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2018 (10) TMI 1166 - AT - Income TaxAddition on low gross profit earned - fall in GP ratio over the last three years - inventory at substantially lower valuation - assessee is in the business of manufacturing & trading of tobacco products and raw tobacco - Held that:- The assessee did not presented any cogent evidences to corroborate its contention as to bumper crop of tobacco and its prices crashing owing to bumper crop. None of the authorities below have also verified the claim of the assessee as to bumper crop and crash in prices and there is no evidence on record to justify such contention except quotations all dated 02-04-2010 from three traders/ agents proposing to buy different varieties of tobacco from the assessee at a particular price which is claimed by the assessee to be substantially lower prices due to bumper crop of tobacco. These quotations in the absence of corroborative evidence does not inspire confidence. The bonafide of change in method of valuation of raw material from "cost" basis to "cost or market value whichever is lower" has not been explained by the assessee. The method adopted by the assessee for valuing raw material held as closing stock is in variance to what is stated by tax-auditor to be method of valuation of stock. None of the authorities below have made any enquiry or verifications as to contentions/ evidences filed by the assessee and no verification of the claim of the assessee was undertaken. In the immediately preceding year i.e. AY 2009-10, the assessment was framed by Revenue u/s 143(3) r.w.s. 153A vide assessment orders dated 31.12.2010 pursuant to search conducted by Revenue on 29.04.2008 against the assessee u/s 132(1) wherein additions have been made towards discrepancies in the stock wherein at different locations/ premises belonging to the assessee excess physical stock was found to the tune of ₹ 13.01 lacs while at the same time, in some of the locations/premises belonging to the assessee, excess book stock to the tune of ₹ 55.76 lacs was found. The rollover impact of such addition made by the AO in assessment of the AY 2009-10 to the year under consideration as was done by the assessee is not looked into by authorities below nor the authorities below looked into as to how the assessee adjusted said discrepancies in stock in its books of accounts which found itself manifested in AO making additions for said discrepancies in stock while framing assessment u/s 143(3) r.w.s. 153A. Thus we are of the considered view that the issue arising in this matter need to be set aside and restored to the file of the AO for fresh denovo determination of the issue on merits in accordance with law - Decided in favour of revenue for statistical purposes. Payment made to "Hanifa" School which is being run by a Trust - allowable business expenditure - Held that:- On being asked by the Bench about the details of the employees children who were studying in the school during the relevant period and other details concerning the school such as location of the school and other school in the vicinity, total children studying in the school, details of children of employees who were studying in the said school etc. so as to justify and prove direct nexus of these expenses with business of the assessee so as to prove that these expenses were wholly and exclusively incurred for the business and the assessee. Assessee submitted that presently these details are not readily available on record but if an opportunity is granted by setting aside and restoring the matter to the file of the AO for framing denovo fresh assessment, the assessee will produce all the records before the AO which AO can verify - Thus set aside and restore this issue back to file of the AO to enable assessee to prove with cogent evidences that these expenses were incurred wholly and exclusively for the purposes of business of the assessee. Thus is emerging from records with a view to render complete justice to both the rival parties, we are of the considered view that the matter need to be set aside and restored to the file of the AO for framig denovo fresh assessment. - Decided in favour of assessee for statistical purposes.
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