2012 (8) TMI 362 - AT - Income Tax

Addition on account of unaccounted purchases - Held that - The assessee has filed copies of acknowledgement of return of income of all the suppliers which contains complete details viz. PAN, address, ward in which assessed etc. and that in two cases, notices u/s 133(6) could not be served as there is change in address of the parties - as the payments were made through a/c payee cheques and the A.O. has not brought any evidence on record by making inquiry from the bank that he payments have not gone to the accounts of the suppliers and that the same have been received back by the assessee - the assessee has made purchases from these parties only and after purchasing diamonds form them, the same have been exported and the quantitative details are given in the tax audit report - deletion of addition by CIT(A) is thus warranted - in favour of assessee. Disallowance of claim of loss due to theft - Held that - The quantitative details adduced from the sale and purchase invoices and the theft was found on 29.03.2007 as on the same day, FIR was filed with the police department - although the assessee has not maintained stock register and merely because stock was uninsured, no adverse interference can be drawn - in favour of assessee.

Summary

Issues:
1. Deletion of addition of Rs. 8,85,798 made by the AO on account of purchases.
2. Deletion of addition of Rs. 7,00,000 made by the AO on account of loss due to theft.

Analysis:

Issue 1:
The first issue revolved around the addition of Rs. 8,85,798 by the Assessing Officer (AO) on purchases. The AO raised concerns about the verifiability of purchases due to parties not being found at given addresses. However, the CIT(A) noted that the assessee provided complete details of suppliers, including PAN, addresses, and ward information. The CIT(A) also highlighted that payments were made through account payee cheques, and there was no evidence to suggest otherwise. The CIT(A) emphasized that the assessee's export sales were dependent on these purchases, and the GP margin was satisfactory. Citing precedents, the CIT(A) concluded that the AO's disallowance was unjustified, leading to the deletion of the addition.

Issue 2:
The second issue pertained to the addition of Rs. 7,00,000 by the AO on account of loss due to theft. The AO disallowed the claim citing lack of stock register and insurance. However, the CIT(A) observed that the theft was reported, an FIR was filed, and no evidence disproving the theft was presented by the AO. The CIT(A) emphasized that the absence of a stock register or insurance did not warrant adverse conclusions. The CIT(A) stressed the importance of verifying claims based on evidence rather than assumptions. Consequently, the CIT(A) deleted the addition, noting the adequacy of evidence provided by the assessee.

In both issues, the CIT(A) meticulously analyzed the facts, emphasizing the importance of evidence and adherence to legal principles. The Tribunal upheld the CIT(A)'s decisions, dismissing the revenue's appeal. The judgment underscores the significance of substantiated claims and the burden of proof on tax authorities to refute them based on concrete evidence.