2022 (5) TMI 688 - HC - Income Tax

Addition u/s 69 - purchases made but not recorded the same in regular books of account - Commissioner (Appeals) and the Tribunal however deleted this addition on the ground that the purchases were reflected in the books of accounts by the assessee and were not made from unexplained sources - HELD THAT - It could thus be seen that the entire issue is based on facts. The Commissioner (Appeals) and the Tribunal concurrently came to findings of facts which are not perverse. The Tribunal in the above quoted portion of the order has accepted the explanation of the assessee that the entire purchase was made from M/s. Maximum Synthetics Pvt. Ltd. and it was also duly recorded in the regular books of accounts. However, the assessee had shown such purchases from different parties only for the purpose of showing the purchases from multiple sellers to the bank. This was done to obtain higher spending limit from the bankers. No question of law arises.

Summary

Issues:
Challenge to ITAT judgment on addition of unexplained investment under Section 69 of the Income-tax Act, 1961.

Analysis:
The appeal filed by the revenue challenged the judgment of the Income Tax Appellate Tribunal (ITAT) regarding the addition of Rs.7,82,95,551/- in the hands of the assessee by the assessing officer under Section 69 of the Income-tax Act, 1961. The primary issue revolved around whether the purchases made by the assessee were from unexplained sources, as alleged by the assessing officer.

The assessing officer contended that the sum in question represented the assessee's unexplained investment. However, the Commissioner (Appeals) and the Tribunal disagreed and deleted this addition. They found that the purchases were reflected in the books of accounts by the assessee and were not made from unexplained sources. The Tribunal specifically noted that the purchases were duly recorded in the regular books of accounts and were supported by stock records. The Tribunal also acknowledged that the assessee had shown purchases from different parties to the bank for the purpose of obtaining a higher spending limit, but in reality, all purchases were made from a single supplier.

The Tribunal's decision was based on factual findings that were not considered perverse. The Tribunal accepted the explanation provided by the assessee regarding the purchases being made from a single supplier and being duly recorded in the books of accounts. The practice of showing purchases from multiple sellers to the bank was solely for obtaining a higher spending limit and did not involve any unexplained sources of income. Consequently, no question of law was found to arise in this matter.

In conclusion, the High Court dismissed the appeal, upholding the decision of the Tribunal and the Commissioner (Appeals) to delete the addition of Rs.7,82,95,551/- in the hands of the assessee. The judgment emphasized that the issue was fact-based, and the explanations provided by the assessee were deemed satisfactory, leading to the rejection of the revenue's appeal.