TaxTMI 
TaxTMI 
2026 (3) TMI 1282
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....ons made therein are illegal, bad In law, without jurisdiction, barred by limitation, and not in accordance with the provisions of the Act. 2. That the Commissioner of lncome Tax (Appeals) ['CIT(A)'] vide order dated 24.04.2025 has erred in upholding the additions made by the AO. 3. That the AO erred in law and on facts in issuing notice under Section 143(2) without disclosing the basis or category of CASS selection, in violation of CBDT Instruction No. F. No. 225/157/2017/ITA-II dated 23.06,2017, rendering the assessment void and without jurisdiction. 4. That on the facts and in the circumstances of the case and in law, the CJT(A) has failed to appreciate the fact that the AO has erred in not passing the draft order as per the mandate of Section 144B(i)(xvi) of the Act. 5. That on the facts and in the circumstances of the case and in law, the AO has erred in rejecting the books of accounts without duly appreciating that the Appellant was prevented by a just and reasonable cause from producing the same during the assessment proceedings and the CIT(A) has erred in upholding the same. 6. That on the facts and in the circumstances of the ca....
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.... AR is under the following facts and circumstances of the matter: - "(I). The assessee was asked vide notice u/s 142(1) dated: 026/10/2022, 14/11/2022 & 02/12/2022 to submit the details of the parties from whom he had made purchase during the year under consideration along with supporting bill/vouchers. But the assessee did not submit any details regarding the purchase made. He was also asked to submit the confirmation of purchase from the parties but he failed to submit any confirmation from this parties till date. (II). Notice u/s 133(6) was issued to the following parties to confirm the genuineness of purchase:- S. No. Name of the party PAN 1. SUNNY GUPTA AWOPG1107G 2. CHHOTU CFOPC1301R 3. SHYAMU MOUPS3777N 4. SIVA SASHIDANADAM THIRUNAVUKKARASU BJTPT5046A 5. ARVIND ROY DTTPR8641P 6. VIKAS BABU DJHPB1591Q 7. SHEETAL MKTPS1894P 8. SAKURANSARI CZAPA0979F 9. ARUN KUMAR TYAGI AHZPT3946J But no compliance has been made by them. Most of the parties from whom purchase were made by the assessee are non-filer and seems to be bogus and not bonafide. (III). In spite ....
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....ement Certificate t is confirmed by MRL that it is maintain as per nature of business and of principal items. 2. Valuation of closing stock is not possible. Made on basis on MRL as given to us of 31/03/2021. From the above, it is concluded that:- (a) The assessee has not maintained and kept any quantitative details/stock register for the goods traded in. (b) There is no evidence on record or document to verify the basis of the valuation of the closing stock shown by the assessee. The assessee is not able to prepare such details even with the help of books of accounts maintained, purchase bills & Sale Invoices. E) It is also important to note here that the tax auditor in his tax audit report, vide Para 5, also mentioned that:- S. No. Qualification Type Observations/Qualifications 1. Records produced for verification of payments through account payee cheque were not sufficient. No cheques duplicate copy was with assessee to check it but assurance by MRL that no cash payment more than 10000/- for revenue expenses paid per day to single party plus of unsecured loan as per section 269SS/TT/ST for the year, plus 269SS/ST/TT l....
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....ents including the Profit and Loss Account and the Balance Sheet submitted by the assessee in the ITR has failed to reflect the correct and true state of affairs of the business. Hence, for the reasons stated above the assessing officer is not satisfied about the correctness or completeness of the accounts on the basis of which the financial statements (Profit and Loss Account and the Balance Sheet) has been drawn and therefore, the accounts including the Profit and Loss Account and the Balance Sheet as submitted in the ITR is hereby rejected by invoking section 145(3) of the Income-tax Act, 1961 and subsequently the present assessment proceedings is going to be completed in the manner provided in section 144 of the said Act." 7. The assumption of Gross Profit of the assessee's business for the year under consideration proposed @9.96% which is average of the gross profit rate disclosed in the last two years and show-cause, therefore, dated 09.12.2022 was issued to explain the same where upon the assessee submitted as follows: - "At the very outset we would like to extreme tender our apologies for the delay in submissions of the documents. It may be submitted that the ta....
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....e audited financial results. 4. Regarding E Way Bills - The copies of E way Bills are also being furnished wherever available are being furnished before your Honour. Refer Annexure 3. 5. Regarding Mistake in ITR and audited balance sheet- It may be submitted that the figures appearing in the audited balance are certified and authentic. The staff of the CA while furnishing the return of income has committed certain errors due to which the balance sheet of the ITR appears cryptic. There can be no way that the Proprietors capital be Nil as is appearing in the ITR which clearly shows that error has been committed. As such it is prayed that the Audited results may kindly be relied upon by your honour. 6. Regarding Ledgers of Banks- The ledgers of the banks are being annexed herewith as Annexure 4. 7. Regarding Estimation of Gross profit- Your Honour has proposed that average of gross profit of the preceding year and relevant year be estimated in this case. In this regard it is submitted that the assessee plays on small margins to the tune of even in Paisa per kg. The assessee is a small trader who increases the turnover on small margins. It may be app....
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....rt has emphasized and discussed about the importance of audited financial statements in absence of books of accounts. The court held- The question arises, therefore, whether the reports of the auditors could be said to be "material" on which reliance could be placed by the income-tax authorities. Unlike the proof required of such reports as also of the account books under the Indian Evidence Act, it is quite competent for the income-tax authorities not only to accept the auditors' report, but also to draw the proper inference from the same. The income-tax authorities could, therefore, come to the conclusion that since the auditors were required by the statute to find out if the deductions claimed by the assessee in their balance-sheets and profit and loss accounts were supported by the relevant entries in their account books, the auditors must have done so and must have found that the account books supported the claims for deductions, when the deductions were disallowed, by the Income-tax Officer on the ground that detailed information regarding them was not available, justice was not done to the assessee. It was not possible for the assessee to produce the or....
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....ough two proprietorship concern namely: Nishi Paper & Print Pack and (ii) Baba Industries. iv. The assessee was asked vide notice u/s 142(1) dated: 26/10/2022, 14/11/2022 & 02/12/2022 to submit the details of the parties from whom he had made purchase during the year under consideration along with supporting bill/vouchers. But the assessee did not submit any details regarding the purchase made. He was also asked to submit the confirmation of purchase from the parties but he failed to submit any confirmation from this parties till date of assessment order. v. The AO gives a finding in the assessment order that, "Notice u/s 133(6) was issued to the following parties to confirm the genuineness of purchase: S. No. Name of the Party PAN 1. SUNNY GUPTA AWOPG1107G 2. CHHOTU CFOPC1301R 3. SHYAMU MOUPS3777N 4. SIVA SASHIDANADAM THIRUNAVUKKARASU BJTPT5046A 5. ARVIND ROY DTTPR8641P 6. VIKAS BABU DJHPB1591Q 7. SHEETAL MKTPS1894P 8. SAKURANSARI CZAPA0979F 9. ARUN KUMAR TYAGI AHZPT3946J But no compliance has been made by them. Most of the parties from whom purchase were made by th....
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....f the account is doubtful. Further, in absence of any submission or documentary, evidences as asked for vide statutory notices from the assessee with regard to the deductions, expenses, stock etc. claimed in the financial statements including the Profit and Loss Account and Balance Sheet, the correctness and completeness of the accounts is beyond the scope of verification and satisfaction of the Assessing Officer. It is the duty of the assessee to explain or substantiate his claim or' deductions, expenses, stock etc. when the Income-tax Return (ITR) is selected for scrutiny by producing supporting evidence and books of accounts as and when asked for b. the assessing officer in the course of scrutiny proceedings. But the assessee has 'else in the present proceedings in doing so even though he has been allowed reasonable opportunities as mentioned supra in pursuance to the principle of natural justice.........." viii. The AO also mentions in the order that, "....(vii) The contention of the assessee that the G.P. has been correctly shown and there has been anaccepted DIP in Gross profit ratio for every 4 crore increase, GP has fallen by 2%. Thus looking to th....
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....iable and even the Auditor's report is clearly found to be faulty and un-reliable by the AO. The AO mentions in the order that, "....the correctness and completeness of the accounts is beyond the scope of verification and satisfaction of the Assessing Officer......". The AO has not outrightly added all of the purchases from questionable purchase parties. Further, the appellant's grounds no.-4 & 5 cannot absolve him of the onus cast upon (through statute), to submit such necessary supporting details I evidences/ confirmations etc. of purchase parties. Thus, merely calling them uncontrolled third parties or mere PAN no. without such other facts to complement/supplement and to prove the purchases, is not enough. It is a settled law that, mere furnishing of particulars/PAN is not enough. Thus, the grounds no.1 to 8 are untenable and hence not being allowed. xi. Fresh hearing Notice us/ 250 of the Income Tax Act, 1961 were issued to the assessee as per the chart mentioned below: Notice to the assessee Date of Hearing Remarks 01.03.2023 No Reply 09.04.2024 16.04.2024 No Reply 14.10.2024 21.10.2024 No Reply 06.03.2025 13.03.2025 ....
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.... identity, creditworthiness and genuineness of the transaction. The Appellant being in the business of purchase and sale of Scrap has also not submitted any relevant TCS details. Further, it is believed that, the books o* accounts have been correctly rejected by the AO u/s. 145(3) of the Act and the gross profit correct estimated @ the average of the Gross profit rate disclosed in last two years 9.96% [(8.91 +11.011/2) on the total turnover of the Assessment Year 2021-22, which comes to Rs. 2,56,28,901/- (i.e.Rs.25,73,18,291/- X 9.96%). Hence Rs. 1,75,68,862/- (i.e. Rs. 2,56,28,901/- less Rs. 80,60,039/-) is rightly added to the income of the assessee under the head "Income from profits and gain of business or profession". xvi. Also the onus is on the appellant assessee to prove the transactions and the facts of its case. But in the present case the appellant assessee has failed to do so. Thus, this Appellate authority places its reliance on the following judgments of the Hon'ble Supreme Court and High court: a. The Hon'ble Supreme Court in the case of ChuharmaI Vs CIT (1988) 172 ITR 250 while affirming the view of the Madhya Pradesh High Court has held that 'the ....
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.... the Department was free to reject his explanation and to hold that the amount represented income from some undisclosed source.' d. And it was also held that, the onus of proving the source of an amount received lies squarely on the assessee. Reliance is placed on the decision of Hon'ble Calcutta High Court in Unit Construction Co Ltd Vs. JCIT (260 ITR 189) wherein it was held that (extracts reproduced): "....In as much as, section 68 of the Income-tax Act, essentially contains a deeming provision, which applies when the assessee's explanation is rejected. Section 68 does not imply that the books of account are to be rejected in order to hold otherwise than the entries made. On the other hand, it implies addition only when the discrepancies are not explained by the assessee to the satisfaction of the Assessing Officer. The same principle will apply in cases under sections 69 and 69B. The onus of proving me source of a sum of money is on the assessee. If he disputes the liability for tax, it is for him to show that the receipt was not income or that it was exempted from taxation under the law. In the absence of any proof, the Assessing Officer is entitled t....
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.... Appellate authority, non- submission of relevant facts/ evidences and non-compliance during these appellate proceedings and the referring to the Judgments of Hon'ble Apex/ High Courts, this Appellate authority is in the view that, the addition amounting to Rs. 1,75,68,862/- made by the AO to the income of the assessee under the head "Income from profits and gain of business or profession", after rejecting his books of accounts u/s. 145(3) of the Act and rejecting the Auditor's report due to it being faulty & unreliable and then going on to estimate the Gross profit (GP) for this AY which is the average of the Gross profit rate disclosed by the appellant in the last two years and which is found to be very fair, it is thus UPHELD. The grounds of appeal no.-1 to 8 are not allowed. Lastly, the ground no.-9 is general and is hence not adjudicated upon further. * In the result, the appeal is NOT ALLOWED." 10. The assessee's case is that in spite of all documents placed before the authorities below, the Ld. Assessing Officer by rejecting the books of accounts of the assessee made addition on estimated basis on the gross profit disclosed in the last two years at 9.96% to the t....
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....ber of occasions, no compliance was made and, therefore, the matter was decided on merits. In the absence of any bills/vouchers provided by the assessee or the bank statement in support of the purchase and selling of scrap qua the parties the identity and credit worthiness of the parties was not found proved by the Ld. CIT(A). Neither the genuineness of the transaction having been proved by the appellant before the First appellate authority as it is evident from the order passed by the Ld. CIT(A). No relevant TCS details filed before him. It is a fact that the assessee to prove the transactions but in the present case it has failed to do so and in this regard, the Ld.CIT(A) relied upon the order passed by different judicial forum including the Hon'ble Apex Court in the case of Chuharmal vs. CIT reported in (1988) 172 ITR 250 wherein addition under Section 69 of the Act was challenged and the expression 'income' had given a wider connotation which resulted in gain like the assessee before us and such addition was confirmed. The source of amount received needs to be proved by the assessee as of the observation made by the Ld.CIT(A) following the judgement passed by the Hon'ble High C....