The Chandigarh Bench of Income Tax Appellate Tribunal (ITAT) held that inquiries made by AO cannot be held erroneous on mere opinion of CIT(A) asking for further inquiry.
The assessee, Sh. Rajeev Goyal deals in the trading business of iron and cement in the name and style of M/s Pardeep Ispat (P) Ltd., Sirsa. Return declaring an income of Rs. 89,620/- was e-filed by the assessee on 12.10.2016 which was processed as such u/s 143(1) of the Act. Subsequently, the case was selected for compulsory scrutiny and notice was issued u/s 143(2) of the Act. A survey operation u/s 133A of the Act was carried out at the business premises on 10.9.2015. During the course of the survey, some excess cash, unaccounted loans and advances to various parties, unexplained investment in furniture and fixtures were found.
The Assessing Officer had made detailed inquiries regarding the assessee’s claim of purchases, sales, sundry debtors, sundry creditors and trading results declared by the assessee in the return of income. However, since on detailed enquiry, the AO rejected the trading results, he estimated the business profit of the assessee by applying the net profit rate declared in subsequent years. The Pr. CIT has neither disputed the rejection of books of accounts by the AO by invoking section 145 of the Act and nor has disputed the application of net profit rate declared in subsequent years.
He has, however, held that based on the enquiries made, addition ought to have been made on account of creditors and disallowance of purchases claimed by the assessee. He has also directed the AO to conduct detailed inquiries regarding the purchases and sales made by the assessee by conducting third party verifications, examination of the creditors, etc. and after inquiries necessary additions to be made as per law. The order of the Pr. CIT on this count is, thus, cryptic, vague and contradictory. No effort has been made to spell out as to in what manner there was lack of enquiry by the AO in the order of assessment vis-a-vis the trading results declared by the assessee. The Assessing Officer had made adequate inquiries as is evident from the order of assessment as well as from the replies furnished.
The coram of Accountant Member, Vikram Singh Yadav and Judicial Member, Sudhanshu Shrivastava in view of the documentary evidences, as called for and examined by the Assessing Officer, it is very much evident that the Assessing Officer had duly applied his mind to the issue of trading results and it was only thereafter that he had estimated income of the assessee.
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