2019 (5) TMI 1728 - AT - Income Tax

Unaccounted investment made in purchases addition was made based in peak working given by the assessee - Addition on account of Gross Profit addition - show-cause notice issued by the DRI - HELD THAT - We find that the addition made on the show-cause notice issued by the DRI. However, said statement was retracted by the partner of the assessee-firm. That the AO has based his findings influenced solely on DRI. There is no evidence whatsoever brought on record which could suggests that the assessee has actually done under invoicing by making import in purchases. Therefore, in our considered opinion, in the absence of any documentary evidence, no addition can be made on the action of third party i.e. the DRI. Further, the CESTAT, West Zone Bench Mumbai, vide its final order NO. A/85365-85368/2019 dated 25.02.2019 has also dropped the proceeding initiated against the assessee-firm. Therefore, we do not find any merits in the revenue appeal. Accordingly, same is dismissed.

Summary

Issues:
Appeal against CIT (A)'s order for Assessment Year 2007-08 - Deletion of addition of unaccounted investment in purchases - Deletion of Gross Profit addition.

Analysis:
1. The appeal by the Revenue contested the CIT (A)'s order regarding the deletion of additions made by the AO for the Assessment Year 2007-08. The first ground related to the deletion of an addition of ?32,57,962 based on unaccounted investment in purchases, while the second ground pertained to the deletion of an addition of ?35,13,067 on account of Gross Profit.

2. The assessee, engaged in the import and manufacturing business, was alleged to have under invoiced imports resulting in under valuation. The AO made additions based on peak working, considering unaccounted investments. The assessee's recorded purchases did not match actual imports, leading to the addition of unrecorded purchases. The AO estimated Gross Profit and made further additions.

3. The CIT (A) deleted the additions, stating that mere admission statements without corroborating evidence are insufficient for additions. The Revenue argued that under invoicing was admitted but retracted, and thus, the CIT (A) should have upheld the AO's additions.

4. The assessee contended that the addition was based on retracted statements before the DRI, and proceedings were dropped by the CESTAT. The Tribunal noted the lack of evidence supporting under invoicing and the retracted statement, leading to the dismissal of the Revenue's appeal.

5. The Tribunal found no merit in the Revenue's appeal, as the additions were solely based on retracted statements without concrete evidence. The CESTAT's decision further supported the dismissal of the appeal. Consequently, the appeal by the Revenue was dismissed, upholding the CIT (A)'s order.

6. The judgment was pronounced on 03.05.2019 by the Appellate Tribunal ITAT SURAT, with detailed analysis provided for each issue raised in the appeal for the Assessment Year 2007-08.