2012 (10) TMI 517 - AT - Income Tax

Unexplained purchase u/s 69C - disallowance of 100% of expenditure and depreciation - CIT(A) deleted the addition - Held that - As decided in COMMISSIONER OF INCOME TAX-V Versus M/S RADHIKA CREATION 2010 (4) TMI 100 - DELHI HIGH COURT Section 69C clearly refers to the source of the expenditure and not to the expenditure itself - No material as such was found during the search and seizure operations and it is only in the special audit directed by the Assessing Officer, who was unable to find any material at the time of search, that the authenticity of the expenditures were doubted. In this case the fact that all the sales made by the assessee stood recorded in the assessee s books of account, which included the sales and purchase vouchers and stock registers maintained by the assessee on a day-to-day basis. These books of account were duly produced before the AO who examined them, on examination, no negative observation thereagainst was recorded. Most of the customers were assessed to income-tax. Sales were made against the opening stock. The purchases made during the year and the sales were but conversion of stock. The profit therefrom had already been taxed. The sale transactions were got confirmed by the Assessing Officer on a test check basis but more inquiries were made - Thus source of the expenditure incurred in purchases is obviously explained - Decided in favour of assessee.

Summary

Issues:
Appeal against deletion of additions under section 69C of the IT Act and disallowance of expenditure and depreciation claimed by the assessee.

Analysis:
The appeals were filed by the department and Cross Objections by the assessee against the order passed by the CIT (A)-II, Delhi for Assessment Years 2003-04 to 2008-09. The department's grievance was related to the deletion of additions made by the Assessing Officer under section 69C of the IT Act and the disallowance of 100% of expenditure and depreciation claimed by the assessee. The Assessing Officer treated the purchases claimed by the assessee as unexplained expenditure under section 69-C of the Act, which the assessee contested by stating that the profit from the sale of goods had already been taxed.

The CIT (A) deleted the additions made under section 69C of the Act after considering that the purchases were duly accounted for in the assessee's books of account, which were not rejected by the Assessing Officer. The CIT (A) relied on a decision of the Delhi High Court and considered the remand report from the Assessing Officer. The assessee's counsel argued that the matter was in favor of the assessee based on a previous case. The department, however, strongly supported the impugned order.

The Tribunal found that the matter was indeed in favor of the assessee based on the similarity of facts with a previous case. The Tribunal noted that the sales and purchases were properly recorded in the books of account, and the Assessing Officer did not find any discrepancies. The Tribunal also considered that the profit from the transactions had already been taxed, and no evidence was presented to suggest undisclosed income. The Tribunal referenced relevant case laws to support its decision.

Conclusively, the Tribunal upheld the CIT (A)'s decision, finding no errors in the orders passed. Consequently, the department's appeals were dismissed, and the Cross Objections by the assessee were deemed academic and dismissed. The judgment was pronounced in open court, confirming the dismissal of all appeals and cross-objections.