2015 (10) TMI 927 - AT - Income Tax

Unexplained investment/unexplained cash - CIT(A) deleted the addition - Held that - Though the assessee could not produce the delivery challan, transport details and details of octroi payment in respect of returning the goods to these 9 parties however, there is no dispute on the fact that these transactions of purchase of goods and subsequently return to the parties does not involve any payment or refund of amount. We further note that the CIT(A) has given a categorical finding that the purchases made by the assessee from these parties amounting to ₹ 52,51,714/- which was claimed to have been returned was duly forming part of the closing stock as on 31/03/2009. Assessee has claimed that these purchases were returned as it was not approved by the prospective buyer of goods from the assessee therefore the credit transactions in the books of account of the assessee were neutralized by the return of the goods purchased. The assessee has also corroborated this fact of rejection of these goods by the buyers and accordingly these purchases were returned to these 9 parties by producing the copies of sales as well as sales returns. The sales during the year has been reflected by the assessee as net of sales return and consequently the goods in question were shown as part of the closing stock. We do concur with the view of the CIT(A) on this issue that the rejected lot of purchases is part of closing stock before it was returned to these parties which does not involve any payments to these parties and therefore the creditors shown in the name cannot be treated as bogus liability. Accordingly we do not find any error or illegality on the order of CIT(A). - Decided against revenue. Additional evidence considered by the CIT(A) without giving opportunity to the AO - Held that - It is clear from the order of the CIT(A) that the additional evidence sought to be filed by the assessee was rejected by the CIT(A) and therefore, the ground No.3 raised by the revenue is not emanating from the impugned order of the CIT(A). It is manifest from the grounds raised by the revenue that the concerned officers are taking the matters so casual without even going through the impugned order and understanding the same properly. This is a case of gross negligent approach on the part of AO as well as the approving Commissioner to file the appeal against the impugned order and authorizing of the grounds of appeal. - Decided against revenue.

Summary

Issues Involved:
Deletion of addition under section 68 of the Income tax Act, 1961 for unexplained investment/cash, Benefit accrued from purchases, Additional evidence considered by CIT(A) without giving opportunity to AO.

Analysis:

Deletion of Addition under Section 68:
The appeal concerned the deletion of an addition of Rs. 52,51,714 made by the Assessing Officer (AO) under section 68 of the Income Tax Act. The appellant, a wholesale cloth merchant, claimed that goods valuing the outstanding balance were returned to certain parties, resulting in no payment made. The AO treated this as unexplained investment or unexplained cash credit. However, the CIT(A) deleted the addition after considering the evidence provided by the assessee, including stock statements, ledger accounts, and financial statements. The CIT(A) found that the purchases from these parties were duly reflected in the closing stock, indicating no financial benefit to the assessee. The CIT(A) concluded that the purchases returned were part of the closing stock and did not involve any payments, hence not constituting bogus liability. The Tribunal concurred with the CIT(A)'s view, emphasizing that the transactions did not involve any payments, and the purchases were returned before any payments were made.

Benefit Accrued from Purchases:
The AO questioned the benefit accrued to the assessee from purchases made from certain parties. The CIT(A) noted that the purchases were reflected in the closing stock, which included goods sent on approval basis to prospective buyers. The CIT(A) found no financial impact on the assessee due to these transactions, as no payments were made or refunds received. The CIT(A) emphasized that the purchases were neutralized by the return of goods, and the assessee provided evidence of rejection by buyers. Consequently, the CIT(A) deleted the addition made by the AO, stating that no benefit accrued to the assessee from these transactions.

Additional Evidence Considered by CIT(A):
The AO challenged the CIT(A)'s consideration of additional evidence without giving an opportunity to respond. The CIT(A rejected the additional evidence submitted by the assessee, including purchase bills and transport challans, as insufficient to prove the return of goods to the creditors. The Tribunal observed that the CIT(A) properly assessed the additional evidence and dismissed the revenue's ground, highlighting the casual approach taken by the officers in filing the appeal. The Tribunal dismissed the revenue's appeal, affirming the CIT(A)'s decision.

In conclusion, the Tribunal upheld the CIT(A)'s decision to delete the addition under section 68, emphasizing the lack of financial impact on the assessee from the transactions in question. The Tribunal also supported the CIT(A)'s handling of additional evidence, dismissing the revenue's appeal on this issue due to procedural shortcomings.