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2022 (2) TMI 106 - ITAT CHENNAIUnexplained expenditure u/s. 69C - unaccounted purchases from unknown sources - - HELD THAT:- There is clear discrepancy in the financial accounts as well as return of income filed by the assessee. It has casually been stated that the stock was inflated for bank purposes only. However, the same stock of ₹ 300 Lacs is reflected in the financial statements whereas stock ₹ 250 Lacs has been reflected in the return of income. Therefore, the various pleas raised by Ld. AR are not acceptable. The complete onus to reconcile the accounts including stock valuation was on the assessee and the assessee has failed to do so. At the same time, we observe that the assessee's turnover has not been doubted by Ld. AO. The assessee is unable to explain the purchases and could not produce any evidence in support of the same. However, all these purchases could not have been termed as income of the assessee since the material purchased by the assessee would have been consumed in the manufacturing process. The manufacturing process would require consumption of raw material. Therefore, it could be presumed that the purchases were made from unknown sources. Under these circumstances, the profit element embedded in unaccounted purchases would have to be brought to tax. Considering the facts of the case as well as the nature of assessee's business, we estimate the profit element in unaccounted purchases @10% - The balance addition stand deleted. The grounds stand partly allowed. Addition u/s. 40(a)(ia) for want of tax deduction at source (TDS) - HELD THAT:- AR has pleaded that the payee has taken into account the interest income while computing their income and offered the same to tax. Therefore, the benefit of second proviso to Section 40(a)(ia) would be available to the assessee. Concurring with the same, we deem it fit to restore the matter back to the file of Ld. AO so as to provide an opportunity to the assessee to demonstrate the fulfillment of conditions as imposed in second proviso to Sec. 40(a)(ia). If the assessee succeeds, the disallowance shall stand deleted. This ground stand allowed for statistical purposes.
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