Sec 145 Accounting Method cannot be rejected without examining books

IN THE INCOME TAX APPELLATE TRIBUNAL

The Relevant Text of the Order as follows :

20. In the impugned order in this appeal, as the assessee did not produce the books of account and vouchers before the ld AO, which is specifically mentioned by the ld AO and the ld CIT(A). This issue is harped upon vehemently by the ld DR, but disputed by the assessee. Therefore,

a. on the basis of the findings of the assessment orders for assessment year 2010 – 11 and 11 – 12, which did not make any reference to the production of the books of accounts by the assessee and further did not speak about any other defect in quantitative details,

b. the appellate order for both these years specifically not rejecting the argument of the assessee with respect to the correctness of the books of accounts,

c. Specific difference in the quantities of raw material and other material in the impugned assessment year, which is not the case in assessment year 2010 – 11 and 11 – 12.

according to us, the addition cannot be deleted based on the argument of the learned authorised representative that the issue in appeal is squarely covered in favour of the assessee by the order of the coordinate bench in assessee’s own case in earlier years.

21. As there is serious dispute between the parties whether books of account were produced before the ld AO or not, both the parties readily agreed that if the books of account are produced before the ld AO, issue may be looked at from the point of view of the decision of the Hon’ble High Court in assessee’s own case provided the other facts or any defects are not found in those accounts. Needless to say that the issue is squarely covered in favour of the assessee if the addition has only legs to stand is the qualification of the auditor. Furthermore, the quantitative difference harped upon by the learned assessing officer is also with respect to the letter submitted by the assessee and the tax audit report. Therefore, to find out the quantitative difference also with respect to Raw materials and other materials it is necessary to examine the books of accounts of the assessee. In the present case, the whole addition is made by applying the provision of section 145(3) of the Act. The provisions of Section 145 (3) can only be applied if the assessing officer is not satisfied about the correctness or completeness of accounts of the assessee primarily. Therefore, even without examination of the books of accounts of the assessee which assessee has not produced despite called for by the assessing officer, application of the provisions of Section 145 (3) is premature. Therefore, as the learned authorised representative has agreed to produce the books of accounts before the assessing officer and the learned DR has also expressed his willingness on behalf of the learned assessing officer to examine it, therefore, in the interest of justice, we set aside the whole issue back to the file of the ld AO with a direction to the assessee to produce books of accounts and vouchers before him for examination. The ld AO is also directed to examine it and then decide the issue, following the order of the Hon’ble Delhi High Court as far as it relates to valuation, and decide the issue on merits with respect to the other grounds. The assessee is directed to produce the books of account before the ld AO within 120 days from the date of this order by taking prior appointment of the ld AO. The assessing officer is directed to pass the order in the name of Dr. Oetker India Pvt. Ltd. Accordingly, ground No. 2 to 7 of the appeal are set aside to the file of the ld AO.

22. In the result, the appeal of assessee is partly allowed.

Order pronounced in the open court on 23 /07/2020.

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