2016 (2) TMI 914 - AT - Income Tax

Addition u/s 69C addition - AO had made the addition as one of the supplier was declared a hawala dealer by the VAT Department - Held that - As decided in assessee's own case as agreed that it was a good starting point for making further investigation and take it to logical end. But, he left the job at initial point itself. Suspicion of highest degree cannot take place of evidence. He could have called for the details of the bank accounts of the suppliers to find out as whether there was any immediate cash withdrawal from their account. We find that no such exercise was done. Transportation of good to the site is one of the deciding factor to be considered for resolving the issue. The FAA has given a finding of fact that part of the goods received by the assessee was forming part of closing stock. There is nothing, in the order of the AO, about the cash traial. Secondly, proof of movement of goods is not in doubt. Therefore additions fairly deleted - Decided in favour of assessee

Issues Involved:
1. Deletion of addition of Rs. 87,24,259 under Section 69C for unexplained expenditure.
2. Deletion of addition of Rs. 14,36,653 under Section 69C for unexplained expenditure.
3. Relief on Rs. 74,08,737 in case of voluntary disclosure.
4. Deletion of addition of Rs. 20,00,000 under Section 69C for subcontract charges.
5. Reliance on judgments of CIT vs. Nikunj Eximp Enterprises Pvt. Ltd.
6. Failure to produce parties from whom alleged bills were received.
7. Failure to rebut findings of Sales Tax Department regarding bogus purchases.
8. Acceptance of misleading submissions about the non-availability of information from the Sales Tax Department.
9. Acceptance of the claim that cross-examination opportunity was not given.
10. Request to set aside the order of CIT(A) and restore that of the AO.

Detailed Analysis:

1. Deletion of Addition of Rs. 87,24,259 under Section 69C:
The AO added Rs. 87,24,259 as unexplained expenditure under Section 69C, citing suspicious dealers who allegedly issued bogus bills without delivering materials. Notices sent to these parties were returned unserved. The CIT(A) deleted this addition, and the Tribunal upheld the CIT(A)'s decision, noting that the AO completed the assessment on suspicion without further investigation.

2. Deletion of Addition of Rs. 14,36,653 under Section 69C:
Similar to the first issue, the AO added Rs. 14,36,653 as unexplained expenditure under Section 69C, based on returned notices and the suspicion of fictitious bills. The CIT(A) deleted this addition, and the Tribunal upheld the deletion, emphasizing the lack of further investigation by the AO.

3. Relief on Rs. 74,08,737 in Case of Voluntary Disclosure:
The AO did not allow relief for Rs. 74,08,737 disclosed voluntarily by the assessee during a statement under Section 131. The CIT(A) granted relief, and the Tribunal upheld the CIT(A)'s decision, noting that the AO's assessment was based on suspicion rather than concrete evidence.

4. Deletion of Addition of Rs. 20,00,000 under Section 69C for Subcontract Charges:
The AO added Rs. 20,00,000 as bogus subcontract expenses, suspecting that payments were made to related parties to reduce tax liability. The CIT(A) deleted this addition, and the Tribunal upheld the deletion, citing the lack of further investigation by the AO.

5. Reliance on Judgments of CIT vs. Nikunj Eximp Enterprises Pvt. Ltd.:
The CIT(A) relied on the judgment in CIT vs. Nikunj Eximp Enterprises Pvt. Ltd. to delete the additions. The Tribunal found that the facts of the assessee's case were similar to those in the cited judgment, supporting the CIT(A)'s reliance on this precedent.

6. Failure to Produce Parties from Whom Alleged Bills Were Received:
The AO noted that the assessee failed to produce parties from whom the alleged bills were received. The CIT(A) and Tribunal found that the AO did not conduct further investigation to verify the transactions, leading to the deletion of the additions.

7. Failure to Rebut Findings of Sales Tax Department Regarding Bogus Purchases:
The AO relied on findings from the Sales Tax Department regarding bogus purchases. The CIT(A) and Tribunal found that the AO did not provide sufficient evidence to support these findings and failed to conduct further investigation, leading to the deletion of the additions.

8. Acceptance of Misleading Submissions About Non-Availability of Information from Sales Tax Department:
The AO claimed that the assessee misled by stating that information from the Sales Tax Department was not made available. The CIT(A) and Tribunal found that the AO did not provide concrete evidence to support this claim, leading to the deletion of the additions.

9. Acceptance of the Claim That Cross-Examination Opportunity Was Not Given:
The assessee claimed that they were not given the opportunity to cross-examine the parties involved. The CIT(A) and Tribunal found that the AO did not provide this opportunity, which is required as per legal precedents, leading to the deletion of the additions.

10. Request to Set Aside the Order of CIT(A) and Restore That of the AO:
The Tribunal dismissed the appeal of the revenue, upholding the CIT(A)'s order and directing the AO accordingly.

Conclusion:
The Tribunal upheld the CIT(A)'s order, dismissing the revenue's appeal and confirming the deletion of additions made by the AO under Section 69C for unexplained expenditure, subcontract charges, and voluntary disclosure. The Tribunal emphasized the need for concrete evidence and further investigation rather than assessments based on suspicion.

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