2014 (2) TMI 934 - AT - Income Tax

Disallowance of loss - Held that - The assessee failed to submit details and evidences of expenses incurred by it - Also the Auditor put a remark that during excise search accounting and stock records were seized and audit was done in the absence of these records and documents - No verification was made even by the auditor, therefore appellant cannot claim that accounts are audited - Loss has been claimed but in support of such claim, no evidence is furnished - The assessee has not taken any step to take the certified copies from the Central Excise Department of the records seized - No panchnama of the records seized is placed on record, therefore in the absence of the material evidence, the authorities below were justified in rejecting the claim of the assessee - Decided against assessee. Unaccounted production and unrecorded sale - Held that - Relying upon the decision in Motorol Technologies Ltd.v s. ITO 2014 (2) TMI 253 - ITAT AHMEDABAD - The assessee failed to furnish the sales bill along with other basic records for verification as called by the AO - The AO has made additions solely on the basis of the penalty order passed by the Commissioner of Central Excise, Vadodara-II penalty order F.No.V.Ch.27(15)9/0A/AC/Prev./03 dated 29/10/2004 - Director of the assessee-company has agreed that goods have been removed from the premises without making entries in Central Excise Records and without paying the duty involved. No material is placed on record by the Revenue that any independent enquiry was made by the AO to find out whether such details of sales were not recorded in the regular books of account by summoning the record from the central excise authorities - The decision in aforesaid case followed to make addition @ 12.5% margin on unaccouted sale - Partly allowed in favour of assessee. Unexplained unsecured loan - Held that - The appellant submitted accounts confirmations from Parikh Enterprise, Alpana Gandhi, Motorol Enterprise, Nirmala S.Gandhi, Motorol Speciality Oils Ltd, Manhatton Fingrowth Ltd. and Flexi Pack India Ltd - Confirmation received from all these seven parties bear the complete address and PAN - Except the case of Motorol Enterprise, the money was received by cheque - Relying upon the decision in Commissioner of Income-Tax, Orissa Versus Orissa Corporation Pvt. Limited 1986 (3) TMI 3 - SUPREME Court - By furnishing confirmation with Pan, primary onus is discharged by the appellant - Onus thereafter shifts to the Assessing Officer to make further investigation and prove the credit non-genuine - Since primary onus is discharged by the appellant by submitting confirmation with PAN, credit cannot be treated as unexplained on non-submission of additional information Decided against Revenue.

Summary

Issues Involved:
1. Disallowance of loss claimed by the assessee.
2. Addition on account of presumed unaccounted production and profit.
3. Addition in respect of unsecured loans.
4. Deletion of additions by CIT(A) in the Revenue's appeal.

Issue-wise Detailed Analysis:

1. Disallowance of Loss Claimed by the Assessee:
The assessee contested the disallowance of a loss amounting to Rs.38,75,670/-. The CIT(A) upheld this disallowance, arguing that the assessee failed to provide sufficient evidence due to the seizure of records by the Central Excise Department. The Tribunal found that the assessee was given ample opportunity to produce the necessary documents but failed to do so. The Tribunal upheld the CIT(A)'s decision, stating that the onus was on the assessee to substantiate the claimed loss with material evidence, which was not fulfilled.

2. Addition on Account of Presumed Unaccounted Production and Profit:
The AO made an addition of Rs.1,80,99,968/- based on unaccounted sales and investments. The CIT(A) reduced this addition to Rs.85,98,027/-. The Tribunal noted that the AO based his addition on a penalty order from the Central Excise Department and failed to conduct an independent inquiry. The Tribunal directed the AO to apply a 12.5% margin on unaccounted sales of Rs.1,77,45,067/-, following a precedent set by the Coordinate Bench in a similar case. Thus, the Tribunal partially allowed the assessee's appeal on this ground.

3. Addition in Respect of Unsecured Loans:
The AO made an addition of Rs.1,03,50,905/- for unsecured loans, which the CIT(A) partially deleted after verifying the genuineness of the transactions and the creditworthiness of the lenders. The Tribunal upheld the CIT(A)'s decision, noting that the primary onus was discharged by the assessee by providing confirmations with PAN details. The Tribunal found no reason to interfere with the CIT(A)'s findings, thereby rejecting the Revenue's appeal on this ground.

4. Deletion of Additions by CIT(A) in the Revenue's Appeal:
The Revenue appealed against the CIT(A)'s deletion of additions related to an increase in share capital and unsecured loans for AY 2004-05. The CIT(A) had deleted an addition of Rs.4.75 crores, explaining that the increase was due to a journal entry reversed the next year, and thus, no actual funds were received. For the unsecured loan of Rs.59,93,172/-, the CIT(A) directed verification of the availability of goods/material with the supplier parties. The Tribunal upheld the CIT(A)'s findings, as the Revenue could not provide contrary evidence. Consequently, the Revenue's appeal was dismissed.

Summary of Results:
1. Assessee's appeal for AY 2003-04 (ITA No.717/Ahd/2009) is partly allowed.
2. Assessee's appeal for AY 2004-05 (ITA No.718/Ahd/2009) is dismissed.
3. Revenue's appeal for AY 2003-04 (ITA No.728/Ahd/2009) is dismissed.
4. Revenue's appeal for AY 2004-05 (ITA No.729/Ahd/2009) is dismissed.