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2015 (12) TMI 1182 - HC - Income TaxAddition of 25% undisclosed sales - Held that:- Revenue, has produced a chart to show the difference between the figures of sales as per the AISR and the figures of sales given in the return of income. The difference is 15 to 20%. The Court is unable to accept the rough and ready method of determination of the percentage of the difference in the two sales figures. The exercise must be done at the micro level. Individual invoices have to be examined to see what the actual discounts allowed for the transactions were. This appears to be the exercise undertaken by the ITAT before it came to the conclusion that there was no difference between the figures reported in the AISR and the sales as per the return of income. It was based on the thorough examination of the books of accounts and is purely factual. Consequently, the Court finds no reason to differ with the conclusion of the ITAT on this aspect. The addition made by the AO of 25% of the sales was rightly deleted. - Decided in favour of the Assessee and against the Revenue. Commodities speculation - ITAT deleted the addition - Held that:- It is not understood why the AO undertook this exercise to arrive at a notional figure. On the other hand, in the impugned order of the ITAT, it has been noted that the Assessee announced several schemes, one of which was distribution of gold chains on the birthday of Mr. Dharam Pal Gulati, to the dealers who achieved certain targets. The Assessee purchased the gold and alloy and got them converted into chains from M/s Vijay Kumar Jewellers with whom the Assessee had a regular account. The ITAT found that “the assessee is not engaged in purchase and sale of gold on the basis of which it could be presumed that the assessee was engaged in speculative business.” It was further pointed out that if the Revenue wanted to rely on the surrender of certain amount made by the Directors after the search, the necessary evidence should have been brought on record since the statements made had been retracted. As rightly pointed out by the ITAT, the conclusion of the AO that the Assessee was engaged in the speculative business in agricultural commodities and gold was based on surmises and not on the basis of any credible evidence. The Court therefore holds that the deletion by the ITAT of the addition on the ground of speculative trading was for cogent and valid reasons. - Decided in favour of the Assessee and against the Revenue. Addition on inflated purchases - ITAT deleted the addition - Held that:- The Court is unable to find any error in the approach of the ITAT in the matter. Indeed if the amount has already been taxed at the hands of Mr. Sushil Kumar Trehan it is not understood how it could be brought to tax again in the hands of the Assessee by disallowance of the expenditure. Moreover the papers on the basis of which addition was made were found in the office of Mr. Sushil Kumar Trehan, who himself was engaged in the procurement of haldi and chillies. Further Mr. Rakesh Gupta, learned counsel for the Assessee informs that Mr. Trehan has paid the tax along with the interest in terms of the order of assessment of his return which has attained finality. - Decided in favour of the Assessee and against the Revenue. Disallowance of advertisement expenditure - ITAT deleted the additionHeld that:- MDH deals primarily in household products. The contention of MDH that Mr. Dharam Pal Gulati is a pioneer of packaged spices in India and has built the business by his vision and hard work for over six decades has been unable to be contradicted by the Revenue. It is entirely up to the Assessee as to how it promotes its products. The Court finds no basis for the AO to have concluded that the expenses on advertisement was not for business purposes and for disallowing 20% of it. The ITAT rightly upheld the order of the CIT (A) deleting the said disallowance - Decided in favour of the Assessee and against the Revenue. Addition under the head “Income Expenditure Investments” - Held that:- The revenue frankly states that he has been unable to ascertain how the said question arises in the concerned AYs. It may also be noticed that certain amounts attributed to the Assessee have in fact been brought to tax in the hands of Mr. Trehan and therefore, their addition in the hands of the Assessee was not justified.- Decided in favour of the Assessee and against the Revenue. Whether the expenses incurred by the Assessee in construction of school building at Byadagi, Karnataka require to be added as income - Held that:- during the course of search Mr. Rajiv Gulati had surrendered a sum of ₹ 10 crores towards difference in stock and ₹ 1 crore on account of discrepancy in stock. The contention was that he was misled on account of pressure during the search operation into surrendering the said sum . This explained his retraction of the said surrender on 28th November 2006 itself. The ITAT also referred to the CBDT Instruction dated 10th March 2003 in this regarding making it mandatory that in the absence of discrepancy in the search inventory of the stock, no addition can be made. In the circumstances, the Court holds that the ITAT was justified in holding that the AO should have brought material in the form of inventory on record, if he wanted to make an addition of ₹ 11 crores. The ITAT, therefore, rightly deleted the said addition. - Decided in favour of the Assessee and against the Revenue.
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