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2021 (10) TMI 722 - AT - Income TaxAddition of cash profit earned on unaccounted sale - Search proceedings - As per AO sales mentioned in loose papers is sales not recorded in books of account - HELD THAT:- We note that various loose papers containing; the data of the monthly profitability of the company are prepared on estimated basis for want of the final accounts due to various variations in purchase, sales, expenses, stock and depreciation. These loose papers are merely prepared for instant information purposes on various dates and time in order to ascertain the current position of the company and to act for future operations of the company. These reports are also prepared to give the management an insight of various unsettled issues relating to RM differences and disputed sales and expenses etc. The figure of production shown in MIS tally with the excise records as well as the disclosure made in the financial accounts because the production figure are readily available from the excise records. These MIS reports by no means can be considered to be the final figure of results disclosed therein. On the contrary if the profit figures as shown in the statement are aggregated, the same are less than the profits disclosed in the accounts. All sales are duly recorded in the books, duly supported by sales bills and delivery challans, reflected in excise records and in monthly excise returns and in RG 1 register. Production is duly supported by production register and monthly production statement by factory and entry in RG 1 register. All purchases are duly supported with GRN, Delivery challan of party and transport LR copy, Purchase bills, Entry in form IV of excise reflecting total purchases for the month. All purchases are recorded in purchase inward register at the time of arrival. In form IV, assessee company provides details of opening stock, purchases, consumption and closing stock on monthly basis to excise department. Assessee is filing monthly excise returns, excise audit and checks are carried, out by the excise department on regular intervals. In all these excise audit and check not a single time it was found out by the excise department that there is any variation in book records and factory records. Therefore, based on this factual position we delete the addition sustained by ld CIT(A) - Decided in favour of assessee. Addition on account of inflation of purchases - suppliers were not maintaining the stock register and their books of accounts were rejected at the time of assessment under section 153C - CIT-A deleted the addition - HELD THAT:- Ad hoc estimated addition of ₹ 2,00,000/- made in assessment year was without verifying the actual purchases from M/s. Mahavir Sales Corporation. The assessee has submitted all the relevant documents, purchase bills, delivery challans and the details of payments made to the supplier M/s Mahavir Sales Corporation. The assessment of M/s Mahavir Sales Corporation was also finalized by the same Assessing Officer. The Assessing Officer simply made the addition on ad hoc basis without relying upon any admissible evidence of inflation of purchases by the assessee. The addition was made without any basis and on ad hoc basis only. CIT(A) has rightly deleted the addition. Addition on account of discrepancy in stock found between physical inventory taken on date of search and stock record - CIT(A) partly deleted the addition - HELD THAT:- As panchnama prepared at the time of search, purchase bills for relevant chemical purchases as well as working of landing cost of such material computed by assessee alongwith supporting evidences shows that there is no difference in quantity of chemical recorded in books of account and stock as per inventory prepared at the time of search. The assessee has submitted reconciliation statement regarding stock of waste paper found during the course of search and stock recoded in books of account and whenever there was difference, it was submitted that while taking the stock, the authorized officer has taken the weight per bale on random bases without considering the variation of weight in each consignment/bale of the same quality. In support of its contention, assessee has filed copy of purchase bill, packing list, bill of entry indicating the weight per bale, Lorry Receipt and Delivery Challan which have been verified. The argument of assessee that in one single consignment, in different containers, the weighment of bales is different which is found correct. In assessee`s case there is no difference in number of bales/bundles found during the course of search and bales already recorded in books of account. CIT(A) has already deleted the addition based on the factual position narrated above. Considering these facts addition on account of discrepancy in stock found between physical inventory taken on date of search and stock recorded in books of accounts should also be deleted. Addition of bogus purchases made on the basis of statements recorded during the course of Search - inflation of purchases - HELD THAT:- As on careful consideration of entire details as well as purchase register produced for relevant months, bank statements and ledger account of Gautam Enterprise, it is found that appellant has not included purchase rom Gautam Enterprise in its Books of Account. Further, in the ledger account of Gautam Enterprise, only financial transaction pertaining to such sum is recorded which suggests that funds received by said party from bank has been transmitted to appellant and after certain period such amount has been paid by appellant through its regular bank account. Thus, argument of appellant regarding accommodation entry, appears to be correct and as appellant has not claimed any purchase from Gautam Enterprise as expenditure while computing Profit & Loss Account for current assessment year, purchase shown in bill cannot be added to the total income of appellant as bogus purchase more particularly when entire transaction is settled through cheques. Based on this factual position, we are not inclined to accept the contention of the Assessing Officer in any manner and the addition made by Assessing Officer was rightly deleted by ld CIT(A) - Decided against revenue. Unaccounted expenses and sales realization made on the basis of entries in the seized loose papers - HELD THAT:- As on the loose paper found during the course of search, on the basis of which Assessing Officer has made impugned addition shows “fixed expenditure” which suggest that this paper is prepared for monthly fixed expenditure. In this loose paper details like payment made in cash, name of the party to whom various payments have been made, date of the transaction has not been mentioned which leads to conclusion that this is a dumb document having no financial implication. These entire loose papers nowhere suggests that appellant has made unexplained expenditure or expenditure are paid in cash nor Assessing Officer has brought any other evidence which can prove that these are notings for payment in cash but addition has been made on presumption basis. CIT-A correctly deleted the addition. Assessment u/s 153A - Disallowance u/s 14A r.w.r. 8D - HELD THAT:- Revenue could not controvert the facts that these assessment years were not pending on the date of search and no incriminating material qua these assessment years were the basis for the additions/disallowances, so we delete the additions made by the assessing officer under section 14A, for assessment yea₹ 2008-09 to 2010-11. Set off of additional income disclosed in the Return of Income having regard to disclosure made under section 132(4) - HELD THAT:- Since we have deleted the entire addition made by the assessing officer therefore, there is no need to provide any telescoping benefit to the assessee, hence, this ground raised by the assessee becomes infructuous and therefore does not require adjudication.
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