2019 (7) TMI 670 - HC - Income Tax

Unexplained investments - Tribunal held that the disallowance to the extent of inflated expenses will adequately cover the unexplained peak amount of investment made in the bogus purchase and no separate addition required - HELD THAT - Tribunal has followed the dictum as laid in the decision of this Court in the case of VIJAY PROTEINS LTD. VERSUS CIT 2015 (1) TMI 828 - GUJARAT HIGH COURT . In our opinion, the Tribunal committed no error in applying the dictum as laid in Vijay Proteins Ltd. (supra) in the facts of the present case. Addition on account of under valuation of stock - Tribunal deleted addition - HELD THAT - Tribunal held that CIT(A) has analysed the submissions of the assessee as well as findings of the AO and after arrived at a fair reasonable valuation of closing stock, hence the findings of the CIT(A) in reducing the closing stock to ₹ 5,61,588/- from ₹ 27,66,485A is therefore upheld. Addition on account of motor case expenses and depreciation - Tribunal deleted addition - HELD THAT - Tribunal took the view that the CIT(A) correctly deleted the said addition. In such circumstances, the Tribunal thought fit not to interfere. No error not to speak of any error of law could be said to have been committed by the Tribunal in passing the impugned order. None of the questions proposed by the Revenue could be termed as the substantial questions of law involved in the present Tax Appeal.

Summary

Issues:
1. Disallowance of inflated expenses covering unexplained investment
2. Deletion of addition on account of under valuation of stock
3. Deletion of addition on account of motor car expenses and depreciation

Analysis:

1. Disallowance of Inflated Expenses Covering Unexplained Investment:
The Tribunal found that the assessee's books of accounts were defective, leading to the rejection of accounts by the Assessing Officer (AO). The Tribunal concurred with the AO's findings regarding the defective accounts and unexplained investments. The Tribunal upheld the CIT(A)'s decision to quantify the investment in purchase by considering purchase additions and transportation expenses, leading to the deletion of a portion of the addition made by the AO. The Tribunal followed the dictum established in the case of Vijay Proteins Ltd., Junagadh vs. ACIT, Circle, Junagadh, and dismissed the Revenue's appeal on this ground.

2. Deletion of Addition on Account of Under Valuation of Stock:
Regarding the under valuation of stock, the Tribunal found that the AO had valued some items of closing stock lower than cost. The CIT(A) correctly deleted the addition in respect of certain items after considering the submissions of the assessee and the findings of the AO. The Tribunal upheld the CIT(A)'s decision on various items of closing stock valuation, leading to the dismissal of the Revenue's appeal on this ground.

3. Deletion of Addition on Account of Motor Car Expenses and Depreciation:
The Tribunal supported the CIT(A)'s decision to delete the addition of motor car expenses and depreciation. The Tribunal found no reason to interfere with the CIT(A)'s findings and dismissed the Revenue's appeal on this issue.

In conclusion, the High Court dismissed the Tax Appeal by the Revenue, stating that no error of law was committed by the Tribunal in passing the order. The proposed questions by the Revenue were not considered substantial questions of law. Therefore, the appeal failed, and the court upheld the Tribunal's decision.