Virupakaxappa Sidramappa Bembalgi Vs ITO (ITAT Panaji)
ITAT Panaji held that ad-hoc determination of taxable income without invoking special audit u/s. 142(2A) of the Income Tax Act not only jostled ad-hoc & irrational estimations but led to farfetched determination due to complexity of business. Accordingly, matter remanded back to AO.
Facts- The assessee is partnership firm engaged in trading business of precious metal. The return of income filed on 20/10/2017 by the assessee declaring total income of ₹NIL was selected for scrutiny wherein the books of account were rejected by the Ld. AO and estimated a gross profit @40% of estimated sales of ₹250Lakhs and made a consequential addition of ₹45,29,674/- while assessing the total income u/s 143(3) of the Act.
CIT(A) dismissed the appeal of the assessee. Being aggrieved, the present appeal is filed.
Conclusion- Held that when such audited results are rejected, then the assessing officer not being an expert of accounts, having regard to complexity of business of the appellant was duty bound to invoke & direct a special audit u/s 142(2A) of the Act. The outcome of such direction could have to rightly enabled the Ld. AO in deducing taxable income in the manner & spirt provided u/s 144 of the Act. The ad-hoc determination of taxable income without such assistance from expert in the present case not only jostled ad-hoc & irrational estimations but led to farfetched determination. The said capricious determination of income since based upon ad-hoc estimation of sales/turnover and ad-hoc estimation of gross profit which in turn was devoid of all pivotal information & cogent material taken on records and without putting the appellant to notice is inconsonance with the provisions of section 144 of the Act. Therefore, we disapprove the estimations and resultant determination of income and for the reason deem it fit to remand the matter to the Ld. AO for fresh determination of income in accordance with law after complying with the provisions of section 142(2A) of the Act.
