2011 (9) TMI 1228 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of addition on account of inflated purchases.
2. Deletion of additions on account of suppression of sale of scrap and under valuation of closing stock of scrap.
3. Deletion of disallowance of commission expenses.
4. Deletion of disallowance of reimbursement of freight expenses.
5. Validity of reopening the assessment under section 148.

Detailed Analysis:

1. Deletion of Addition on Account of Inflated Purchases:
The department contested the deletion of an addition of Rs. 16,97,475/- made by the Assessing Officer (AO) for inflated purchases. The AO's reasons included discrepancies in purchase bills from various suppliers. However, the CIT (A) found that the AO did not verify the bills or issue summons to the parties involved. The CIT (A) noted that all purchases were made through account payee cheques and were properly recorded in the stock register. The Tribunal upheld the CIT (A)'s decision, noting that similar additions for the assessment year 1999-2000 were also deleted by the Tribunal.

2. Deletion of Additions on Account of Suppression of Sale of Scrap and Under Valuation of Closing Stock of Scrap:
The department challenged the deletion of additions totaling Rs. 1,12,82,308/- and Rs. 5,61,198/- for suppression of sale of scrap and under valuation of closing stock of scrap, respectively. The AO based these additions on the assumption that the assessee sold scrap at a higher rate than recorded and received the difference in cash. The CIT (A) found no evidence to support the AO's assumption of a higher sale rate. The Tribunal affirmed the CIT (A)'s decision, citing a similar case for the assessment year 1999-2000 where the Tribunal had deleted similar additions.

3. Deletion of Disallowance of Commission Expenses:
The AO disallowed commission expenses of Rs. 4,60,502/- on the grounds that the assessee could not provide satisfactory explanations. The CIT (A) deleted the disallowance, noting that the assessee had provided copies of account and bank statements proving the payments. The Tribunal upheld the CIT (A)'s decision, referencing a similar case for the assessment year 1999-2000 where the Tribunal had confirmed the deletion of similar disallowances.

4. Deletion of Disallowance of Reimbursement of Freight Expenses:
The AO disallowed Rs. 6,94,186/- claimed as reimbursement of freight expenses, arguing that the assessee did not deliver scrap on an FOR basis. The CIT (A) deleted the disallowance, noting that the assessee had provided supporting documents for the freight charges. The Tribunal upheld the CIT (A)'s decision, citing a similar case for the assessment year 1999-2000 where the Tribunal had deleted similar disallowances.

5. Validity of Reopening the Assessment under Section 148:
The assessee contested the reopening of the assessment under section 148, arguing that it was done after four years without any failure on their part to disclose material facts. The Tribunal found that the AO did not mention any failure by the assessee to disclose material facts in the reasons recorded for reopening. Citing various judgments, the Tribunal held that reopening the assessment after four years was not permissible without such a failure. Consequently, the Tribunal quashed the assessment, deeming it bad in law.

Conclusion:
The Tribunal dismissed the department's appeal and allowed the assessee's cross objection, quashing the reopening of the assessment and confirming the deletions of the additions and disallowances made by the AO.