ITO Vs Balaji Processors (ITAT Chandigarh)
The appeal concerns the assessment for AY 2016–17, where the Assessing Officer (AO) rejected the assessee’s books of account under Section 145(3) and estimated income by applying an 8% net profit rate, resulting in assessed business income of Rs. 12.81 crore instead of the returned income of Rs. 79.85 lakh. The Commissioner of Income Tax (Appeals) [CIT(A)] subsequently reversed the AO’s action. The revenue appealed against this reversal.
The AO noted several deficiencies, including the alleged non-submission of sales and purchase accounts, absence of customer and supplier details, lack of EPF/ESI details for most employees, missing cash book, unverified sales and purchases, and absence of confirmations from 60 of 67 creditors. Based on these observations, the AO rejected the books and estimated income.
Before the CIT(A), the assessee challenged the rejection of books and income estimation, submitting documentary evidence and explanations. The assessee provided capital account details and bank statements of partners, explaining the source of capital introduction through banking channels. Documentary evidence for additions to fixed assets was submitted, and no adverse findings had been made by the AO regarding these. Sales and purchase details, including ledger accounts, lists of creditors and debtors, and relevant statements, were stated to have been furnished during assessment proceedings. The assessee also provided further copies of these documents before the CIT(A).
