2010 (2) TMI 990 - AT - Income Tax

Summary

Issues:
- Addition of Rs. 71,54,248 on account of unaccounted purchases under section 69C of the Income-tax Act.
- Addition of Rs. 28,51,613 on account of unaccounted payment/unexplained expenditure under section 69C of the Income-tax Act.

Issue 1: Addition of Rs. 71,54,248 on account of unaccounted purchases under section 69C of the Income-tax Act.

The case involved an assessee engaged in purchasing grey cloth and exporting finished cloth. The Assessing Officer questioned an outstanding credit balance of Rs. 1,46,45,884 in the name of a creditor, Ayyappas Knits Export. Discrepancies were found in the accounts between Ayyappas Knits Export and Abhishek Exports. The Assessing Officer made additions under section 69C due to mismatches in purchase and sale transactions. The Commissioner of Income-tax (Appeals) allowed the appeal, stating that section 69C could only be invoked when expenditures lacked explanation, which was not the case here. The Commissioner directed the deletion of the additions, emphasizing the need for proper scrutiny of third-party records before making such additions.

Issue 2: Addition of Rs. 28,51,613 on account of unaccounted payment/unexplained expenditure under section 69C of the Income-tax Act.

The dispute centered on purchases from Ayyappas Knits Export, with the Commissioner of Income-tax (Appeals) emphasizing the importance of a statement given under oath by the proprietor of Ayyappas Knits Export. The Commissioner believed the Assessing Officer rightly treated the purchases as unexplained expenditure. However, the authorised representative argued that the confirmation letter from Ayyappas Knits Export corroborated the purchases and payments made by the assessee. The Commissioner upheld the deletion of the addition, considering the confirmation and the lack of reflected purchases in the books of account.

In conclusion, the Appellate Tribunal dismissed the appeal, supporting the Commissioner's decision to delete both additions. The Tribunal emphasized the necessity for proper scrutiny of third-party records before making additions under section 69C. The decision highlighted the importance of corroborating evidence and the need for explanations regarding expenditures to invoke section 69C effectively.