Assessee cannot take advantage of accepted accounting for other periods after voluntarily disclosure of receipt of certain amount

Issue before court:

Whether ITAT was correct in upholding the order of CIT (A),who deleted addition made u/s 68 as undisclosed income, relying upon the assessment orders of another year and ignored the facts that assessee himself declared receipt of certain amount.

Brief facts of the case:

• The assessee during the relevant AY 2005-06 claimed benefit of Section 44AF of Income Tax Act and filed a return disclosing income of Rs. 2,15,292/-.
• Subsequently, the assessment was reopened under Section 147 of the Act. AO.
• The AO considered the source of a separate cash deposit of Rs. 31,29,880/- and further amount of Rs.16,07,240/-. After adding these amounts, the AO reassessed the income on regular basis bringing them to tax under Section 68 on the ground that this amount was the assessee’s income from undisclosed sources.
• The assessee’s appeal was partly allowed restricting to net profit rate of 5% applied on the amount declared under Section 44AF, i.e. Rs. 2,36,856/-. The ITAT also accepted the assessee’s contention and rejected the Revenue’s appeal.

Contention of the revenue:

• Assessee did not maintain any books of accounts and failed to produce any supporting document in support of his submission that some of the amount pertain to expenditure.
• Assessee himself during assessment proceedings accepted receipt of certain amount against which he cannot produce any corroborative evidence.

Contention of the Assessee:

• AO made no effort to distinguish as to the character of the amounts and that some of them at least constituted expenses.
• It is further argued that the assessee had voluntarily disclosed receivingRs. 16,07,240/- during the course of the assessment and under the circumstances was entitled to the benefit of Section 44AF.
• It is lastly contended that for other periods the assessee’s returns were accepted which implied that this method of accounting was also acceptable to the revenue.

Held by the court:

• ITAT decision, which has merely stated the CIT(A)’s finding and does not contain any reasoning, appears to be guided by the decision on the assessment of other years.
• ITAT was conscious of the fact that its decision favouring the assessee was perhaps unsupportable in law, as is evident from its observation in para 8 that the impugned order would not be quoted as a precedent.
• The assessee had sought the benefit of provision of section 44 AF but the revenue found later that the amounts deposited in its account were far and excessive than what was disclosed and contrary to the provision of the section.

Conclusion:

Assessee relied upon the assessment order of AY 2008-09 before CIT (A) in which the accounting to assessee was accepted by revenue. CIT (A) took cognizance of that order pertaining to AY 2008-09 and quantified net profit of assessee retail business @ 5%. ITAT also confirmed the order of CIT (A). On appeal High Court accepted the contention of the revenue that assessee’s   turnover exceed the limit prescribed under section 44AF after the his voluntarily disclosure and he cannot take advantage of same accepted accountability of some other period.