2015 (10) TMI 1001 - AT - Income Tax

Unexplained investment in stock - CIT(A) deleted the addition - Held that - The additional evidence admitted by the Ld. CIT(A) in the form of delivery challans issued by the supplier M/s Liberty Hosiery Mills Pvt. Ltd. These evidences and the discrepancies pointed out by the A.R. in the evidences collected by the AO form the supplier, lead him to arrive at a considered view that the goods were supplied by M/s Liberty Hosiery Mills Pvt. Ltd. to the assessee in the month of August, 1998 and not in the month of November, 1998 as claimed by the AO. Therefore, Ld. CIT(A) has rightly held that there remains no ground for an addition to the income of the assessee u/s. 69 of the Act and hence, deleted the said addition - Decided in favour of assessee. Addition on account of alleged profit 220% on sale of stock of ₹ 75 lacs in domestic market - CIT(A) deleted the addition - Held that - The goods purchased from M/s. Liberty Hosiery Mills Pvt. Ltd. in the month of August, 1998 were exported by the appellant in the same month, there was no stock left with the appellant for further sale after August, 1998. Moreover, the addition has been made on the basis of suspicion, conjectures and surmises, as no evidence has been brought on record by the AO of any domestic sale by the appellant. We find that the AO has only assumed that since the goods worth ₹ 75 lacs were supplied by M/s. Liberty Hosiery Mills Pvt. Ltd. in the month of November, 1998 and not in the month of August, 1998, therefore, the asssessee has not only invested unaccounted money in purchase of goods worth ₹ 75 lacs in August, 1998, which were exported and the goods receive by them from the supplier in the month of November, 1998, must have been sold in the local market, earning a profit @ 20%thereon. This theory of the AO has already been discarded, once it is held that the goods worth ₹ 75 lacs were received by the assessee from the supplier in the month of August, 1998 only and these very goods were exported on 13.08.1998. Therefore, the question of earning any profit on any domestic sale does not arise at all. Hence, Ld. CIT(A) has rightly deleted the said addition. - Decided in favour of assessee. Recalculate the deduction u/s. 80HHC - assessee has challenged the incorrect computation of the deduction admissible u/sw. 80HHC of the Act, which was restricted to ₹ 1.75 crores as against the original claim of the assessee at ₹ 2.48 crores - Held that - CIT(A) has rightly directed the AO to recomputed the deduction admissible u/s. 80HHC of the Act to the assessee after proper effect to this appellate order. In our considered opinion, the Ld. CIT(A) has passed a well reasoned order - Decided in favour of assessee. Additional evidence of the assessee under Rule 46A of the I.T. Rules rejected - Held that - We find that the AO stated in the Remand Report that these documents had already been considered at the time of original assessment. In the rejoinder, the AR of the assessee submitted that since all the documents filed along with the application under Rule 46A had been considered at the time of original assessment, the same was also considered by the Ld. CIT(A) after considering the Remand Report and the Rejoinder of the Ld. Counsel of the assessee and rightly allowed the additional evidences filed by the assessee. In our considered opinion, the Ld. CIT(A) has passed a well reasoned order which does not need any interference - Decided in favour of assessee.

Summary

Issues:
1. Deletion of addition of Rs. 75,00,000 as unexplained investment in stock.
2. Deletion of addition of Rs. 15,00,000 as gross profit on sale of unexplained investment in the domestic market.
3. Direction to recalculate the deduction under section 80HHC after giving effect to the appellate order.
4. Ignoring the submission of the AO not to accept the additional evidence of the assessee under Rule 46A of the I.T. Rules.

Analysis:

Issue 1 - Deletion of addition of Rs. 75,00,000 as unexplained investment in stock:
The Ld. CIT(A) admitted additional evidence in the form of delivery challans from the supplier, leading to a conclusion that the goods were supplied to the assessee in August 1998, not in November 1998 as claimed by the AO. Consequently, the Ld. CIT(A) deleted the addition, ruling out grounds for addition under section 69 of the Act. The ITAT upheld this decision, stating that the order was well-reasoned and required no interference.

Issue 2 - Deletion of addition of Rs. 15,00,000 as gross profit on sale of unexplained investment in the domestic market:
As the goods purchased in August 1998 were exported in the same month, no stock remained for further domestic sale. The AO's addition was based on speculation without concrete evidence of domestic sales. The ITAT concurred with the Ld. CIT(A)'s decision to delete the addition, emphasizing that the AO's theory lacked substantiation and was already dismissed. The ITAT upheld the decision as well-reasoned and warranted no intervention.

Issue 3 - Direction to recalculate the deduction under section 80HHC:
The Ld. CIT(A) directed the AO to recalculate the deduction under section 80HHC after the appellate order, challenging the initial computation that restricted the deduction. The ITAT supported this direction, acknowledging the need for proper computation in line with the appellate order. The ITAT upheld the decision, considering it well-reasoned and justified.

Issue 4 - Ignoring the submission of the AO not to accept the additional evidence under Rule 46A:
The AO's efforts to locate the assessee and the legal heir's address were acknowledged. The ITAT noted that the additional evidence submitted by the assessee was rightly allowed by the Ld. CIT(A) due to the circumstances preventing the presentation of evidence before the AO. The ITAT upheld the decision, stating that the order was well-reasoned and did not require any interference.

In conclusion, the ITAT dismissed the appeal of the Revenue, affirming the decisions made by the Ld. CIT(A) on all the issues raised in the appeal. The ITAT found the orders well-reasoned and supported by the evidence, leading to the dismissal of the Revenue's appeal.