TMI Blog2020 (3) TMI 393X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the evidence regarding the payments for import of goods. The AO noted from the ledger of import that the assessee has debited a sum of ₹ 3,92,62,287/- against which various debit notes amounting to ₹ 1,80,85,152/- was claimed and balance amount of ₹ 2,11,77,135/- was debited in the profit and loss account. The AO found that the assessee has shown debit notes of ₹ 56,13,075/-, ₹ 56,40,345/- dated 11-11-2014 and ₹ 24,87,298/- dated 27-02-2015, total amounting to ₹ 1,37,40,718/- shown by the assessee on account of defective goods received from the supplier party from China. The assessee also produced the debit notes issued by him alongwith corresponding credit notes issued by the suppliers and claimed that the said amount of import/purchase is debited to the profit and loss account after adjusting the debit notes issued by the assessee in respect of the defective goods and corresponding credit notes issued by the supplier. The AO did not accept the explanation of the assessee and treated the said amount of ₹ 1,37,40,718/- as out of books sales. The AO accordingly made an addition of ₹ 96,18,503/- as net income after allowing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... redit notes as well as confirmations of the issuance of credit notes regarding the goods received by the assessee, being expiry date. The ld.AR of the assessee has referred to the E-Mail correspondence between the assessee and the supplier of goods and submitted that documents produced by the assessee establishes the facts that some of the goods imported by the assessee were found to be defective due to expiry date and therefore, the said fact cannot be rejected without any contrary material. The ld.AR of the assessee has also referred to DHL Courier details and receipts regarding confirmation of credit notes sent by the supplier. Thus the ld.AR of the assessee submitted that when the assessee produced all the relevant documentary evidences to show that the goods to the tune of ₹ 1,37,40,718/- were received as defective and the same were reduced from the purchases/import account. The assessee issued the debit notes of the said amount to the supplier of the goods which was accepted by the supplier who issued corresponding debit notes. Therefore, the purchases shown by the assessee in the profit and loss account is the correct figure and the AO has treated the said quantity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fective due to expiry of date. It is pertinent to note that the invoice regarding import of these goods and debit notes issued by the assessee give the details and description of the goods and particularly the Adhesive in question. We find that the invoice issued by the supplier gives the details of quantity of goods as well as the amount in USD whereas the assessee has given the details of the goods matching the same quantity and giving the reference of the invoice but the amount is converted into Rupees. The AO has not disputed the details as mentioned in the invoice and the debit notes issued by the assessee and corresponding credit notes issued by the supplier. The AO has questioned the correctness of the claim on the ground that no evidence was produced for transportation of the defective goods back to the supplier. It is pertinent to note that once the goods are imported from China and found to be defective and the said fact is accepted by the supplier then sending back to these goods to China may not be a wise decision for the assessee as well as the supplier due to heavy cost involved in the process. Once the defective goods is found to be having Zero Value and useless for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 90300 (ii) 30.09.2014 INSH-141913 18000 Kgs Adhesive Glue 90000 (iii) 29.11.2014 INSH-141029 7880 Kgs Adhesive 39400 Total 219700 The 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 addit ..... 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