2017 (1) TMI 1150 - HC - Income Tax

Addition on account of suppressed sales - ITAT deleted the addition - assessee filed return of income declaring total loss - Held that - Similar additions made by the Assessing Officer, which were on similar ground viz., suppressed sales, came to be set-aside for A.Y 2004-2005 and AY 2005- 2006 and considering the same, when learned Tribunal has deleted the addition of suppressed sales, it cannot be said that the Tribunal has committed any error. The findings recorded by the learned CIT A , while making deletion are on appreciation of evidence and there was justification for decline in the gross profit in the earlier years, which also came to be considered by the learned Tribunal. - Decided against revenue

Summary

Issues:
- Whether the Appellate Tribunal was correct in deleting the addition made by the Assessing Officer on account of suppressed sales?
- Whether the order of the Appellate Tribunal was perverse?

Analysis:
1. The case involved the Revenue appealing against the deletion of an addition made by the Assessing Officer on account of suppressed sales by the respondent-assessee. The respondent had shown total sales of &8377; 1,88,18,394/= with a gross profit of 17.56%, lower than the previous year's gross profit of 27.71%. The Assessing Officer made an addition of &8377; 2,65,93,526/= on account of suppressed sales, which was later deleted by the CIT [A].

2. The Revenue, dissatisfied with the CIT [A]'s decision, appealed to the Tribunal. The Tribunal, in line with its earlier decisions for A.Y 2004-2005 and AY 2005-2006, confirmed the deletion of the addition on suppressed sales. The Revenue contended that the Tribunal erred in not considering the decline in gross profit and the evidence of raw material consumption, leading to the addition by the Assessing Officer.

3. The Court noted that the Assessing Officer based the addition on suppressed sales on the consumption of raw materials and production ratio from the previous year. The Tribunal's decision to delete the addition was justified as similar additions in previous years were set aside, and the decline in gross profit was adequately explained. The Court found no error in the Tribunal's decision and dismissed the Tax Appeal, stating no question of law arose from the case.

This detailed analysis of the judgment highlights the key legal issues, arguments presented, and the reasoning behind the decision, providing a comprehensive understanding of the case.