2016 (3) TMI 489 - AT - Income Tax

Addition made on inflation of purchases of raw material u/s. 69 - Held that - As decided in assessee s own case CIT(A) has adopted the norms prescribed under the standard input and output ratio of consumption but the assessee-company has clearly demonstrated that it would be better of had it imported the raw material as per the input output norms. The assessee-company has claimed that it has consumed less than what is prescribed under the input output norms. The CIT(A) has wrongly relied on the input output consumption ratio thus we delete the addition and allow this issue of the assessee s appeal - Decided in favour of assessee

Summary

Issues Involved:
1. Deletion of addition on account of inflation of purchases of raw material.
2. Deletion of addition made under Section 69 of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Inflation of Purchases of Raw Material:

The Revenue appealed against the order of CIT(A) which deleted the addition of Rs. 1,93,29,886/- made by the Assessing Officer (A.O.) on account of inflation of purchases of raw material. The A.O. had based the addition on the difference between actual consumption and the standard consumption prescribed under the Exim Input Output Norms. This method had been consistently applied in earlier years, and similar additions were made from A.Y. 2002-03 to A.Y. 2007-08. The CIT(A) deleted the addition, referencing his decisions in earlier years (A.Y. 2006-07 and 2007-08) and the Hon'ble ITAT's judgments, which had previously deleted such additions. The Tribunal upheld the CIT(A)'s decision, noting that the Co-ordinate Bench of the Tribunal had consistently ruled in favor of the Assessee in earlier years on identical issues. The Tribunal found no reason to deviate from these precedents and dismissed the Revenue's ground.

2. Deletion of Addition Made Under Section 69 of the Income Tax Act:

The A.O. also made an addition of Rs. 76,35,041/- under Section 69 of the Income Tax Act, citing unexplained investment in the purchase of raw materials. This addition was similarly based on discrepancies between actual and standard consumption as per Exim Input Output Norms. The CIT(A) deleted this addition as well, again relying on consistent past decisions and the ITAT's judgments. The Tribunal, upon reviewing the facts and the CIT(A)'s reliance on past decisions, found that the Revenue had not provided any contrary binding decision or material evidence to overturn the CIT(A)'s ruling. The Tribunal thus upheld the CIT(A)'s deletion of the addition under Section 69, leading to the dismissal of the Revenue's appeal on this ground as well.

Conclusion:

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s deletion of additions on account of both inflation of purchases of raw material and unexplained investment under Section 69. The Tribunal's decision was heavily influenced by consistent past rulings in the Assessee's favor on identical issues, and the absence of any new contrary evidence from the Revenue. The order was pronounced in Open Court on 4.12.2015.