No Addition can be made on Estimated basis, without rejecting Books of Account of Assessee: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Ahmedabad bench consisting of Waseem Ahmed, Accountant Member and Siddhartha Nautiyal, Judicial Member held that no addition can be made on estimated basis, without rejecting books of account of assessee.

Investigation team of the Excise Department revealed that tile manufacturers were declaring only 50% of the actual ex-factory prices and MRP for the purpose of payment of Excise duty. Consequently, the DGCEI carried out search at the business premises of the assessee, Samir Kishor Parekh and it was alleged that the assessee had resorted to certain measures like removal of ceramic frit, undervaluing of finished goods and issuing parallel invoices etc. to evade excise duty. On the basis of the investigation carried by the Excise Department, the Income Tax Department initiated assessment proceedings and Assessing Officer made certain additions to the returned income of the assessee, which were confirmed by the Commissioner of Income Tax (CIT) in appeal for the impugned year under consideration.

In appeal before ITAT, the assessee submitted that the aforesaid additions have been made on the basis of investigation additions made by the Central Excise Department, against which the assessee has filed appeal before the Custom Excise and Services Tax Tribunal (CESTAT) in respect of which an order was expected shortly. In view of the above facts, the ITAT set aside the file to the CITfor adjudication afresh in the light of the order of the CESTAT. In the set aside proceedings before the CIT, the assessee submitted that CESTAT had deleted all demands for AY 2008-09 under consideration so far as Central Excise proceedings are concerned.

Accordingly, the assessee inter alia submitted that since the assessment was framed primarily relying on the enquiries carried out by the Central Excise officers, and now since the matter has been decided by CESTAT in favour of the assessee, the income tax demands are liable to be set aside. The CITaccordingly gave part relief to the assessee and restricted the disallowance to 40 lakhs. The assessee is in appeal before the Tribunal against the order of CIT confirming the additions of 40 lakhs.

ITAT held that “The additions have been sustained by CIT on purely estimate basis, as is evident from the observations made by Ld. CIT(Appeals) while passing the appeal order. It is well-settled law that no addition could be made on estimated basis without rejecting books of account of assessee.”

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