Case Law Details
PCIT Vs Mahabir Jute Mills Lts. (Allahabad High Court)
The case of PCIT vs. Mahabir Jute Mills Ltd. before the Allahabad High Court pertains to an appeal filed under Section 260-A of the Income Tax Act, 1961. The appeal arose from an order of the Income Tax Appellate Tribunal (ITAT), Varanasi Bench, which dismissed the appeal filed by the revenue and upheld the order of the CIT (Appeals) for the assessment year 2014-15.
The issues raised in the appeal revolve around the assessment made by the Assessing Officer (AO) concerning the determination of gross profit, disallowance of certain expenses under Section 40-A(3) of the Act, and the deletion of an addition related to unverified consignment sales expenses.
The first question of law raised in the appeal pertains to the AO’s adjustment of the gross profit by applying the average gross profit rate of the previous three assessment years. The AO made this adjustment after rejecting the books of accounts due to various findings affecting their credibility. The court noted that while the AO made adjustments based on certain findings such as cash payments exceeding Rs. 20,000 and unverified consignment sale expenses, there was no specific challenge to the acceptance of the books of accounts by the CIT (Appeals). The Tribunal, upon examination, found that the vouchers for cash expenditures were produced before the AO, and except for two expenditures, all others were duly vouched. Consequently, the Tribunal deleted the addition made by the AO under Section 40-A(3) of the Act. Regarding the ad hoc disallowance of consignment sale expenses, the Tribunal found it to be an academic issue as no addition was made in the final computation of income. Therefore, the court concluded that in the absence of any other objections to the books of accounts before the Tribunal, there was no basis to reject them. As a result, the Tribunal did not err in confirming the order of the CIT (Appeals), and the appeal lacked merit.
The court emphasized the principle that the AO’s jurisdiction is confined to examining the correctness and completeness of the books of accounts and cannot exceed this by rejecting the gross profit rate disclosed by the assessee. Since the CIT (Appeals) had accepted the books of accounts without challenge, the AO’s adjustments were deemed unwarranted.
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