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2026 (4) TMI 553
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....e Act dated 09/08/2018 and 11/09/2018 is illegal and bad in law. 4. That on the facts and in the circumstances of the case and in law, the case of the appellant company has been transferred from income Tax Officer, Ward 3(4), Raipur to DCIT, Circle 3(1), 'Raipur without an order u/s. 127 of the Act, hence, the entire assessment proceeding is illegal and bad in law. 5. That on the facts and in the circumstances of the case and in law, the assessment order passed u/s. 143(3) of the Act dated 31/12/2019 is illegal and bad in law. 6. That on the facts and circumstances of the case and in law, the assessing officer erred in making an addition of Rs. 74,50,000/- u/s. 68 on account of unsecured loan from Raghupati Vinimay Private Limited. 7. That on the facts and circumstances of the case and in law, the assessing officer erred in making an ad-hoc disallowance of Rs. 4,28,540/- under the head other expenses claimed by the appellant." 2. That so far Grounds of appeal No. 1, 3, 4 and 5 are concerned, it is contended that notice u/s. 143(2) of the Income Tax Act, 1961 (for short 'the Act') was not issued by the jurisdictional A.O. However, after hea....
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....ed (i.e., Handling and Transportation expenses) cannot be done and impermissible as per law is devoid of merit as for estimated disallowances rejection of books of account is not required. It is a fact that the appellant failed to 'produce complete set of bills and is also a fact that most of these payments were made in cash and the appellant was able to produce only the self-made vouchers and thus failed to fully establish the genuineness of the above expenses claimed to be incurred. The above disallowance made by the A.O on estimate basis is confirmed and the grounds of the appellant are dismissed. The case laws submitted by the appellant are not applicable in the present case as the facts in those cases are different." 7. That on careful perusal of the records and the facts and circumstances, it is discernable that the A.O has not rejected books of account in terms with Section 145(3) of the Act which means as per Department there is no defect in so far transaction recorded in the books of account of the assessee are concerned. In absence of such rejection of books of account, the A.O had further proceeded to make estimate addition through ad-hoc disallowance of 10% of H ....
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....ertain projects when Books of Accounts have not been rejected. Considering the factual position that there is no reference in the Assessment Order made by the AO regarding the Books of Accounts (this has been fairly admitted by the Revenue before ITAT), we are not, therefore, labouring through the labyrinth of case laws relied on by CIT (A). The relevant portion pertaining to admission in this regard by the Revenue is at Paragraph 4 of the order of ITAT and the same reads as follows: "4. On a query from the bench, whether the assessing officer rejected the books of account during the course of assessment proceedings, the learned department representative very fairly submitted that there is no reference in the assessment order in the rejection of books of account" 4(f) As this factual position has been admitted, ITAT, dismissed the appeal 9f the Revenue by holding that profits of an Assessee cannot be estimated without rejecting the books of account. 4(g) ITAT has expressed its considered opinion that only when an assessee is not maintaining Books of Accounts properly and the correct income cannot be estimated on the basis of the Books of Accounts, the Boo....
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....udgment assessment. On facts, the Revenue has not been able to show any defect in the respondent's records which would warrant rejection of the books and making a best judgment assessment. Thus, on facts the view taken by the Tribunal is a possible view. Therefore, no substantial question of law arises. Thus not entertained." [Emphasis supplied] 21. The Division Bench of the Karnataka High Court in the case of CIT v. Anil Kumar & Co. [2016 SCC OnLine Kar 8512], has held that in cases where the Revenue had failed to reject the books of account and proceeded to an estimation of income without framing the assessment under Section 144 of the Act, such an action is unsustainable as per law. The relevant paragraph of the said decision is reproduced as under:- "11. In so far as the estimation of gross profit made by the Assessing Officer modified by the Commissioner of Income-tax (Appeals), the Tribunal has rightly held that when the books of account of the assessee had not been rejected and assessment having not been framed under section 144 of the Income-tax Act the said authorities were in error in resorting to an estimation of income and such exercise un....
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.... "8. Section 29 of the Act prescribes that the income referred to in section 28 which is assessable under the head "Profits and gains of business or profession" shall be computed in accordance with the provisions contained in sections 30 to 43A of the Act. Section 145 of the Act provides for computation of income under section 29 on the basis of books of account and the method of accounting regularly followed by the assessee. However, where the Assessing Officer is not satisfied with the correctness or completeness of the said books, he may reject the same and estimate the income to the best of his judgment in accordance with the provisions of section 144 of the Act. When an estimate is made to the best judgment of an Assessing Officer, he substitutes the income that is to be computed under section 29 of the Act. Once the best judgment assessment is made by fixing a rate of net profit, the assessee's claim for deduction on account of expenses cannot be deemed to have been ignored. The net profit rate is applied after taking into consideration all factors and it accounts for all the deductions which are referred to under section 29 and are deemed to have been taken into consid....
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.... under the facts and circumstances of the case, therefore; we do not find any infirmity in the same. Accordingly the same is upheld and the ground raised by the revenue is dismissed." 27. Also, the decisions relied upon by the Revenue do not essentially support its case as the facts of the cited cases are strikingly different from the case at hand and therefore, the same are distinguishable. Though the decision of the Division Bench of the Calcutta High Court in Unit Construction Co. Ltd. would only have a persuasive value, however, a closer scrutiny of the same leads us to the conclusion that the said decision was rendered in the context of unexplained investments as per the scheme of Section 69 of the Act. In Paradise Holidays, the issue pertained to the rejection of books of account without an appropriate justification and therefore, unlike the present case, the challenge was laid with respect to the rejection of books of account itself. 28. So far as the proposed question (D) is concerned, the same is a matter of fact which has been settled by the ITAT which states that the action of the AO in making an addition of Rs. 1,00,000/- on the protective basis, which....
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....well as on examination of the facts, Grounds of appeal No.2 & 7 raised by the assessee is allowed. The A.O is directed to delete the addition from the hands of the assessee. 11. In the result, appeal of the assessee is partly allowed for statistical purposes as per afore-stated terms. Order pronounced in the open court on 19th March, 2026. ============= Document 1 18-03-26-03 I BC 19/2/2016 BEFORE THE HON'BLE INCOME TAX APPELATE TRIBUNAL, RAIPUR BENCH, RAIPUR (C. G.farfar af 4 4 0 Appellant : Step Logistics Private Limited, Raipur [C.G.) Ministry of Law & Justice कà¥à¤°à¤®à¤¾à¤‚क .. 1407 Respondent : Dy. Commissioner of Income Tax, Circle 1(1}, BaippB(2828 Appeal No. : ITA 636/RPR/2025 बकर अपीलीय अधिकरण, रायपूर Assessment Year : 2017-18 income-Tax Appellate Tribunal, Raipur Subject : Application under Rule 29 for admission of additional evidence. With reference to the above, it is respectfully submitted that during the course of assessment proceedings before the assessing officer and subsequently during th....