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2020 (2) TMI 500 - AT - Income TaxBogus purchases - admissibility of additional evidence - HELD THAT - As gone through the entire case records including order of AO and the order of CIT(A) and noted that only documents not produced by assessee was inward and outward register which has already corroborated the purchases and sales supported by bills and invoices including challans and lorry receipts. Hence in our view we find that the CIT(A) has accepted the books of account because there was no defect pointed by the AO in the books of accounts and moreover each and every details were produced by assessee before the AO during assessment proceeding which was considered by CIT(A) in detail. Hence we confirm the order of CIT(A) accepting the book results and this issue of Revenue s appeal is dismissed. Addition u/s 41(1) stating that the liabilities still exists - HELD THAT - We noted that even at the time of assessment proceedings the company was before BIFR for its revival and the revenue was aware of the BIFR proceedings as it had objected to the relief sought under the DRS by the company. The assessee has furnished complete party wise and age wise details of sundry creditors aggregating to Rs. 30, 91, 95, 000/- and these were outstanding as on date and had not ceased to exist or were written off by the assessee. Hence these were very much existing liability and cannot be treated as ceased under section 41(1) of the Act. Hence we are of the view that the CIT(A) has rightly deleted the addition and we confirm the same. Carry forward and set off of unabsorbed depreciation beyond 8 years - HELD THAT - This issue is squarely covered in favour of assessee and against Revenue by the decision of Hon ble Gujarat High Court in the case of General Motors India (P). LTD. 2012 (8) TMI 714 - GUJARAT HIGH COURT - Decided against revenue.
Issues Involved:
1. Admission of additional evidence by CIT(A). 2. Rejection of books of accounts by AO. 3. Deletion of addition under section 41(1) by CIT(A). 4. Carry forward and set off of unabsorbed depreciation. Issue-wise Detailed Analysis: 1. Admission of Additional Evidence by CIT(A): The Revenue contended that the CIT(A) unjustifiably admitted additional evidence furnished by the assessee despite the AO providing 12 opportunities. The AO argued that there was no violation of natural justice, and the AR of the assessee made a false statement under oath regarding documents being with the Sales Tax Department. The Tribunal, however, noted that the assessee had indeed submitted the necessary documents during the assessment proceedings, and the CIT(A) admitted the additional evidence under Rule 46A(1) of the Income-tax Rules, 1962. The Tribunal found no defect in the books of accounts and confirmed the CIT(A)'s decision to accept the book results, dismissing the Revenue's appeal on this issue. 2. Rejection of Books of Accounts by AO: The AO rejected the books of accounts under section 145(3) of the Income-tax Act, 1961, citing the assessee's failure to furnish complete original documents such as purchase bills, lorry receipts, delivery challans, and inward registers. The AO applied a profit rate of 31.63% based on the previous year's gross profit ratio, resulting in an addition of Rs. 80,75,744/-. The CIT(A) deleted this addition, noting that the assessee had provided substantial documentation and there was a communication gap regarding the production of inward and outward registers. The Tribunal upheld the CIT(A)'s decision, emphasizing that the AO did not find any defects in the books of accounts and the documents provided corroborated the purchases and sales. 3. Deletion of Addition under Section 41(1) by CIT(A): The AO added Rs. 30,91,95,000/- under section 41(1) of the Act, arguing that the liabilities did not exist as the assessee failed to provide confirmations from creditors. The assessee, a sick industrial unit under BIFR, claimed that the liabilities were still pending and acknowledged in the balance sheet. The CIT(A) deleted the addition, stating that the liabilities had not ceased and were part of the Draft Rehabilitation Scheme (DRS) pending approval. The Tribunal confirmed the CIT(A)'s decision, noting that the liabilities were acknowledged in the balance sheet and there was no evidence of cessation. 4. Carry Forward and Set Off of Unabsorbed Depreciation: The AO disallowed the set-off of unabsorbed depreciation amounting to Rs. 66,79,03,134/- for AY 1997-98 to 2001-02, citing the eight-year limit under the pre-amended section 32(2). The CIT(A) allowed the carry forward and set-off, relying on the Gujarat High Court's decision in General Motors India P. Ltd. v/s DCIT, which held that unabsorbed depreciation from AY 1997-98 to 2001-02 could be carried forward indefinitely post the amendment by the Finance Act, 2001. The Tribunal upheld the CIT(A)'s decision, following the Gujarat High Court's ruling. Conclusion: The Tribunal dismissed the Revenue's appeal, confirming the CIT(A)'s decisions on all issues, including the admission of additional evidence, rejection of books of accounts, deletion of addition under section 41(1), and the carry forward and set-off of unabsorbed depreciation.
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