2018 (3) TMI 1650 - AT - Income Tax

Additions towards unexplained investment in closing stock - Additions towards unexplained share capital - CIT deleted the additions - Held that - When all the details and information available to revenue, CIT(A) has rightly deleted the additions.

Summary

Issues Involved:
1. Addition of ?5,28,94,800/- on account of unexplained investment in closing stock.
2. Addition of ?79,00,000/- as unexplained share capital.
3. Addition of ?6,97,717/- as unexplained credits.
4. Disallowance of ?60,62,940/- on account of interest payment.
5. Disallowance of ?14,96,951/- as commission expenditure.

Detailed Analysis:

1. Addition of ?5,28,94,800/- on account of unexplained investment in closing stock:
The Revenue argued that the CIT(A) erred in reversing the Assessing Officer's addition of ?5,28,94,800/- for unexplained investment in closing stock. The CIT(A) found that the assessee had included dies, moulds, and chillers in the work-in-progress (WIP) stock statement submitted to the bank, which were also reflected as fixed assets in the balance sheet. The assessee provided detailed reconciliations and explanations, including evidence that the bank accepted these items as part of WIP. The CIT(A) concluded that there was no discrepancy between the bank statement and the balance sheet, thus no unexplained investment existed. The Tribunal upheld the CIT(A)'s decision, noting that the Revenue failed to rebut these findings.

2. Addition of ?79,00,000/- as unexplained share capital:
The Revenue challenged the deletion of ?79,00,000/- added as unexplained share capital. The CIT(A) examined the confirmations and returns of the entities involved, Mahavir Enterprise and Indra Enterprises. The CIT(A) found that the identity, creditworthiness, and genuineness of the transactions were established. The Tribunal affirmed the CIT(A)'s decision, noting that the Revenue did not provide any evidence to counter the findings.

3. Addition of ?6,97,717/- as unexplained credits:
The Revenue sought to restore the addition of ?6,97,717/- as unexplained credits. The CIT(A) deleted the additions for loans from Sangita Shah and Bleachchem, finding that the assessee provided sufficient evidence, including confirmations and PAN details. However, the CIT(A) upheld the addition of ?97,417/- from Jagdishbhai J. Patel due to lack of evidence. The Tribunal agreed with the CIT(A)'s findings, noting that the Revenue did not present any contrary evidence.

4. Disallowance of ?60,62,940/- on account of interest payment:
The Revenue contested the deletion of ?60,62,940/- disallowed as interest payment on loans allegedly diverted for non-business purposes. The CIT(A) found that the advances were for business purposes, such as CENVAT/Excise duty receivables, VAT/GST, sales tax receivables, advances for purchases, and employee advances. The Tribunal upheld the CIT(A)'s decision, noting that the Revenue did not provide evidence of any specific non-business diversion of funds.

5. Disallowance of ?14,96,951/- as commission expenditure:
The Revenue sought to revive the disallowance of ?14,96,951/- as commission expenditure. The CIT(A) directed the Assessing Officer to verify the bank certificates confirming the remittance of commission payments to Pachlis Glystias Greece. The Tribunal found no prejudice to the Revenue's interest in this directive and upheld the CIT(A)'s decision, rejecting the Revenue's appeal.

Conclusion:
The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decisions on all issues. The Tribunal found that the CIT(A) had correctly evaluated the evidence and provided detailed reasoning for the deletions and disallowances. The Revenue failed to provide sufficient evidence to counter the CIT(A)'s findings.