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2018 (8) TMI 1629 - AT - Income TaxAddition made u/s 153C - Addition on account of unaccounted production of Gutka Pouches - Held that - As correctly contended, that the additions in the present cases are not based on any incriminating material found during the search. Therefore, respectfully following Kabul Chawla (2015 (9) TMI 80 - DELHI HIGH COURT) the Cross-objections are accepted and the additions for all the four years are deleted. Addition on account of difference in stock value - Held that - The request of the assessee is justified. The amount of ₹ 5, 27, 617/- was declared by the assessee in the return of income filed. This comprised of shortfall of ₹ 4, 83, 487/- in raw material, representing the difference in the stock as per the record of the assessee and the stock found during the search, and of ₹ 44, 130/- in the case of finished goods. The assessee is entitled to the benefit of the amount of ₹ 5, 27, 617/-, as declared in the return of income filed, to be allowed against the stock. For the purpose, the matter is remitted to the file of the AO, subject to verification and co-relation.
Issues Involved:
1. Deletion of addition on account of unaccounted production of Gutka Pouches. 2. Validity of additions made under Section 153A of the IT Act without incriminating material found during search. 3. Confirmation of addition on account of share application money. 4. Confirmation of addition on account of difference in stock value. Detailed Analysis: 1. Deletion of Addition on Account of Unaccounted Production of Gutka Pouches: The Department challenged the deletion of ?10,78,27,200/- added by the Assessing Officer (AO) to the assessee's income for unaccounted production of Gutka Pouches. The Tribunal observed that the statement of Gulzari Lal Gupta, which the Department relied upon, did not pertain to the assessment years under consideration (2005-06 to 2008-09). The statement was dated 07.10.2010, and Gupta was not a director during the relevant period. The Tribunal also noted that the production estimation was based on an Excise Notification dated 01.07.2008, which was not applicable to the years in question. Therefore, the Tribunal upheld the deletion of the addition. 2. Validity of Additions Made Under Section 153A of the IT Act Without Incriminating Material Found During Search: The assessee raised a cross-objection arguing that the additions made under Section 153A were not based on any incriminating material found during the search, thus rendering them illegal and beyond jurisdiction. The Tribunal referred to the case of 'CIT vs. Kabul Chawla', where it was held that in the absence of incriminating material found during the search, the invocation of Section 153A for earlier assessment years was not justified. The Tribunal found that no incriminating material was found during the search for the years under consideration, and therefore, the additions were not legally sustainable. Consequently, the cross-objections were accepted, and the additions for the years 2005-06 to 2008-09 were deleted. 3. Confirmation of Addition on Account of Share Application Money: For the assessment year 2009-10, the assessee contended that the addition of ?4 lakhs on account of share application money was not based on any incriminating material found during the search. The Tribunal noted that the addition was made based on the balance sheet and not on any material found during the search. Referring to the 'Kabul Chawla' case, the Tribunal held that the addition was unsustainable in law and deleted it. 4. Confirmation of Addition on Account of Difference in Stock Value: For the assessment year 2011-12, the AO added ?19,41,786/- under Section 69 of the IT Act for excess stock found during the search. The assessee claimed that a part of the stock had not been billed yet and declared ?5,27,617/- in its return of income. The Tribunal noted that the assessee had included this amount in its income and directed the AO to verify the discrepancies in the stock valuation and allow the benefit of the declared amount against the stock. The matter was remitted to the AO for verification and co-relation. Conclusion: - The cross-objections for the years 2005-06 to 2008-09 were accepted, and the corresponding appeals by the Department were dismissed. - The appeal for the year 2009-10 was allowed. - The appeal for the year 2011-12 was treated as allowed for statistical purposes, subject to verification by the AO. Order Pronouncement: The order was pronounced in the open court on 14/08/2018.
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