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2020 (3) TMI 393 - AT - Income TaxAddition on account of sale out of books on presumption basis made by AO - CIT(A) enhancing the addition for credit allowed on account of expenditure @ 30% without serving notice u/s 251(2) - HELD THAT:- It is pertinent to note that once the assessee has produce the relevant documentary evidences in support of the fact that certain goods imported from Chinese supplier were found to be defective and this fact was accepted by the counterpart by giving the credit of said amount from the purchase bills then the assessee has discharged his onus by production of the documentary evidences. The AO has not doubted the fact that the assessee has not paid in respect of the goods found to be defective and therefore, to the extent of cost of the purchase of the goods found to be defective was reduced from the total cost of purchase as per import bill. Therefore, accepting the fact of non-payment of purchase price due to the reason as is manifest from the record being defective goods, the corresponding sale of the goods is not possible. AO has not disputed that the value of these goods as per the invoice is USD 219700 and the corresponding value is in ₹ 1,37,40,718/-. These facts were confirmed by the supplier which is also recorded in the books of account of the assessee, ledger account, supporting invoice, Debit Notes and Credit Notes etc. The goods imported by the assessee are perishable in nature having limited shelf life. Therefore, the goods received by the assessee were found to be out dated or expiry date then it would certainly become useless having no value as chemical properties and compounds gets changed after the said period of shelf life. Accordingly, we find that the claim of defective goods reduced from purchase is established by supporting evidence and therefore, the addition made by the AO purely on presumption and assumption is liable to be deleted. It is pertinent to note that requirement of issuing show cause notice is must prior to enhancement of the assessment as envisaged in Section 251(2) of the Act for each and every enhancement and it does not depend on overall outcome of the total income of the assessee in pursuant to the order of the ld. CIT(A). If the AO has made more than one addition to the total income of the assessee and some of the additions are found to be not sustainable by the ld. CIT(A) and accordingly deleted then the addition which is enhanced by the ld. CIT(A) shall satisfy the conditions of issuing show cause under sub-section 2 of Section 251 as the same is not obliterated due to reason that certain other additions made by the AO were deleted by the ld. CIT(A). Therefore, the enhancement of assessment has to be considered in the context of each issue raised in the appeal before the ld. CIT(A). Without going into the controversy of the validity of the order, once we find that the assessee has established the facts of defective goods received from the Chinese suppliers then the addition itself would not survive and the same is deleted. Thus the appeal of the assessee is allowed.
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