2016 (5) TMI 349 - AT - Income Tax

Addition made on account of discrepancy in DVAT account - Held that - The reconciliation statement, ledgers of the parties in the books of accounts of the assessee. It is ample clear that the purchases shown by the assessee in the purchase returns are the same that of the sales shown by the assessee in the sales returns in regard to these three parties in the books of accounts of the assessee. The CIT(A) after considering the reconciliation statement, copies of the ledger accounts of the alleged party rightly and correctly held that there were no inflated purchases shown by the assessee in its Profit & Loss Account and there were no access purchases were claimed by the assessee in its P & L Account. In view of above, we are inclined to agree with the conclusion of the CIT(A) all that there were no inflated purchases claimed by the assessee in its Profit & Loss Account. Therefore, addition made by the AO on the allegation of inflated purchases cannot be held as sustainable and the same was rightly deleted by the CIT(A) - Decided in favour of assessee Addition made on account of discrepancies in sales and purchases - Held that - Neither the AO nor the Ld. DR has brought on record any allegation to establish that the sales were made by the assessee during the FY 2008-09 relevant to AY 2009-10 amounting to ₹ 1,12,99,491/- from M/s. A.P.Sons and of ₹ 2,39,166/- from M/s. South Delhi Saree House and thus, we are in agreement with the conclusion of the CIT(A) wherein he held that there were no unaccounted sales of the assessee to its alleged dedicated dealers i.e. M/s A.P. Sons and M/s. South Delhi Saree House and hence we uphold the findings of the CIT(A) on this count. - Decided in favour of assessee Disallowance of expenses - Held that - The assessing officer made additions without any reasonable cause for both the assessment years and the CIT(A), after considering and properly appreciating the facts, circumstances and explanation of the assessee to the rightly held that the expense was incurred wholly and exclusively for the purpose of the business of the assessee and the same was allowable expenses expenditure for the assessee under the provisions of the Act - Decided in favour of assessee

Summary

Issues Involved:
1. Deletion of addition on account of discrepancy in DVAT account.
2. Deletion of addition on account of discrepancy in sales and purchase.
3. Deletion of addition on account of commission and brokerage.

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Discrepancy in DVAT Account:
The Revenue challenged the deletion of ?1,27,24,220/- made on account of discrepancies in the DVAT account. The Tribunal noted that during the assessment proceedings, the Assessing Officer (AO) observed discrepancies between the DVAT return and the Profit & Loss Account. The CIT(A) found that the difference of ?84,892/- was due to the accounting method employed by the appellant, recording VAT separately and taking input credit, which was not charged through the Profit & Loss Account. The CIT(A) concluded that the purchases and purchase returns shown by the appellant were consistent with the sales and sales returns recorded by the parties involved. Therefore, the CIT(A) directed the AO to delete the addition, and the Tribunal upheld this decision, dismissing the Revenue's ground as devoid of merits.

2. Deletion of Addition on Account of Discrepancy in Sales and Purchase:
The Revenue contended that the CIT(A) erred in deleting the addition of ?24,43,888/- due to discrepancies in sales and purchases. The AO noted several instances of discrepancies in transactions with independent parties. However, the CIT(A) observed that the appellant's ledger accounts and reconciliation statements matched the transactions with the parties involved, namely M/s. A.P. Sons and M/s. South Delhi Saree House. The CIT(A) found no unaccounted sales or inflated purchases and directed the AO to delete the addition. The Tribunal agreed with the CIT(A)'s findings, noting that neither the AO nor the Revenue provided evidence to establish unaccounted sales. Consequently, the Tribunal upheld the CIT(A)'s decision and dismissed the Revenue's ground.

3. Deletion of Addition on Account of Commission and Brokerage:
The Revenue challenged the deletion of ?14,99,850/- for AY 2009-10 and ?15,01,947/- for AY 2010-11 on account of commission and brokerage. The AO had disallowed these expenses, arguing they were not incurred wholly and exclusively for the business. The CIT(A) found that the expenses were incurred to manage relationships with dedicated dealers, which accounted for a significant portion of the appellant's sales. The CIT(A) noted that the method of computation was an incentive for individuals to increase sales, benefiting the appellant's business. The Tribunal observed that the expenses were incurred for business purposes and were allowable under Section 37 of the Act. The Tribunal upheld the CIT(A)'s decision, emphasizing the principle of consistency and dismissing the Revenue's grounds for both assessment years.

Conclusion:
The Tribunal concluded that the AO made additions without reasonable cause, and the CIT(A) correctly appreciated the facts and circumstances, granting relief to the appellant. The Tribunal upheld the CIT(A)'s orders for both assessment years, dismissing the Revenue's appeals. The appeals of the Revenue for both assessment years were dismissed, and the order was pronounced in the court on 21/04/2016.