2017 (9) TMI 1970 - AT - Income Tax

Addition made on account of inflation of purchases - HELD THAT - AO has in the remand report reiterated the reasons given in the assessment order and has not been able to bring on record any evidence to hold that purchases made from these parties are inflated bogus. The fact that all the payments for the material purchased have been made through the banking channel against the receipt of bills, the yield in the production process, no. of cylinders manufactured, etc. have not been disputed by the AO. In the absence of any material/evidence to the contrary available on record,thus hold that there is no justification on the part of the AO to treat the purchases from these parties as inflated/not genuine Disallowance on account of suppression of scrap sales - CIT-A deleted the addition - HELD THAT - We find that the ld. CIT (A) after taking into consideration various aspects of the matter and also following the decision of the Tribunal in the assessee s own case for the assessment year 1999-2000, deleted the addition. We find no reason to interfere into the order of ld. CIT (A), the same is hereby affirmed. The grounds of the revenue are rejected. Disallowance of bogus payment of commission - HELD THAT - As perused the material on record and gone through the orders of the authorities below. Both the parties have advanced the similar arguments as made for the assessment year 1998-99. We have adjudicated the identical grounds in the appeal of the revenue - Since there is no change in the facts and circumstances for the assessment year under consideration, we affirm the order of ld. CIT (Appeals) who had rightly deleted the additions by following the decisions of the Tribunal in the assessee s own case for the A.Y. 1999-2000. The grounds of the revenue are rejected. Reopening of assessment u/s 147 - HELD THAT - We do not find any reason to interfere into the order of ld. CIT (A) in respect of this ground, the same is hereby upheld, as the ld. Counsel for the assessee could not point out any illegality into the re-opening of assessment by furnishing any contrary material on record. The ground of the assessee is rejected.

Summary

Issues Involved:
1. Deletion of addition on account of inflation of purchases.
2. Deletion of addition on account of suppression of scrap sales.
3. Deletion of addition on account of bogus payment of commission.
4. Reopening of assessment under section 148 of the Income Tax Act.

Detailed Analysis:

1. Deletion of Addition on Account of Inflation of Purchases:
The revenue challenged the deletion of an addition of ?79,82,382/- made by the Assessing Officer (AO) on account of inflated purchases. The AO had doubted the genuineness of purchases from three parties: M/s. Agarwal Brothers, M/s. R.K. Steel Trading Corp., and M/s. Saurabh Steel Syndicate, citing discrepancies such as the absence of sales tax check post stamps and weighment slips. However, the assessee provided evidence including bills, account payee cheque payments, and ledger accounts. The Commissioner of Income Tax (Appeals) [CIT(A)] and the Income Tax Appellate Tribunal (ITAT) had previously accepted similar purchases as genuine for other assessment years. The ITAT upheld the CIT(A)'s decision, noting that the AO failed to provide any contrary material evidence and that the purchases were supported by proper documentation.

2. Deletion of Addition on Account of Suppression of Scrap Sales:
The AO had made an addition of ?60,70,056/- alleging suppression of scrap sales based on extrapolated figures from loose papers found during a survey, which indicated higher market rates for scrap than those recorded. The CIT(A) deleted the addition, stating that the AO did not provide concrete evidence for the year under consideration and relied on extrapolation from other years without substantiation. The ITAT affirmed this decision, emphasizing the lack of direct evidence for the specific year.

3. Deletion of Addition on Account of Bogus Payment of Commission:
The AO disallowed ?1,23,879/- claimed as commission expenses on scrap sales, arguing that all sales were direct and no commission was necessary. The CIT(A) deleted the addition, referencing the ITAT's earlier decisions for other years where similar commission payments were accepted as genuine. The ITAT upheld the CIT(A)'s decision, finding no new evidence to support the AO's claim of bogus payments.

4. Reopening of Assessment under Section 148:
The assessee contested the reopening of the assessment under section 148, arguing that the AO did not have valid reasons. The CIT(A) upheld the reopening, citing that the AO had recorded reasons based on material found during a survey and discrepancies in declared income. The CIT(A) referenced legal precedents, including the Supreme Court's decision in Kelvinator India, which allows reassessment if there is tangible material. The ITAT agreed with the CIT(A), noting that the AO followed due process and provided reasonable opportunity for the assessee to respond.

Conclusion:
The ITAT dismissed the revenue's appeals, affirming the CIT(A)'s deletion of additions related to inflated purchases, suppression of scrap sales, and bogus commission payments. The ITAT also dismissed the assessee's cross-objections, upholding the validity of the reopening of assessments under section 148. The decisions were based on thorough examination of evidence, adherence to legal precedents, and consistent findings across multiple assessment years.