2017 (7) TMI 566 - AT - Income Tax

Deduction u/s 80IC - disallowance made on account of cash purchases as bogus - Held that - As for the parties from whom purchases made were held to be bogus since confirmations of their balances was not received the AO, the assessee stated that all bills and vouchers of purchases had been produced before the Assessing Officer time and again and had been examined by the AO also. The Ld. counsel for the assessee further stated that all payments were made to them by cheques or by bank transfers. The assessee also stated that the AO had not doubted the sales by made by the assessee and therefore there was no reason at all to disallow the profit made on account of the purchase and sale transaction attributed to the purchases held bogus Alternatively the assessee stated that the addition made on account of inflated profits had only increased the profit of the business of the assessee and there was no reason or evidence with the AO to hold that the same was on account of income from other sources. Ld.Counsel for the assessee stated that the CBDT had issued a circular No.37/2016 dated 2nd Nov, 2016 wherein it had directed that additions made on account of disallowances made, which resulted in enhancement of profits of assessees eligible to deduction under chapter VIA, should not be denied deduction of the enhanced profits. Thus on all aspects of the addition made the assessee had filed detailed submissions and evidences. A perusal of the order of the CIT(A), on the other hand reveals that she has not dealt with the voluminous submissions made by the assessee but on the contrary has passed a cryptic and non speaking order. The Ld. CIT(A) has merely reiterated the findings of the AO and has miserably failed to deal with the arguments and evidences filed by the assessee in support of its contentions. In the interest of justice therefore, we consider it fit to restore the matter back to the file of the CIT(A) to consider the issue afresh and pass a speaking order in the light of submissions and evidences filed by the assessee and also after taking into consideration the CBDT circular No.37/2016 dated 2nd Nov, 2016 referred to by the assessee in this regard - Grounds raised by the assessee allowed for statistical purposes.

Summary

Issues:
1. Disallowance of total addition made by AO
2. Treatment of cash purchases as bogus and denial of deduction under section 80IC
3. Addition of purchases from specific parties and application of NP rate
4. Denial of deduction under section 80IC on the additions/disallowances
5. Failure to provide evidence for purchases made
6. Lack of detailed consideration by CIT(A) in passing the order

Analysis:

Issue 1: Disallowance of total addition made by AO
The appellant challenged the total addition of ?71,77,603 made by the AO under section 143(3). The CIT(A) confirmed the addition, stating that the appellant failed to provide details of parties for cash purchases and lacked evidence to support the genuineness of the purchases. The CIT(A) upheld the disallowance, emphasizing the absence of evidence to substantiate the nature of transactions. The Tribunal found that the CIT(A) did not adequately address the submissions and evidence presented by the appellant. Consequently, the matter was remanded back to the CIT(A) for a fresh consideration, directing a speaking order taking into account the appellant's submissions and a relevant CBDT circular.

Issue 2: Treatment of cash purchases as bogus and denial of deduction under section 80IC
The AO treated cash purchases as bogus, leading to an addition of ?59,56,645. The appellant argued that being an Agro-based Industrial unit, cash purchases were legitimate, especially from small farmers. The Tribunal noted that the appellant provided detailed submissions and evidence supporting the legitimacy of cash purchases. However, the CIT(A) failed to address these submissions adequately. The Tribunal directed the CIT(A) to reevaluate the issue considering the appellant's contentions and the CBDT circular.

Issue 3: Addition of purchases from specific parties and application of NP rate
The AO added ?12,20,958 based on purchases from specific parties, applying an NP rate. The appellant contended that all bills and vouchers were produced, payments were made through cheques/bank transfers, and the purchases were genuine. The Tribunal found that the CIT(A) did not sufficiently address the appellant's submissions and evidence. The matter was remanded to the CIT(A) for a detailed reconsideration.

Issue 4: Denial of deduction under section 80IC on the additions/disallowances
The appellant challenged the denial of deduction under section 80IC on the additions/disallowances made by the AO. The Tribunal noted that the CIT(A) did not adequately address the appellant's arguments and evidence. The matter was sent back to the CIT(A) for a fresh decision in light of the appellant's submissions and the CBDT circular.

Issue 5: Failure to provide evidence for purchases made
The appellant faced challenges due to the lack of evidence provided for purchases made, leading to disallowances and additions by the AO. The Tribunal emphasized the need for the CIT(A) to consider the evidence and submissions presented by the appellant before making a decision.

Issue 6: Lack of detailed consideration by CIT(A) in passing the order
The Tribunal highlighted the CIT(A)'s failure to provide a detailed and reasoned order, leading to a remand of the case for a fresh consideration. The Tribunal directed the CIT(A) to issue a speaking order, taking into account all relevant submissions and evidence presented by the appellant.

In conclusion, the Tribunal allowed all grounds raised by the appellant for statistical purposes, remanding the case back to the CIT(A) for a thorough reconsideration in light of the appellant's submissions and the relevant CBDT circular.