2014 (3) TMI 811 - HC - Income Tax

Offer to surrender treated as admission Inability to produce evidence under Rule 46A of the Rules - Whether the Authorities below wrongly construed the offer to surrender as an admission - Held that - The Assessing Officer considered net profit at the rate of 5% and made addition accordingly on the amount of Rs. 11,12,052/- on the failure of the assessee to produce any documents regarding giving of such spare parts to the purchasers - the CIT(A) considered the additional evidence sought to be produced by the appellant and upheld the view of the AO - assessee contended that he has lead sufficient evidence to prove that the tractor s parts were given to the purchasers of the tractors, as a farmers kit without any charges and the same could not be added to the income of the appellant - the entire evidence has been taken into consideration by the CIT(A) - the CIT (Appeals) has not accepted the plea raised by the appellant the finding returned is based on the facts which were before the CIT(A) thus, there is no substantial question of law arises for consideration Decided against Assessee.

Summary

Issues:
1. Interpretation of surrender offer as an admission leading to addition of sales outside the books of account.
2. Denial of opportunity to produce evidence under Rule 46A of Income Tax Rules.
3. Appreciation of additional evidence to prove free accessories given as incentives.
4. Legality of the impugned orders.

Issue 1: Interpretation of Surrender Offer:
The appellant challenged the addition of Rs.11,67,655 as sales outside the books of account and 5% profit on said purchases. The Assessing Officer made the addition due to the failure of the assessee to produce evidence regarding the supply of spare parts of tractors. The appellant claimed the spare parts were given free of cost to promote tractor sales, and delivery was not mentioned on sales bills to avoid legal issues. The Commissioner of Income Tax (Appeals) did not allow additional evidence under Rule 46A, as the appellant failed to show reasonable cause for not submitting the evidence earlier. The Tribunal affirmed the order based on the facts before the Commissioner of Income Tax (Appeals).

Issue 2: Denial of Opportunity to Produce Evidence:
The appellant argued that sufficient evidence was provided to prove the spare parts were given to tractor purchasers as farmer kits without charge. The appellant submitted challans, bills, and affidavits of purchasers to support the claim. However, the Commissioner of Income Tax (Appeals) did not accept this evidence, leading to the Tribunal affirming the order. The appellant contended that the spare parts should not be added to income based on trade practices.

Issue 3: Appreciation of Additional Evidence:
The Commissioner of Income Tax (Appeals) considered the evidence presented by the appellant but did not find it sufficient to support the claim that spare parts were given as incentives. The appellant's argument that the spare parts were provided free of cost to promote tractor sales was not accepted, leading to the dismissal of the appeal.

Issue 4: Legality of Impugned Orders:
The High Court dismissed the appeal, stating that the findings were based on facts before the Commissioner of Income Tax (Appeals) and did not raise any substantial question of law for the Court's consideration. Consequently, the legality of the impugned orders was upheld, and the appeal was dismissed.