Delhi bench of Income Tax Appellate Tribunal (ITAT) set aside the action of Commissioner of income Tax (Appeals) [CIT(A)] affirmed the additions made by the Assessing Officer (AO).
The assessee, Blue Stampings & Forgings Ltd, engaged in the business of manufacturing iron forgings and machining parts of vehicles, filed return of income declaring Rs.2,78,37,670 for the A.Y. 2013-14 in question which was subjected to scrutiny assessment.
The Assessing Officer (AO) added the amount of addition was subsequently revised under Section 154 of the Income Tax Act and eventually an addition of Rs.33,11,182 was retained on the grounds of lower reporting of net profit.
Before the Commissioner of Income Tax (Appeals) [CIT(A)], the assessee contested the Assessing Officer’s stated action. However, the CIT(A) affirmed the additions made as a result of the low net profit.
K.C. Singhal, counsel for the assessee submitted at the outset that the additions of Rs.33,11,182 on account of marginal fall in net profit in question is wholly without any basis made and sustained on flimsy grounds.
Further submitted that the reasons given by the AO for applying the provisions of Section 145(3) of Income Tax Act are that (i) net profit rate declared by the assessee is 6.15% as compared to 6.52% net profit cloaked in the immediately preceding year (ii) the photocopies of vouchers relating to the expenses were produced instead of original bills.
The counsel of assessee submitted that the invocation of Section 145(3) of Income Tax Act cannot be done casually to dislodge the financial records without showing the incompleteness per se in such records.
Furthermore, AO has not embarked upon any inquiry based on alleged photocopy of the bills nor asked for production of the original bill of a particular transaction specifically.
The Tribunal observed that the sole basis for making such estimated addition is that original bills and vouchers were not produced before the AO and thus the completeness of books of account is not established.
The bench further highlighted that AO in the present case has not shown as to how audited the books of account maintained by the assessee are incorrect or otherwise incomplete which is likely to vitiate the true profits of the assessee.
According to Anubhav Sharma (judicial member) and Pradip Kumar Kedia ( accountant member), audited books of accounts cannot be disregarded for failing to produce photocopies of bills.
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