Ambika Garments Vs ACIT (ITAT Jaipur)
ITAT Jaipur held that approval granted under section 153D in a mechanical and consolidated manner without due application of mind is invalid. Accordingly, assessment orders framed under section 153A cannot be sustained.
Facts- A search action was conducted on 01.10.2018 in the case of Karnani Group, Jaipur to which the assessee belongs. Various assets/books of account and documents were found and seized as per annexure prepared while search. The jurisdiction over the case was assigned to ACIT, Central Circle-3, Jaipur on 11.12.2018 vide order u/s 127 of the Act, by Pr. CIT-II, Jodhpur. Accordingly, notice u/s 153A of the IT Act, 1961 for the assessment year 2014-15 was issued on 18.09.2020 and duly served upon the assessee.
AO noted that on the basis of evidence found during the search proceeding, it is evident that assessee was engaged in out of books sales and purchase therefore, regular books of account maintain under the trade name Shri Ambica Garments was not considered as reliable and representing the correct profit of the assessee. In view of aforesaid specific defects in the books of accounts, these books were not considered as reliable or otherwise not capable of deducing the correct profitability of M/s Shri Ambica Garments, therefore, provisions of Section 145(3) were invoked and the books of assessee were rejected. Since the book results were rejected, profits was required to be estimated u/s 144 on the basis of best judgment and thereby the Gross profit was estimated @ 12.5 % considered the past years average profit and thereby AO made the addition of Rs. 3,10,688/-.
