2018 (1) TMI 1678 - AT - Income Tax

Addition of advance received for supply of goods as bogus trading liability - HELD THAT - Advance was shown as liability received by the assessee from M/s. Aditya Renewable Resources. On perusal of account of the party in the books of the assessee it was found that 27, 49, 796/- has been accumulated by receiving four cheques has been considered and the invoice was raised in the financial year 2009-2010 relevant to assessment year 2010-2011. To substantiate ld A.R. submitted the paper book disclosing copy of invoice and the calculation of the stock with documents. We are of the considered view that the assessee should be provided an opportunity to explain the details alongwith statements filed before us and the Assessing Officer has to verify whether the assessee has raised sales bills in the assessment year 2010-2011 and pass the order on merits. The Assessing Officer is directed to afford proper opportunity of hearing to the assessee before adjudicating the issue afresh. Addition as suppressed sales - HELD THAT - Addition being suppressed sales is also restored to the file of the Assessing officer with the same direction as give above. This issue is also allowed for statistical purposes

Summary

Issues:
1. Disallowance of advance received for supply of goods as bogus trading liability.
2. Addition of suppressed sales.

Issue 1: Disallowance of advance received for supply of goods as bogus trading liability:
The case involved an appeal by the assessee against the order of the CIT(A)- Bilaspur for the assessment year 2009-2010. The primary issue was the disallowance of ?27,49,190/- by the lower authorities, treating it as an advance received for the supply of goods and considering it a bogus trading liability. The Assessing Officer observed discrepancies in the account of the party from whom the advance was received. The assessee explained that the advance was for a specific project, and the realization value would be accounted for in the next assessment year. However, the Assessing Officer did not accept this explanation and treated the amount as a bogus liability under section 68 of the Act. The CIT(A) upheld this decision. During the appeal, the assessee presented additional evidence, including an invoice and stock calculation for the relevant financial year. The ITAT directed the Assessing Officer to provide the assessee with an opportunity to explain the details and verify the sales bills for the assessment year 2010-2011 before passing a fresh order on the issue.

Issue 2: Addition of suppressed sales:
Another issue in the case was the addition of ?8,60,783/- as suppressed sales. The ITAT, having restored the earlier disallowance issue back to the Assessing Officer for reevaluation, also directed the reconsideration of the suppressed sales addition with the same instructions. Consequently, the addition of suppressed sales was also allowed for statistical purposes. Ultimately, the appeal filed by the assessee was allowed for statistical purposes, with the order pronounced on 15/01/2018.