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2014 (5) TMI 345 - AT - Income TaxAddition on account of inflation of purchases – Held that:- The Assessee was able to file reconciliation statement and reconcile the purchase bills and the finding of the CESTAT is that the Assessee in the last could not reconcile the quantity involved in respect of invoices of purchases - the addition made by the AO cannot be sustained - the accounts of the Assessee could not said to represent the correct state of affairs - some reasonable estimate of addition has to be made and which may not be restricted to the actual amount of unproved purchases in the case – thus, the addition is restricted – Decided partly in favour of Assessee. Reductions made - Validity of consideration of the additional evidences under Rule 46A(3) of the Rules – Held that:-The decision of the previous assessment year has been followed that there is no merit in the grounds of appeal of the Revenue - The addition of Rs. 75 lacs sustained while disposing of Assessee’s appeal – the order shall cover the addition made on account of inflation of purchases, disallowance of Job Work Charges and addition on account of material inward expenses of the Assessee – Decided against Revenue. Deletion of penalty u/s 271(1)(c) of the Act – Additions on account of inflated purchases - Held that:- CIT(A) has passed a speaking order on the issues and has considered all the facts and law applicable - the addition made by the AO on account of inflated purchases, Job Work Charges and material inward expenses have been restricted to Rs. 75 lacs - there may be more than one reason due to which the Assessee may not be in a position to reconcile the purchase bills - penalty u/s 271(1)(c) is not imposable where some part of the addition is sustained by way of estimate only – thus, the order of the CIT(A) is upheld – Decided against Revenue. Deletion of disallowance of interest u/s 36(1)(iii) of the Act – Held that:- The Assessee’s has advanced Rs. 92.31 lacs to two parties as interest free loans whereas the Assessee has huge non- interest bearing funds like share capital of Rs. 8 crore and reserves and surplus amounting to Rs. 11 crore - funds advanced as interest free loans to two parties are out of Assessee’s own funds which are not interest bearing and therefore no case of disallowance out of interest payment could be made out by the Department - the order of the CIT(A) is upheld – Decided against Revenue.
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