2012 (5) TMI 608 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of addition on account of undisclosed closing stock.
2. Deletion of addition on account of unexplained creditors.
3. Enhancement of income by adding sales not included in P&L account.
4. Disallowance of gas cylinder expenses.
5. Addition of diesel expenses.
6. Addition for unaccounted khoya purchases.

Summary:

1. Deletion of addition on account of undisclosed closing stock:
The Assessing Officer (AO) added Rs. 11,84,861 to the taxable income, alleging the consignment transactions were actually the assessee's own trading and the resultant closing stock was not reflected in the books. The Ld. Commissioner of Income Tax (Appeals) [CIT(A)] deleted this addition, finding no material defect in the accounts and noting that the discrepancy was explained and accepted during the assessment stage. The ITAT upheld the CIT(A)'s order, finding no infirmity in the deletion.

2. Deletion of addition on account of unexplained creditors:
The AO added Rs. 1,22,52,846 on account of unexplained creditors, alleging the consignment purchases were actually the assessee's own trading and the creditors were bogus. The CIT(A) deleted this addition, noting that the creditors' identities and creditworthiness were not doubted, and the transactions were confirmed by the creditors. The ITAT upheld the CIT(A)'s order, agreeing that the addition was unjustified.

3. Enhancement of income by adding sales not included in P&L account:
The CIT(A) enhanced the income by Rs. 11,97,312, noting that sales of milk worth Rs. 12,21,082 to Apollo Hospital were not credited to the P&L account, though the corresponding purchases were debited. The ITAT upheld this enhancement, agreeing with the CIT(A) that the entire sales amount, not just the profit, should be added.

4. Disallowance of gas cylinder expenses:
The AO disallowed 50% of the gas cylinder expenses amounting to Rs. 2,07,960, as the assessee failed to furnish supporting bills/vouchers. The CIT(A) upheld this disallowance, and the ITAT agreed, finding no need to interfere with the lower authorities' reasonable view.

5. Addition of diesel expenses:
The AO added Rs. 1,00,000 for diesel expenses, noting that the assessee did not reflect these expenses in the accounts, though the truck was used for business. The CIT(A) confirmed this addition, and the ITAT upheld the same, agreeing that the addition was justified.

6. Addition for unaccounted khoya purchases:
The AO added Rs. 3,17,550 for unaccounted khoya purchases based on the statement of a supplier, Shri Ashok Kumar, who stated that all supplies were without bills and payments were in cash. The CIT(A) confirmed this addition, noting that the assessee did not rebut the supplier's statement. The ITAT upheld the addition, agreeing with the CIT(A) that the addition was correct.

Conclusion:
Both the appeals filed by the Revenue and the Assessee were dismissed. The ITAT upheld the orders of the CIT(A) on all issues.