The division bench of the Allahabad High Court, in CIT & Anr v. M/S Pashupati Nath Agro Food Products Pvt. Ltd. Hardoi, observed that if the Assessing Officer (AO) has not rejected the books of account, it means that the assessee has maintained the books of accounts in accordance with the prescribed standards as per s. 145 of the Act. The bench held that in such a situation, the AO cannot make any addition on account of sale of goods out of books or for investment in stock out of undisclosed sources under the provisions of the Income Tax Act.
The assessee, in the instant case, had maintained the books of accounts in accordance with the prescribed standard as per Section 145 of the Income Tax Act. Admittedly, the account books have not been rejected by the assessing officer. However, he initiated assessment proceedings against the assessee on ground of investment in stock out of undisclosed sources.
The Tribunal, on appeal deleted the addition and observed that where once the account books are expected to be maintained in the prescribed accounting standard, the assessing officer could not have made any additions towards the sale of rice treating it to be outside the books of accounts or towards investing in stock of rice and wheat outside the books of accounts.
Concurring with the findings of the Tribunal, Justice Pankaj Mithal and Justice Vinod Kumar Misra said that the Tribunal has rightly deleted the addition by holding that no investment was done beyond the books of accounts.
Read the full text of the Order below.
