ACIT Vs Omshree Agrotech Private Ltd (ITAT Pune)
ITAT Pune held that rejection of books of accounts invoking provisions of section 145(3) of the Income Tax Act simply because of lower gross profit rate in comparison to earlier years or with other assessees is not suffice and will not stand the test of rejection. Accordingly, such rejection is unsustainable
Facts- The respondent assessee is a private limited company engaged in manufacturing and trading of edible & non-edible oils etc. Whereupon a search action u/s 132 of the Act on ‘Omshree Group’ [Searched Party] was conducted, wherein as many as seven residential premises, three factory premises and a locker maintained at treasury branch of SBI Bank, Dhule were also covered.
Beside aforestated search action on the assessee group, a simultaneous survey action u/s 133A of the Act were also conducted at the factory premise of M/s Shree Gajanan Oil Mills, M/s Om Industries and at the business premises of M/s Sunil Traders [Other Party].
Consequent to search action u/s 132 of the Act, a proceedings u/s 153A of the Act were initiated against the assessee by service of notice thereunder and in response thereto, the assessee company filed its returns of income for six assessment years comprised of AY 2008-09 to AY 2013-14 and an ITR for the year of search i.e. AY 2014-15 was also filed.
The income returned in these ITR filed under 153A proceedings, in the opinion of AO did not reflect the true income of the respondent, for the reason subjecting them to a scrutiny by notice u/s 143(2) culminated these assessment by separate orders u/s 143(3) r.w.s. 153A of the Act with several additions.
In capping the aforestated assessment u/s 143(3) r.w.s. 153A of the Act, the Ld. AO invoking the provisions of section 145(3) of the Act has first rejected the books of account of the respondent assessee for all seven years including the year of search and made addition inter-alia differential amount of gross profit estimated @4% over the on amount of gross profit declared in the respective ITRs filed u/s 153A of the Act.
CIT(A) disapproved the action of AO. Being aggrieved, revenue has preferred the present appeal.
Conclusion- Therefore, it is expected that the assessing officer shall bring on record specific defects in the books of account of the assessee before invoking the provisions of Section 145(3), thus rejections of books of account simply on lower gross profit rate in comparison to earlier years or with other assessees placed in similar circumstances would not suffice and will not stand the test of rejection.
In our considered opinion, the shortfall of cash represents the utilization and since such shortfall undisputedly emanated from the business premises of the respondent, the presumption always that it must have been used for the outgoing business expenditure which remained to be accounted in the books of account of the assessee. Therefore it is hard to believe by any stretch of imagination that the non-existence of cash (to the extent of shortfall) gives rise to unaccounted money. An inverse position that cash is found in excess or over what has been found recorded in the books of account, can give rise to unaccounted or unexplained money, certainly not in the present case.
FULL TEXT OF THE ORDER OF ITAT PUNE
These appeals of the Revenue and Cross Objection thereagainst of the assessee are directed against the consolidated order of Commissioner of Income Tax (Appeals)-12, Pune [‘CIT(A)’ hereinafter] dt. 30/03/2022 passed u/s 250 of the Income-tax Act, 1961 [‘the Act’ hereinafter], which in turn emanated from separate orders of assessment dt. 07/03/2016 framed u/s 143(3) r.w.s. 153(A) of the Act by the Asstt. Commissioner of Income Tax, Central Circle-2, Nashik [‘AO’ hereinafter] for assessment years [‘AY’ hereinafter] 2009-10 to 2014-15.
2. Since issues in all these appeals and cross-objections are based on similar, identical facts and further based on a search action conducted on ‘Omshree Group’ therefore, on agreement between rival parties, for the sake of brevity and convenience, we proceeded to hear these matters together for being disposed of by this common and consolidated order.
3. Succinctly stated undisputed facts borne out of case records are;
31. The respondent assessee is a private limited company engaged in manufacturing and trading of edible & non-edible oils etc. Whereupon a search action u/s 132 of the Act on ‘Omshree Group’ [‘Searched Party’ hereinafter] was conducted on 20/11/2013, wherein as many as seven residential premises, three factory premises and a locker maintained at treasury branch of SBI Bank, Dhule were also covered.
3.2 Beside aforestated search action on the assessee group, a simultaneous survey action u/s 1 33A of the Act were also conducted at the factory premise of M/s Shree Gajanan Oil Mills, M/s Om Industries and at the business premises of M/s Sunil Traders [‘Other Party’ hereinafter].
3.3 Consequent to search action u/s 132 of the Act, a proceedings u/s 153A of the Act were initiated against the assessee by service of notice thereunder and in response thereto, the assessee company filed its returns of income [‘ITR’ hereinafter] for six assessment years comprised of AY 2008-09 to AY 20 13-14 on 29/09/20 14 and an ITR for the year of search
i.e. AY 2014-15 was filed on 18/11/2014.
3.4 The income returned in these ITR filed under 153A proceedings, in ,the opinion of the Ld. AO did not reflect the true income of the respondent, for the reason subjecting them to a scrutiny by notice u/s 143(2) culminated these assessment by separate orders u/s 143(3) r.w.s. 153A of the Act with several additions as adumbrated hereinafter;
