TMI Blog2023 (5) TMI 1000X X X X Extracts X X X X X X X X Extracts X X X X ..... the subsequent year. No justification in AO for disallowing the expenses on adhoc basis and which was upheld by CIT(A). We, therefore, set aside the addition made by AO. Thus the ground of assessee is allowed. Addition on account of suppressed income from sale of Katran/Scrap material - waste generated known as Katran - HELD THAT:- We find that the basis of working out the alleged sale value of Scrap that assessee ought to have earned is only on the basis of the search conducted by the AO on the internet. AO has not brought any material on record to demonstrate that the Scrap Sales found by him on the internet by various other entities were engaged in dealing with similar business as of the assessee. AO has also not stated the basis of the selection of parties, the name of the parties on the basis of which he has concluded the sale of scrap to be understated. Assessee has also demonstrated the percentage of sale of Scrap in various preceding and succeeding assessment years and percentage of waste to the sale in the year under consideration are in the same range as that of earlier and subsequent years. AO has not brought on record any concrete material to demonstrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25,49,235/- made by Ld. Assessing officer [Ld. AO] for alleged addition on account of suppressed income from sale of Katran/Scrap Material. The addition was made by Ld. AO solely based on a random search conducted on the google/internet for rate of scrap per kg resulting in a hypothetical income being added which was confirmed by Ld. CIT(A) ignoring the details related to sale of scrap sales including copies of invoices available on record. It is a well settled proposition that Income Tax cannot be levied on hypothetical income. 2.1 That the addition as confirmed by the Ld. CIT(A) is based on erroneous views and / or non-appreciation of the facts and law involved and without properly considering the submissions and material on record. Binding case laws in appellant's favor has not been discussed and rebutted. As such too the addition is unwarranted and not capable of being sustained. 3. That the Ld. AO has erred in converting the assessment proceedings from Limited Scrutiny to Complete Scrutiny without following the binding directions/instructions of the CBDT issued vide Instruction number 05/2016 dated 14.07.2016 and 20/2015 dated 29.12.2015. 3.1 Validity of ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ucceeding years but no disallowance has been made by AO in the assessment orders framed u/s 143(3) of the Act of those years. In support of his aforesaid contention, he pointed to the chart of the payments made to the various persons in the A.Ys. 2013-14, 2014-15, 2015-16, 2016-17 2017-18 and submitted that the amount has not been disallowed in earlier and succeeding years. He also pointed to the assessment orders framed u/s 143(3) of the Act placed at page 167 to 182 of the paper book. He further submitted that to invoke the provisions of Section 40A(2)(a), AO has to prove that the transaction is not a bonafide or the value of goods and services are not in consonance with the fair market value. He submitted that no adverse material has been brought on record by the AO to demonstrate that the expenses are unreasonable or excessive in nature. He further submitted that in the computation of income filed by the respective recipient, the amount received from the assessee has been declared in their income and in such a situation also the amount paid by the assessee cannot be treated as bogus. He further submitted that on the ground of principal of consistency also the disallowance as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that AO has also not brought on record any material to demonstrate that the payments made to the parties who are stated to be related parties are in excess of the amounts paid to other parties for similar service or are not bonafide. Before us, Learned DR has submitted that the principal of res-judicata is not applicable to the assessment proceedings and each assessment year has to be considered on standalone basis. We do not dispute the aforesaid preposition of Learned DR but at the same time the Hon ble Supreme Court in the case of Radhasoami Satsang vs CIT (1992) 193 ITR 321 (SC) has held that even though principles of res judicata do not apply to income tax proceedings, but where a fundamental aspect permeating through different assessment years has been found as the fact one way or the other and the parties have allowed the position to be sustained by not challenging the order, then it would not be appropriate to allow the position to be changed in the subsequent year. Considering the totality of the aforesaid facts and relying on the aforesaid decision rendered in the case of Radhasoami Satsang (supra), we do not find any justification in AO for disallowing the expenses on ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... framed u/s 143(3) in earlier or subsequent years. He therefore submitted that merely on the basis of suspicion the addition on account of hypothetical income cannot be made and therefore is bad in law and therefore it be deleted. 13. Learned DR on the other hand supported the order of lower authorities. 14. We have heard the rival submissions and perused the material on record. The issue in the present ground is with respect to the addition made on account of alleged waste generated known as Katran . It is an undisputed fact that assessee had shown income from Scrap Sales at Rs.8,16,618/- and according to AO assessee has understated the Scrap Sales. According to AO on the basis of the calculation worked out by AO in the table, the value of scrap sales should have been to the extent of Rs.33,65,853/-. We find that the basis of working out the alleged sale value of Scrap that assessee ought to have earned is only on the basis of the search conducted by the AO on the internet. The AO has not brought any material on record to demonstrate that the Scrap Sales found by him on the internet by various other entities were engaged in dealing with similar business as of the assessee. F ..... X X X X Extracts X X X X X X X X Extracts X X X X
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