ITO Vs Sanjay Singh (ITAT Agra)
Summary: The Revenue filed two appeals for AY 2018-19 against orders of the CIT(A), NFAC. In the first appeal, the AO rejected the assessee’s books and estimated business income at 10% of turnover after making additions for opening capital, opening stock, sundry creditors and cash deposits. The CIT(A) deleted additions relating to sundry creditors, opening stock and cash deposits. ITAT Agra held that once the books were rejected and business income estimated, separate additions for those business items were not warranted, as they were reflected in the same rejected books and their separate addition would amount to double addition. In the second appeal, the AO had disallowed purchases of ₹225.96 lakh allegedly made from entities involved in input tax credit fraud/evasion and added ₹203.37 lakh after the 10% estimation. The Tribunal held that, having confirmed the CIT(A)’s approach in the first appeal, separate addition of bogus creditors/purchases was also not required once the books were rejected. Both Revenue appeals were dismissed.
Cases Discussed
- Malpani House of Stones vs. CIT (395 ITR 385) (Rajasthan High Court)
- Vijay Trading Co. vs. ITO (76 Taxmann.com 366) (Gujarat High Court)
FULL TEXT OF THE ORDER OF ITAT AGRA
Aforesaid appeals by revenue for Assessment Year (AY) 2018-19 arises out of separate orders of learned first appellate authority. First, we take up appeal ITA No.181/Agr/2023 which arises out of an order of learned Commissioner of Income Tax (Appeals), NFAC [CIT(A)] dated 29¬09-2023 in the matter of an assessment framed by Ld. AO u/s 144 r.w.s. 144B of the Act vide order dated 22-04-2021. At the time of hearing, none appeared for assessee. Therefore, the appeals were heard with the able assistance of Ld. CIT-DR who pleaded for restoration of assessment order. Upon perusal of case records, the appeal is disposed-off as under.
2. The assessee’s case was scrutinized to verify business purchases and quantitative details. In the absence of any response as forthcoming from the assessee, Ld. AO added opening capital, opening stock, sundry creditors and cash deposits to the income of the assessee. All the four items aggregated to Rs.12.84 Crores. The Ld. AO also rejected the books of accounts and estimated the income @10% of turnover which resulted into another addition of Rs.7.88 Crores.
3. Upon further appeal, Ld. CIT(A) substantially confirmed the assessment except for deletion of addition of sundry creditors, opening stock and cash deposit for Rs.12.73 Crores. The same was on the ground that the when income is estimated basis by rejecting the books of accounts, no further addition for these items could be made on the basis of same books of accounts as held by Hon’ble Rajasthan High Court in the case of Malpani House of Stones vs. CIT (395 ITR 385) as well as the decision of Hon’ble Gujarat High Court in the case of *Vijay Trading Co. vs. ITO* (76 Taxmann.com 366). Aggrieved, the revenue is in further appeal before us.
4. From the assessment order, it is quite clear that Ld. AO has rejected the books of accounts and estimated the business income of the assessee. In such a case, separate addition of sundry creditors, opening stock and cash deposit is not warranted since the same are in the course of assessee’s business only. The same are reflected in the very books of accounts which have been rejected by Ld. AO. In such a case, adding the same again would amount to double addition which is impermissible. The case laws as cited by Ld. CIT(A) duly supports this view. Therefore, we do not find any reason to interfere in the same. ITA No.181/Agr/2023 stand dismissed.
5. ITA No.182/Agr/2023 is directed against re-assessment order dated 31-03-2023 as passed by Ld. AO. The case was reopened on the ground that the assessee made paper purchases from two entities which were involved in Input Tax Credit fraud / evasion. Based on investigation findings, Ld. AO rejected the submission of the assessee and proceeded to disallow the purchases of Rs.225.96 Lacs as made from these two entities. After deduction of 10% estimation as made in regular assessment order, Ld. AO added the remaining amount of Rs.203.37 Lacs to the income of the assessee. The Ld. CIT(A), considering first appellate order dated 29-09-2023, held that the books were rejected and income was estimated and therefore, separate addition of bogus creditors would not be required. Aggrieved, the revenue is in further appeal before us.
6. Since we have confirmed first appellate order dated 29-09-2023, it would be quite logical to confirm this order also. We concur that once the books are rejected, separate addition of bogus creditors / purchases would not be required. We order so. The appeal stand dismissed.
7. Both appeals stand dismissed.
Order pronounced u/r 34(4) of Income Tax (Appellate Tribunal) Rules, 1963.
