2015 (12) TMI 900 - AT - Income Tax

Addition made on account of suppression of sales - CIT(A) deleted the addition - Held that - CIT(A) has given a finding that it has not been shown by the AO that the assessee has wrongly recorded the sale price in the books. He further observed that this observation leads to suspicion and can be the starting point for investigation but this cannot be the basis for rejecting the books. The A.O. should have carried out inquiries with the buyers to confirm his suspicion before concluding that the books were defective. As no specific defect has been shown in the books they could not be rejected. We find merit into this contention of the ld.CIT(A) that the AO has not made any enquiry from the buyers to verify the actual sale price. In the absence of the same in our considered view the AO was not justified in rejecting the books of account and making the addition. Therefore we do not see any reason to interfere with the order of the ld.CIT(A) same is hereby upheld - Decided against revenue

Issues:
1. Deletion of addition on account of suppression of sales by the assessee.
2. Rejection of book results by the Assessing Officer.
3. Justification of the Assessing Officer's actions in making additions.
4. Appeal against the order of the Ld.CIT(A) by the Revenue.

Analysis:

Issue 1: Deletion of addition on account of suppression of sales by the assessee
The Revenue appealed against the deletion of additions totaling &8377; 23,54,825/- and &8377; 6,47,300/- made by the Assessing Officer for suppression of sales. The ld.CIT(A) upheld the deletion based on the argument that the Assessing Officer did not prove that the assessee wrongly recorded sale prices in the books. The ld.CIT(A) highlighted that suspicion alone cannot justify rejecting the books without further investigation or confirmation from buyers. The AO's failure to inquire from buyers to verify actual sale prices was a crucial factor in the decision. The Tribunal concurred with the ld.CIT(A) and upheld the deletion of the additions, emphasizing the lack of justifiable grounds for rejecting the books or making the additions.

Issue 2: Rejection of book results by the Assessing Officer
The Assessing Officer rejected the book results due to defects observed during a survey. The AO made additions based on Annexure BF-15 and BF-4, claiming suppression of sales. However, the ld.CIT(A) found that the prices in the catalogue may differ from actual sale prices due to various factors like discounts and materials. The Tribunal agreed with the ld.CIT(A) that the AO's reliance on mere suspicion without verifying actual sales with buyers was unjustified. The Tribunal emphasized that suspicion alone cannot be the basis for rejecting books of account. The ld.CIT(A)'s decision to delete the additions was upheld due to the lack of concrete evidence or defects in recording sale prices.

Issue 3: Justification of the Assessing Officer's actions in making additions
The Assessing Officer's additions for suppression of sales were based on discrepancies between catalogue prices and recorded prices in the books. However, the ld.CIT(A) and the Tribunal found that the AO failed to conduct necessary inquiries with buyers to confirm actual sale prices. The AO's calculations were also questioned for not considering genuine direct expenses like customs and transportation. The Tribunal agreed that the AO's actions lacked sufficient grounds for making the additions, especially without proper verification or evidence of incorrect recording of sale prices. The ld.CIT(A)'s decision to delete the additions was supported due to the absence of defects in the books or concrete proof of suppression of sales.

Issue 4: Appeal against the order of the Ld.CIT(A) by the Revenue
The Revenue's appeal against the ld.CIT(A)'s order deleting the additions was dismissed by the Tribunal. The Tribunal upheld the ld.CIT(A)'s decision, emphasizing the lack of substantiated grounds for the Assessing Officer's actions. The Tribunal concluded that suspicion alone cannot warrant the rejection of books or the making of additions without proper verification or confirmation from relevant parties. The Revenue's appeal was rejected, affirming the ld.CIT(A)'s order in favor of the assessee.

Conclusion:
The Tribunal upheld the ld.CIT(A)'s decision to delete the additions made by the Assessing Officer for suppression of sales, emphasizing the necessity of concrete evidence and proper verification before rejecting books or making additions. The Tribunal dismissed the Revenue's appeal, supporting the ld.CIT(A)'s findings and highlighting the importance of thorough investigation and substantiated grounds in tax assessments.

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