2016 (7) TMI 640 - AT - Income Tax

Addition under section 69C - addition on the basis of the report provided by the State Sales Department and the statements of the parties, as recorded by the Sales Tax Department - Held that - As find from the record that though the assessee has provided documentary evidences but these documents have not been considered by the authorities below and they made the addition only on the basis of third person evidence without giving any opportunity to the assessee. Therefore, as felt that if the assessee be given opportunity before the AO to substantiate its case, it will meet the ends of justice and no prejudice would be caused to the revenue. - Decided in favour of assessee for statistical purposes.

Summary

Issues:
Assessment year 2009-10 - Challenge to CIT(A) order dated 12.3.2015 - Addition of unexplained expenditure under section 69C - Allegations of bogus purchases - Lack of quantitative details and reconciliation - Addition on account of unexplained expenditure in the case of returned goods - Lack of verifiable claims and physical quantitative tally - Opportunity for assessee to substantiate case - Legal and factual aspects - Addition based on third-party evidence - Opportunity for fresh consideration by AO.

Analysis:
The judgment involves an appeal for assessment year 2009-10 challenging the CIT(A) order dated 12.3.2015 regarding the addition of unexplained expenditure under section 69C of the Income Tax Act. The case revolves around allegations of bogus purchases made by the assessee from certain parties. The AO proceeded under sections 147 and 148 based on information received from the Sales Tax Department regarding accommodation entries. The CIT(A) upheld the AO's decision due to the lack of quantitative details and reconciliation provided by the assessee, leading to the dismissal of the appeal.

Regarding the addition of unexplained expenditure on account of returned goods, the CIT(A) confirmed the AO's decision based on the lack of verifiable claims and physical quantitative tally of goods purchased. The appellant's failure to show payment by account payee cheque further supported the addition. However, to prevent double taxation, the appellant was advised to take remedial measures in the subsequent assessment year.

The Tribunal, upon review, found that the authorities below had not considered the documentary evidence provided by the assessee and had relied solely on third-party evidence. Citing a similar case precedent, the Tribunal emphasized the importance of providing the assessee with an opportunity to substantiate their case before making additions based on third-party statements. The Tribunal set aside the CIT(A) order and directed a fresh consideration by the AO, ensuring the assessee's cooperation and adequate opportunity in the proceedings.

In conclusion, the appeal was allowed for statistical purposes on 4th July 2016, highlighting the significance of providing the assessee with a fair opportunity to present their case and address the allegations of unexplained expenditure, emphasizing the need for a thorough examination of documentary evidence before making additions based on third-party evidence.