2020 (5) TMI 231 - AT - Income Tax

Suppression of sales - sales are entered in the sales register and the figure of sale amount shown in profit loss account - HELD THAT - AO has referred in his order the stock statement as sales register, which in fact was the statement of stocks showing the inward outward quantity of materials received. It is primarily maintained for the status of stocks (in quantity) position of the company. Value of the sales are entered in the sales register and the figure of sale amount shown in profit loss account is in agreements with the figure shown in the sales register - As explained to AO that the same was entered into the stock register because of the wrong setting of accounts in the computer system. As such it was wrongly entered into the stock register. Assessing Officer s attention was also drawn on the fact that had the same has been sales, there would have been an entry of stock quantity in the outward column. The assessee company, also produced the bank statement and the ledger copy of the party, but ignoring all the evidences produced before him, the Assessing Officer has treated this amount as suppressed sales, which is completely unjustified. Counsel explained the Bench with help of reconciliation statement that the entry in the stock register dated 08.08.2013 relates to advance received from M/s Bagaria Brothers Pvt. Ltd. of ₹ 1,75,00,000/- which has been inadvertently entered into the stock register and therefore it resulted into difference but if the said sum is excluded then there will not be any difference in the quantity of the stock register. The ld. D.R. has also fairly agreed with the reconciliation of stock submitted by the assessee, as noted above. Considering the explanation submitted by the assessee and taking into account the stock reconciliation statement, we note that there is no any suppressed sales, hence we delete the addition. Ground of assessee allowed. Disallowance of operating expenses - HELD THAT - Reconciliation of the operating expenses has neither been examined by Assessing Officer nor by ld. CIT(A). Therefore, ld. Counsel prayed the Bench that this issue may be remitted back to the file of Assessing Officer for his examination. Ld. D.R. did not have any objection if the matter is remitted back to the file of Assessing Officer for fresh adjudication. We have heard both the parties and perused the material available on record. We note that one more opportunity should be given to the assessee to explain the above mentioned reconciliation of operating expenses and justification thereof. Ground raised by the assessee are allowed for statistical purposes. Addition of travelling expenses - Allowable business expenses - HELD THAT - As Counsel submitted that now assessee is ready to submit the vouchers and bills of the travelling expenses therefore, one more opportunity should be given to the assessee to explain the genuineness of the travelling expenses before Assessing Officer therefore the matter may be remitted back to the file of the AO.The ld. D.R. for the revenue did not have any objection if this ground is remitted back to the file of AO.Therefore, we are of the view that one more opportunity should be given to assessee to plead his case before Assessing Officer. Therefore, we set aside the order of ld. CIT(A) and remit the issue back to the file of Assessing Officer for de novo adjudication.Ground raised by the assessee are allowed for statistical purposes. Addition under the head subscription and donation - assessee failed to produce relevant bills and vouchers before Assessing Officer - HELD THAT - As Counsel prayed the Bench that if an opportunity is given the assessee is ready to make compliance. Therefore one more opportunity should be given to assessee to plead his case before Assessing Officer. Therefore, we set aside the order of ld. CIT(A) and remit the issue back to the file of Assessing Officer for de novo adjudication. Ground raised by the assessee are allowed for statistical purposes.

Summary

Issues involved:
1. Addition of ?1,75,00,000/- on account of alleged suppressed sales.
2. Addition of ?21,52,08,544/- on account of disallowance of operating expenses.
3. Addition of ?9,27,919/- on account of travelling expenses.
4. Addition of ?3,35,960/- under the head subscription and donation.

Detailed Analysis:

Issue 1: Addition of ?1,75,00,000/- on account of alleged suppressed sales

The Assessing Officer (AO) noticed a discrepancy between the value of total sales shown in the audited profit & loss account (?100,94,98,608/-) and the month-wise sales statement (?102,69,98,608/-), leading to an addition of ?1,75,00,000/- as suppressed sales. The assessee argued that the discrepancy was due to an advance of ?1,75,00,000/- received from M/s Bagadia Brothers (P) Ltd, which was mistakenly entered into the stock register under the outward column but was later returned. The Tribunal noted that the AO's suspicion arose from a wrong entry in the stock register and that the amount did not affect the profit & loss account. The Tribunal concluded that the addition was unjustified and deleted the addition of ?1,75,00,000/-.

Issue 2: Addition of ?21,52,08,544/- on account of disallowance of operating expenses

The assessee provided a reconciliation of operating expenses, which the AO and the Commissioner of Income Tax (Appeal) [CIT(A)] had not examined. The Tribunal noted that the AO computed the difference based on a rough reconciliation made by the assessee's representative on the last day of proceedings without issuing a show-cause notice or providing a reasonable opportunity to the assessee. The Tribunal remitted the matter back to the AO for a fresh examination of the reconciliation and justification of operating expenses.

Issue 3: Addition of ?9,27,919/- on account of travelling expenses

The AO made an ad hoc disallowance of travelling expenses due to the assessee's failure to submit bills and vouchers. The Tribunal noted that the assessment was framed under section 143(3) of the Income Tax Act, and ad hoc disallowance without rejecting the books of accounts was not permitted. The assessee expressed readiness to submit the necessary vouchers and bills. The Tribunal remitted the issue back to the AO for de novo adjudication, providing the assessee with another opportunity to explain the genuineness of the travelling expenses.

Issue 4: Addition of ?3,35,960/- under the head subscription and donation

The AO made an addition under the head subscription and donation due to the assessee's failure to produce relevant bills and vouchers. The assessee's counsel admitted the lapse and expressed readiness to submit the necessary documents. The Tribunal remitted the issue back to the AO for a fresh examination, allowing the assessee another opportunity to prove the genuineness of the expenses.

Conclusion:

The appeal was partly allowed, with the Tribunal deleting the addition related to suppressed sales and remitting the other issues back to the AO for fresh adjudication. The Tribunal emphasized providing the assessee with an opportunity to present relevant evidence and ensuring adherence to principles of natural justice.