2014 (7) TMI 767 - AT - Income Tax

Addition u/s 69C of the Act Liquor purchases - Difference in AIR information Held that - Once the assessee has discharged its initial onus of reconciling the purchases vis- -vis the bills in its book of account, then burden shifts on the Revenue to show that such an information is corroborated by cogent material on record that the assessee had made purchases from this party - If such material is not brought, then no adverse inference should be taken - the confirmation from the party has been received by the department - the confirmation was not available with the AO as well as CIT(A) As regards the addition which is on account of difference in liquor purchase, once the assessee has reconciled all the purchases recorded in the books of account from the bills, then for making further addition the AO should have made out a preliminary inquiry from the vendors about the quantity of sale made by them to the assessee - thus, the matter is remitted back to the AO for verification of claim Decided in favour of assessee. Loss of trading stock due to fire Deduction for business loss of trading stock Held that - This is also prima facie borne out from the various evidences placed before us in the paper book - If it is a loss on account of stock-in-trade, then definitely it is on revenue account and has to be allowed as deduction while computing the profits u/s 28 of the Act - a claim cannot be made for the first time before the AO or before the CIT(A), as it tantamounts to revising of the return of income - the assessee has also brought on record that it has received the insurance claim on account of loss due to fire in the subsequent year and the same has been offered for the tax in the AY 2009-10 the entire issue of claim of deduction of loss should be sent back to the file of the AO for examination of claim decided in favour of Assessee.

Summary

Issues Involved:
1. Addition on account of alleged difference in AIR information.
2. Loss of trading stock due to fire.

Detailed Analysis:

1. Addition on account of alleged difference in AIR information:

(A) Alleged liquor purchases from M/s. Mansha Agencies Private Limited:
The assessee, engaged in the hotel business, was confronted with AIR information indicating liquor purchases worth Rs. 1,70,719 from M/s. Mansha Agencies Private Limited. The assessee denied any such purchase. The Assessing Officer (AO) issued a notice under section 133(6) to M/s. Mansha Agencies, but did not receive a response, leading to the addition of Rs. 1,70,719 as unexplained expenditure under section 69C.

(B) Alleged difference in liquor purchase:
The AO also noted a discrepancy of Rs. 92,161 in liquor purchases, which the assessee attributed to factors like local taxes. The AO rejected this explanation and added the amount to the assessee's income.

CIT(A) Proceedings:
The assessee argued that all liquor purchases and TCS certificates pertained to its Goa hotel, as the Juhu hotel was closed for renovation. The CIT(A) dismissed the assessee's claims, stating the onus was on the assessee to obtain confirmations from the vendors.

Tribunal's Findings:
The Tribunal noted that the assessee had provided sufficient reconciliation of purchases and denied any transactions with M/s. Mansha Agencies. A confirmation letter from M/s. Mansha Agencies, received later, supported the assessee's claim. The Tribunal admitted this additional evidence and remitted the matter back to the AO for verification.

For the Rs. 92,161 discrepancy, the Tribunal held that the AO should have conducted inquiries with the vendors. The matter was remitted back to the AO for further verification and decision.

2. Loss of trading stock due to fire:

The assessee claimed a deduction for a business loss of Rs. 12,66,898 due to a fire at its Juhu hotel. The loss included fixed assets and operating supplies like linen, crockery, and cutlery. Although the insurance claim was settled and received in the next year, the AO did not allow the deduction.

CIT(A) Proceedings:
The assessee argued that the loss of stock-in-trade is a deductible business expense. The CIT(A) rejected the claim, citing the Supreme Court's decision in M/s. Goetz (India) Ltd., which prohibits new claims not made through a revised return.

Tribunal's Findings:
The Tribunal clarified that the Supreme Court's decision does not restrict the CIT(A) or the Tribunal from entertaining new claims. Since the loss due to fire was substantiated and the insurance claim was offered for tax in the subsequent year, the Tribunal remitted the issue back to the AO for examination and verification.

Conclusion:
The appeal was allowed for statistical purposes, with both issues remitted back to the AO for further verification and decision. The Tribunal emphasized the need for due and effective opportunity for the assessee to present its case.