in the government exchequer well within time, so there remains no basis for the addition so made by the ld. Assessing Officer in the assessment order be sustained in the appellate proc....