2015 (4) TMI 1080 - AT - Income Tax

Unexplained expenditure relating to purchases - Held that - The assessing officer has made the impugned addition only on the basis of information given by the Sales tax department, he did not make independent enquiry with the sales tax department, the assessee was not given opportunity to cross examine the officials of sales tax department, the evidences furnished by the assessee to prove purchases of sands and its movement were not disproved, the evidences furnished by the assessee to prove the payments made against purchases by way of account payee cheques were also not disproved. Under these set of facts, by following the decision rendered by this bench of Tribunal in the case of Deepak Popatlal Gala (2015 (6) TMI 944 - ITAT MUMBAI ), we uphold the order of Ld CIT(A) on this issue in deleting the addition - Decided in favour of assessee. Adhoc addition from out of purchases - Held that - Assessing officer has made adhoc addition only on the reasoning that the assessee has failed to furnish the details. The case of the assessee before the Ld.CIT(A) was that he was having all the relevant details. We notice that the first appellate authority has deleted this disallowance without verifying those details. Since this addition was made for want of evidences and details and since the details, if any, available with the assessee were not examined by the tax authorities, we are of the view that this issue requires to be restored to the file of the AO. Accordingly, we set aside the order of Ld CIT(A) on this issue and restore the same to the file of the assessing officer with the direction to examine the same afresh. The assessee is also directed to furnish all the details that may be called for by the AO on this issue. - Decided in favour of revenue for statistical purposes.

Summary

Issues:
1. Unexplained expenditure relating to purchases of Rs. 63,87,826/-
2. Adhoc addition from out of purchases - Rs. 4,72,034/-

Analysis:
1. Unexplained Expenditure of Rs. 63,87,826/-:
The Revenue contested the deletion of additions made by the assessing officer regarding unexplained expenditure on purchases of sand. The AO relied on a list of suspicious dealers from the Sales Tax Department, treating the purchases as unexplained. However, the CIT(A) noted that the purchases were recorded in the books and payments were made through account payee cheques. The CIT(A) found the AO failed to investigate further or disprove the purchases. The Tribunal cited a similar case precedent where additions were deleted due to lack of independent investigation by the AO. Consequently, the Tribunal upheld the CIT(A)'s decision, emphasizing the importance of thorough examination before making such additions.

2. Adhoc Addition of Rs. 4,72,034/-:
The AO disallowed 4% of purchases from five parties due to lack of details provided by the assessee. The CIT(A) overturned this decision, stating that the AO made the addition without rejecting the books of account. The Tribunal observed that the addition was solely based on the absence of details, which the assessee claimed to possess. As the CIT(A) did not verify these details before deleting the addition, the Tribunal decided to remand the issue back to the AO for further examination. The Tribunal directed the assessee to provide all necessary details to the AO for reconsideration.

In conclusion, the Tribunal partially allowed the Revenue's appeal and the assessee's cross-objection, highlighting the importance of thorough investigation and verification before making additions to income. The judgment emphasized the need for tax authorities to conduct independent inquiries and consider all evidence provided by the assessee before making decisions on disputed expenditures.