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2018 (2) TMI 46 - AT - Income TaxAddition U/s 69-C - differences in purchase has not been proved by the assessee due to input VAT, as claimed by the assessee - Held that - In the remand report of AO it is clearly mentioned that assessee has explained the difference with reconciliation statement on production of different ledgers, VAT Returns etc. therefore, there is no question of treating the amount as unexplained expenditure . We note that CIT(A) did not considered the remand report at all therefore, it is against the principle of natural justice. Therefore, based on the factual position, we delete both the additions made by AO, that is, we delete addition based on undisclosed purchases by applying GP rate at ₹ 95,654/-, (@ 3.11% of ₹ 30,75,702), and under section 69C as unexplained expenditure ₹ 30,75,702/- . - Decided in favour of assessee.
Issues:
1. Addition of undisclosed purchases based on GP rate and unexplained expenditure under section 69C. 2. Consideration of remand report by the CIT(A). 3. Violation of natural justice by not considering the remand report. Issue 1: Addition of Undisclosed Purchases and Unexplained Expenditure: The appeal pertained to the assessment year 2011-12, challenging the order passed by the ld. Commissioner of Income Tax (Appeals) and the Assessing Officer's decision under section 143(3) of the Income Tax Act 1961. The assessee raised grounds of appeal related to the estimation of undisclosed purchases and unexplained expenditure. The Assessing Officer added undisclosed purchases amounting to &8377; 30,75,702 and applied a GP rate of 3.11%, resulting in an addition of &8377; 95,654. Additionally, the AO treated the same amount as unexplained expenditure under section 69C. The main contention of the assessee was that these additions were unjust and should be deleted. Issue 2: Consideration of Remand Report: During the appellate proceedings, the CIT(A) did not consider the remand report submitted by the Income Tax Officer, which detailed that the assessee had explained the differences in purchases with reconciliation statements and supporting documents like ledgers and VAT returns. The remand report clarified that there was no basis to treat the amount as unexplained expenditure. The failure to consider this report was deemed a violation of natural justice by the assessee, as it was crucial evidence in support of their case. Issue 3: Violation of Natural Justice: The failure of the CIT(A) to consider the remand report was highlighted as a violation of natural justice by the assessee. The remand report provided crucial information that supported the assessee's position regarding the disputed additions. By not taking this report into account, the CIT(A) overlooked significant evidence that could have influenced the decision in favor of the assessee. This omission was considered a breach of fair procedure and the principles of natural justice. In conclusion, the Appellate Tribunal, after considering the facts and the remand report, found that the assessee had adequately explained the differences in purchases and provided supporting documentation. Therefore, the Tribunal deleted both the additions made by the Assessing Officer, namely the addition based on undisclosed purchases using the GP rate and the unexplained expenditure under section 69C. The appeal filed by the assessee was allowed, emphasizing the importance of adhering to principles of natural justice in tax proceedings.
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