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2024 (4) TMI 264 - AT - Income TaxAddition u/s 69A - price difference existed in certain items as supplied by specified vendors/suppliers at Chakan Plant only - HELD THAT - As per the terms of Loyalty Incentive agreement which were found and seized during the course of search, the assessee Company has already recognized income on account of loyalty incentive in its books of account for F.Y 2017-18 based on the written agreement entered into with the suppliers and after expiry of seven years from the date of agreement as has been provided of the Agreements initial period in terms of Agreements. Assessee company recognizes its revenue and expenses as per the applicable accounting Standards (IndAS) and generally accepted accounting principles and has been constantly following the same over the years. The loyalty incentive accrued to the assessee Company in AY 2018-19 has been duly recorded in the books of accounts of the assessee company. It is seen from the regular Books of Account that the loyalty incentive income was recorded on 31/03/2018. After receipt of credit notes and necessary documents from the vendors the loyalty incentive were debited to the respective vendors ledgers. Copies of credit note, ledger accounts in the books of vender and ledger account in the books of the Assessee. Thus, it is apparent and clearly evident from the perusal of above extracts of the regular books of account that the income in respect of loyalty incentive been already recognized by the assessee company in its regular books of account. Considering the above facts and circumstances, we find no reason to interfere with the findings and conclusion of the CIT(A), accordingly the Ground No. 1 2 of the Revenue is dismissed. Unexplained investment in stock/suppression u/s 69B - difference between the amount as per books and amount as per the valuation was at a uniform and absolute percentage of 44.82%, which was applied on the basis of GP of the last available unaudited published result of the Company for the half year ending on 30.09.2017 - A.O. based on the loose sheet and also based on the statement of Sh. Deepak Jain, M.D, the above addition has been made. In the Appeal filed by the Assessee - CIT(A) deleted the said addition - HELD THAT - The statement of Sh. Deepak Jain states that, the said sheet may have been prepared for the purposes of some strategic purposes and it was only out of pressure and to buy peace of mind that he agreed to offer the differential amount to tax. The said fact has been clarified vide his letter dated 27/12/2017 filed before ADIT (Inv) Unit II, Faridabad produced. It was stated that the statement recorded during the search was an under stressed statement and the said sheet was prepared for strategic purpose for presenting before prospective investors and the copy of the said letter - CIT(A) was rightly observed that that the act of the AO in placing heavy reliance on the statement of Mr. Deepak Jain recorded during the course of search to make additions is also untenable. In fact, the statement given by Mr. Deepak Jain should have been considered by the AO in line with the seized documents and in the right perspective. We find no error or infirmity in the order of the CIT(A) in deleting the said addition - Finding no merit in Ground, we dismiss the Ground No. 3 4 of the Revenue. Under valuation of stocks by relying on the seized material and the statement of employees - HELD THAT - Perusal of the impugned seized sheet, the difference was merely on account of valuation to an extent of absolute percentage of 44.82%, which was applied on the basis of GP of the last available unaudited published result of the Company for the half year ending on 30.09.2017. The evidence that the impugned valuation was wholly and exclusively notional in nature which was prepared for strategic purposes of presentation to prospective investors existed in the seized material itself, which were incorrectly brushed aside by the AO. It is to be noted that the said seized document contained the similar details of three Companies i.e. M/s Lumax Industries Ltd., M/s Lumax Auto Technologies Ltd. and M/s Lumax D K Auto Industries. As already discussed elaborately of the similar Companies involved to the similar Companies in the case of Lumax Industries Ltd. supra and held that the CIT(A) has justified in deleting the addition. Finding the parity, in the instant Appeals for the reasons mentioned thereon, we find no reason to entertain the findings and the conclusion of the CIT(A) in deleting the addition in the appeals in hand.
Issues Involved:
1. Deletion of addition made u/s 69A for over-invoicing of purchases. 2. Deletion of addition made u/s 69B for under-valuation of stock. Summary: Issue 1: Deletion of addition made u/s 69A for over-invoicing of purchases The Revenue challenged the deletion of an addition of Rs. 23,30,303/- made u/s 69A by the AO. The AO's addition was based on an excel sheet "Adjustment.xlsx" found during a search, which allegedly showed over-invoicing of purchases. The CIT(A) deleted the addition, noting that the excel sheet did not pertain to the relevant assessment year and that the statements of employees admitting over-invoicing were retracted. The Tribunal upheld the CIT(A)'s decision, emphasizing that the AO cannot cherry-pick evidence and must consider the entire material found during the search. The Tribunal also noted that the loyalty incentive agreements found during the search supported the assessee's explanation. Issue 2: Deletion of addition made u/s 69B for under-valuation of stockThe Revenue also contested the deletion of an addition of Rs. 39,68,55,017/- made u/s 69B by the AO for alleged under-valuation of stock. The AO's addition was based on a seized document showing a notional valuation of stock for presentation to investors. The CIT(A) deleted the addition, finding that the valuation was notional and prepared for strategic purposes, not reflecting any actual financial implications. The Tribunal agreed with the CIT(A), stating that no addition can be made on a notional basis and that the AO erred in ignoring other seized materials and the context of the document. In related appeals (ITA Nos. 947/Del/2021 & 948/Del/2021), similar additions were made for other group companies based on the same type of seized documents and retracted employee statements. The Tribunal, following the same reasoning as in ITA No. 1846/Del/2020, dismissed the Revenue's appeals, upholding the CIT(A)'s deletion of the additions. Order pronounced in the open Court on 04th April, 2024.
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