2012 (3) TMI 694 - AT - Income Tax

Summary

Issues Involved:
1. Additional Ground Raised by Assessee Regarding Notice u/s 143(2)
2. General Grounds Challenging the Impugned Order
3. Non-Admission of Additional Evidence by CIT(A)
4. Sustaining Addition of Un-Reconciled Difference in Trade Scheme Expenses
5. Addition Due to Lack of Address and Split Account of Manjit Singh Bhatia
6. Addition on Account of Interest-Free Loans to Sister Concern
7. Disallowance of Foreign Exchange Loss

Summary:

1. Additional Ground Raised by Assessee Regarding Notice u/s 143(2):
The assessee sought to raise an additional ground challenging the assessment framed u/s 143(3) without issuing notice u/s 143(2) within the prescribed time. This application was withdrawn during the hearing, and thus, no adjudication was required.

2. General Grounds Challenging the Impugned Order:
Grounds 1, 2, and 3, which contended that the impugned order was bad in law and passed without sufficient opportunity, were not pressed and thus dismissed.

3. Non-Admission of Additional Evidence by CIT(A):
The main grievance was the non-admission of additional evidence by the CIT(A), which the assessee argued resulted in a miscarriage of justice. The CIT(A) had refused to admit additional evidence under Rule 46A, concluding that the details should have been available with the assessee when the return was filed. The Tribunal found that the time available was insufficient for furnishing complete details due to decentralization of accounts and ongoing audit work. Citing the decision in Manish Buildwell (P) Ltd., the Tribunal restored the matter to the AO for fresh adjudication, directing the AO to take into account the additional evidence and grant a reasonable opportunity of being heard to the assessee.

4. Sustaining Addition of Un-Reconciled Difference in Trade Scheme Expenses:
The assessee contested the addition of Rs. 1,10,58,759/- representing un-reconciled differences in trade scheme expenses. The Tribunal restored this ground to the AO for fresh decision after considering the additional evidence and giving the assessee a reasonable opportunity of being heard.

5. Addition Due to Lack of Address and Split Account of Manjit Singh Bhatia:
Grounds 6, 7, 8, and 9, which arose due to lack of address and split account of Manjit Singh Bhatia, were also restored to the AO for fresh adjudication.

6. Addition on Account of Interest-Free Loans to Sister Concern:
The AO disallowed Rs. 14,60,567/- on account of interest-free loans given to a sister concern, SDL, arguing that borrowed capital was diverted. The Tribunal noted that the assessee failed to show the linkage between the businesses of the two companies and did not produce the bank account before the lower authorities. The matter was restored to the AO for fresh examination, directing the assessee to produce the bank account.

7. Disallowance of Foreign Exchange Loss:
The CIT(A) deleted the disallowance of foreign exchange loss, relying on the Tribunal's decision in the assessee's own case for previous years. The Tribunal upheld this deletion, citing the Woodward Governor India Ltd. case, which established that loss on foreign exchange fluctuation related to working capital is deductible.

Conclusion:
The appeal of the assessee is treated as allowed for statistical purposes, and the appeal of the revenue is partly allowed for statistical purposes.