2009 (10) TMI 942 - AT - Income Tax

Summary

Issues Involved:
1. Addition on account of alleged unaccounted cash sales.
2. Disallowance of expenses on account of rate and weight difference.
3. Disallowance of sales commission expenses.
4. Treatment of purchases as bogus and rejection of books of account under Section 145.
5. Revision proceedings under Section 263 of the Income-tax Act.

Issue-wise Detailed Analysis:

1. Addition on Account of Alleged Unaccounted Cash Sales:
The first issue addressed was the addition of Rs. 40,200 on account of unaccounted cash sales. The Assessing Officer (AO) noticed that cash sales to M/s. Techno Rub Industries were not recorded in the cash book for March 2001. The assessee claimed it was a clerical error, but the AO found discrepancies between the cash sales in November 2000 and those in March 2001. The CIT(A) confirmed the AO's decision, and the Tribunal upheld the addition, stating that the sales of November were different and duly recorded, whereas those of March were unaccounted for. Consequently, the addition of Rs. 40,200 was confirmed.

2. Disallowance of Expenses on Account of Rate and Weight Difference:
The next issue was the disallowance of Rs. 82,881 claimed under "rate and weight difference." The AO disallowed this amount as the assessee failed to provide any clarification or evidence. The CIT(A) upheld the disallowance, noting that the appellant did not respond during assessment proceedings and failed to justify the claim. The Tribunal agreed, emphasizing the lack of confirmation from respective parties and the absence of supporting evidence. Therefore, the disallowance of Rs. 82,881 was confirmed.

3. Disallowance of Sales Commission Expenses:
The assessee did not press the issue of disallowance of Rs. 16,596 out of a total of Rs. 49,596, leading to its dismissal. Another disallowance of Rs. 91,000 paid to M/s. R.N. Sahni & Sons was also contested. The AO disallowed this amount due to the absence of evidence proving the services rendered and lack of response from the recipient. The CIT(A) confirmed this, and the Tribunal upheld the disallowance, citing the absence of any supporting evidence or confirmation from the recipient party.

4. Treatment of Purchases as Bogus and Rejection of Books of Account under Section 145:
The AO treated purchases amounting to Rs. 13,80,636 as bogus after rejecting the books of account under Section 145. The AO found abnormal fluctuations in production loss and identified bogus purchases from non-existent parties. The CIT(A) upheld the AO's decision, noting the lack of delivery challans and the non-existence of the suppliers. The Tribunal confirmed the disallowance, agreeing with the findings of the lower authorities and the absence of any payments made to these parties.

5. Revision Proceedings under Section 263 of the Income-tax Act:
The CIT initiated revision proceedings under Section 263, citing errors in the AO's assessment order. The CIT pointed out that the AO failed to add unexplained investment in closing stock and did not properly add back inflated purchases from non-existent parties. The Tribunal found that the AO had already considered these issues during assessment and reached a fair conclusion. The Tribunal quashed the revision order, stating that the AO had already made appropriate additions and any further addition would result in double taxation.

Conclusion:
The Tribunal dismissed the assessee's appeal in ITA No.160/Ahd/2006, confirming the additions and disallowances made by the AO and CIT(A). However, the Tribunal allowed the assessee's appeal in ITA No.1089/Ahd/2006, quashing the revision order under Section 263. The order was pronounced in open court on 16/10/2009.