1999 (10) TMI 117 - AT - Income Tax

Summary

Issues Involved:

1. Addition on account of excess stock.
2. Addition on account of sale of coal ash.
3. Addition on account of bogus purchase of steel from Jindal Steels.
4. Addition on account of bogus purchase of steel from Maheshwari Iron & Steel Ltd.
5. Addition on account of raising of share capital amount spent outside the books.
6. Addition on account of payments made to individuals.

Summary:

1. Addition on Account of Excess Stock:

The assessee disputed the addition of Rs. 33,76,890 made by the Assessing Officer (AO) for excess stock found during the search and seizure operation u/s 132. The Managing Director initially agreed to an addition of Rs. 6.75 lakhs after reconciliation. The Tribunal held that the AO exceeded his jurisdiction by making an addition of Rs. 33,76,890 without the previous approval of the Commissioner, as required u/s 158BG. The addition over and above Rs. 6.75 lakhs was deleted, sustaining only the Rs. 6.75 lakhs.

2. Addition on Account of Sale of Coal Ash:

The addition of Rs. 5,45,000 on account of the sale of coal ash was not disputed by the assessee and thus stands confirmed.

3. Addition on Account of Bogus Purchase of Steel from Jindal Steels:

The AO added Rs. 21,97,374 for bogus purchases from Jindal Steels, based on evidence that the funds were misappropriated by the directors. The Tribunal deleted this addition, noting that the funds were transferred from the company's bank account and not claimed as business expenditure. The Tribunal emphasized that no income accrued to the company from these transactions.

4. Addition on Account of Bogus Purchase of Steel from Maheshwari Iron & Steel Ltd.:

The AO added Rs. 53,68,953 for bogus purchases from Maheshwari Iron & Steel Ltd., based on circumstantial evidence. The Tribunal deleted this addition, stating that the AO failed to bring positive material to prove the falsity of the transactions. The Tribunal highlighted that mere suspicion is insufficient to reject the books of account and that the burden of proof lies on the AO.

5. Addition on Account of Raising of Share Capital Amount Spent Outside the Books:

The AO added Rs. 15.25 lakhs based on loose papers found during the search, which the Managing Director admitted represented payments outside the books. The Tribunal confirmed the addition of Rs. 3.25 lakhs, which was not pressed by the assessee. The Tribunal also confirmed the addition of Rs. 12 lakhs, rejecting the assessee's retraction and explanation as unconvincing.

6. Addition on Account of Payments Made to Individuals:

The AO added Rs. 3.5 lakhs for payments made to Shri Shaikh Amin and Shri A.G. Ghare. The Tribunal allowed the set-off of this amount against the undisputed addition of Rs. 5,45,000 on account of the sale of coal ash, deleting the Rs. 3.5 lakhs addition.

Conclusion:

The appeal of the assessee was partly allowed, with several additions deleted or reduced based on the Tribunal's findings on jurisdictional overreach and lack of substantive evidence.