2011 (7) TMI 1257 - AT - Income Tax

Summary

Issues involved: Appeal against addition made by Assessing Officer u/s 143(3) of the Income-tax Act, 1961 regarding sale rate of cashew kernels to sister concerns below cost, entitlement to benefit u/s 80HHC, suppression of income, and tax avoidance.

Issue 1: Addition made by Assessing Officer

The appeal raised a single issue regarding the addition of `2825205/- made by the Assessing Officer (AO) u/s 143(3) of the Income-tax Act, 1961. The AO assumed the sale rate of cashew kernels sold to sister concerns at `171 per kg, below the average sale rate of `165 per kg, resulting in a loss to the assessee. The AO concluded that the sales were made at below cost without a satisfactory reason, impacting the profit of sister concerns. The first appellate authority upheld this addition.

Issue 2: Assessee's Argument and CIT(A)'s Decision

The assessee argued that the comparison of sale rates was invalid as it did not consider the product mix, including lower grade kernels sold to sister concerns at a lower value. However, the CIT(A) found the assessee's explanation unsubstantiated as grade-wise details were not provided to the AO. The CIT(A) considered this lack of satisfactory explanation as a suppression of income and a tax avoidance scheme, citing relevant case law. The assessee appealed against this decision.

Issue 3: Tribunal's Consideration and Decision

The Tribunal noted similarities with a previous case and observed a difference in the quantum of the addition. Despite this, the nature of the addition remained the same. The Tribunal found that grade-wise details of sales were not considered by the CIT(A) and questioned the basis for valuing the closing stock without grade-wise information. The Tribunal decided to restore the matter back to the CIT(A) with directions for further examination, emphasizing the need for a proper opportunity for both parties to present their case. The Tribunal clarified that the decision in a similar case would not bind the current judgment, as each case would be decided on its own merits. Ultimately, the Tribunal allowed the assessee's appeal for statistical purposes.

This summary provides a detailed breakdown of the legal judgment, highlighting the issues involved, the arguments presented by the parties, and the decision rendered by the Tribunal.