TaxTMI 
TaxTMI 
2026 (9) TMI 1715
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....nt proceedings u/s 153A of the Income Tax Act were completed without following the mandatory provisions of the Income Tax Act, 1961, and therefore assessment order so passed is not in accordance with law and deserves to be quashed. 2. On the facts and in the circumstances of the case and in law, approval granted by the ld. Addl. Commissioner of income tax, central Range, Jaipur as required u/s 153D in this case is mechanical in nature and consequent assessment order passed u/s 153A is bad in law and deserves to be quashed. 3. On the facts and in the circumstances of the case and in law, ld. CIT(A) has erred in confirming addition of Rs. 6,52,698/- made by ld.AO being the GP on the unrecorded sales worked out as a result of unrecorded purchases made by assessee, arbitrarily. 3.1 That, ld.CIT(A) has further erred in confirming addition of Rs. 6,52,698/- made by ld.AO by applying GP rate of 5.91% (Average GP rate of preceding 4 years) on sales of Rs. 1,10,43,961/- (estimated to be incurred out of unrecorded purchases made from M/s Triveni Grit Manufacturing Co.) as against actual GP rate of (-) 2.02% i.e. Gross Loss during the year, arbitrarily. Appellant pr....
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....eal either before or at the time of hearing of appeal." 3. The assessee has also filed additional grounds of appeal, which read as under: "7. Appellant prays that telescoping set off of the income finally assessed in the hands of the assessee company vis a vis application in the hands of assessee company deserves to be allowed from the income of the year under consideration or that assessed in the preceding years. 7.1. Appellant further prays that surplus available out of income finally assessed in the hands of assessee company (if any, remaining after giving set off to the assessee as per grounds of appeal) deserves to be allowed as source available in the hands of the key person of the group Sh. Mahesh Gupta in his individual hands for being set off against application /investment/expenditure or as balance available." The claim of telescoping was raised before the learned CIT(A) and has been dealt with by him in the impugned order. The additional grounds introduce no new facts and rest on material already on record. They are accordingly admitted for adjudication. 4. Briefly stated, the facts of the case are that the assessee is a private limited company....
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....recorded in books, please explain why the amount of Rs. 28,00,000/- (2500000+300000) may not be added to your total income for A.Y. 2017-18." The assessee replied that the sums were cash received against the unaccounted sales of Rs 1,10,43,961 already worked out by it, that the employee had erroneously described them as loans, and that the entries stood recorded under the head "Mahesh Gupta Ji A/c" and not in its own books. The AO rejected the explanation and, holding that the identity, creditworthiness and genuineness of the creditors were not established, made the addition. 7. In appeal, the learned CIT(A) sustained the addition of Rs 6,52,698, holding in paragraph 4.2 of his order that "the addition of Rs. 6,52,698/- made by the AO by applying a reasonable GP rate on the estimated unrecorded turnover is well-founded, logically sustainable, and legally permissible". As regards the sum of Rs 28,00,000, he held in paragraph 5.2 that the appellant "failed to establish the identity, credit worthiness and genuineness of the loan creditors at the assessment as well as during this appeal stage", and upheld the addition. On a separate ground relating to telescoping, he directed the....
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....ase of grit of Rs 33,61,782, and the AO has accepted that estimate in its entirety. The dispute therefore lies within a narrow compass, namely the rate at which profit on that turnover is to be computed. 12. Having accepted the assessee's working of the unaccounted turnover, the AO has substituted the rate that forms part of that very working. The two are limbs of one exercise resting on the same assumptions, and no reason has been recorded why those assumptions are dependable for quantifying the turnover but not for quantifying the profit. More fundamentally, the rate of (-)2.02 per cent is not an estimate at all. It is the audited result of the ready mix concrete activity for the year, the recorded sales of that activity being Rs 24,49,97,542 and the gross loss thereon Rs 49,61,403. The books of account have not been rejected, section 145(3) of the Act has not been invoked, and no defect in the books has been pointed out by either authority; on the contrary, the learned CIT(A) has recorded that the AO accepted that the regular books of the appellant showed a gross loss. 13. Where the recorded turnover of the same product, manufactured at the same plant, in the same year and....
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.... basis for the first time in the year before us, and did so in the only year in which the rate of the year was negative. No reason for the departure has been recorded. A rate cannot be adopted or discarded according to whether it yields an addition. Having applied the rate of the year for four consecutive years on the same material, the AO was bound, in the absence of any change in circumstances, to apply the rate of the year for the year under consideration as well. The requirement that like cases be treated alike leave no room for a different course. 16. The decisions relied upon by the learned CIT(A) lay down that an estimate of profit is permissible where the records relating to the transactions are incomplete or unreliable. That proposition is not in dispute, the entire computation here being an estimate. It does not, however, answer the question before us, which is not whether an estimate may be made but whether the particular rate adopted is supported by the material on record. For the reasons set out above, we hold that it is not. The addition of Rs 6,52,698 is deleted and grounds no. 3 and 3.1 are allowed. 17. Grounds no. 4 to 4.3 relate to the addition of Rs 28,00,0....
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....000 "has been deleted giving the benefit of telescoping", so that his order does not speak with one voice on this issue. 19. The assessee has, in addition, placed material to show that the very same sum has been considered in the individual assessment of Shri Mahesh Gupta. Its submission, extracted at page 22 of the order of the learned CIT(A), reads as under: "It is submitted that the above facts are further fortified with the Assessment order of A.Y.2017-18 passed in the Mahesh Gupta Ji, wherein in Annexure A to Assessment Order, entry of Rs. 25,00,000/- from S.C. Gupta Ji is appearing as under: ... ....In view of above, it is submitted that since, entries on the basis of which addition is made are part of "Group Fund" of Sh. Mahesh Gupta and "Peak balance" of entries in such "Group Fund" has been duly examined and accepted by ld.AO and therefore addition made in the case of assessee again on such entries tantamounts to double addition and deserves to be deleted." The submission, as recorded at the same page, is that the two entries making up the sum of Rs 25,00,000, namely Rs 20,00,000 dated 21.11.2016 and Rs 5,00,000 dated 24.11.2016, both in the name of....