INCOME TAX ACT, 1961

Section 154

Rectification - Turnover estimated by AO - Later rectified by AO himself - CIT(A) declined to take cognizance of 154 action -- -- ITAT nullified the order of CIT(A)

The assessee was subjected to search action under section 132 during which incriminating documents were found and seized and the assessment framed under section 153A read with section 143(3) on the basis thereof. Since, during the assessment proceedings, the assessee failed to produce books of account, her liquor business income was estimated by adopting a net profit rate of 4% on a turnover of Rs. 11,76,50,385 for the assessment years 2010-11 which resulted in addition of Rs. 43,25,223. The assessee appealed there against before the CIT(A) and during the pendency thereof, moved an application under section 154 with the AO, claiming the turnover of her liquor business to be, in fact, at Rs. 1,05,71,935, i.e., as per the audited accounts. The same was almost accepted by the AO vide order under section 154, revising the estimated turn over to Rs. 1,05,87,289 which was brought to the notice of the CIT(A). But, it was not accepted by the CIT(A) on the ground that the AO estimated the turnover and net profit after due application of law and rejecting the books of account, after taking into account the seized material found during the course of search and the addition of Rs. 43,25,223 was confirmed. Held: On perusal of assessment orders for assessment years 2015-16 and 2016-17, it was found that the AO accepted the turn over on the basis of audited books of account of the assessee which were Rs. 3,19,51,800 and Rs. 3,72,23,847 respectively. Thus, the method of uniformly estimating the turnover after rejecting the books of account was that as revealed through audited books of accounts. Hence, adopting Rs. 11,76,50,385 as estimated turn over was a mistake on the part of the AO coming within the purview of section 154. In view of this, the addition of Rs. Rs. 43,25,223 , as confirmed by the CIT(A) was deleted.

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2010-11

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