2024 (11) TMI 242 - AT - Income Tax

Addition u/s 69C r.w.s. 115BBE - assessee failed to substantiate with evidence to his satisfaction regarding the difference between purchases shown in its Profit and Loss Account and the TCS reflected in Form 26AS - Low income disclosure from receipts (liquor) on which TCS has been deducted - HELD THAT - A perusal of the sample bills shows that the invoices were raised in the names of the sister concerns of the assessee whereas the PAN of the assessee has been quoted instead of the PAN of the purchasers. The payments for such invoices are also reflected in some of the invoices which are the bank accounts of the sister concerns. These vital documents were completely ignored by the lower authorities although these were produced before them. We deem it proper to restore the issue to the file of the Assessing Officer with a direction to give an opportunity of being heard to the assessee to substantiate that the purchases are in fact made by the sister concerns of the assessee for which they have made the payments from their bank accounts and that such purchases are reflected in their Trading and Profit and Loss Accounts. AO if so considers fit, may, ask the assessee to furnish the required details, which according to assessee are voluminous, before the verification unit and call for a report from the verification unit. Assessing Officer shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee. The assessee is also hereby directed to appear before the Assessing Officer on the appointed date and file the requisite details without seeking any adjournment under any pretext, failing which the Assessing Officer is at liberty to pass appropriate order as per law. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.

Summary

Issues Involved:

1. Whether the addition of Rs. 40,14,65,505 towards unexplained purchases under Section 69C of the Income Tax Act was justified.
2. The correctness of TCS reporting on the PAN of the appellant firm due to alleged errors by suppliers.
3. The adequacy of evidence provided by the assessee to substantiate the claim that purchases were made by sister concerns.

Issue-wise Detailed Analysis:

1. Addition of Rs. 40,14,65,505 under Section 69C:

The primary issue in this case was the addition of Rs. 40,14,65,505 to the assessee's income as unexplained purchases under Section 69C of the Income Tax Act. The Assessing Officer (AO) observed a significant discrepancy between the purchases reported in the Profit and Loss Account and those reflected in Form 26AS. The AO noted that the assessee claimed purchases of Rs. 4,13,20,150, while Form 26AS indicated purchases of Rs. 44,27,85,656. The AO issued notices and, finding the assessee's responses unsatisfactory, invoked Section 69C, which pertains to unexplained expenditure, leading to the addition of the said amount to the taxable income under Section 115BBE.

2. TCS Reporting Errors:

The assessee contended that the discrepancy arose due to errors by suppliers who incorrectly quoted the PAN of the assessee firm instead of its sister concerns in their invoices. The assessee argued that the purchases were actually made by sister concerns, and the payments were reflected in their accounts. The CIT(A) upheld the AO's decision, stating that the assessee failed to provide sufficient evidence to support its claim and that the purchases were indeed made by the assessee on which TCS had been collected.

3. Adequacy of Evidence Provided:

The assessee provided sample bills and other documents to demonstrate that the purchases were made by sister concerns and that the PAN error was a typographical mistake by the suppliers. However, both the AO and the CIT(A) found these submissions inadequate. The Tribunal, upon reviewing the evidence, noted that the lower authorities had overlooked vital documents presented by the assessee. The Tribunal found merit in the assessee's argument and decided to remit the matter back to the AO for a fresh examination, allowing the assessee an opportunity to substantiate its claims with appropriate evidence.

Conclusion:

The Tribunal concluded that the matter required further verification and directed the AO to reassess the issue, giving the assessee an opportunity to present evidence that the purchases were made by sister concerns and the payments were made from their accounts. The Tribunal emphasized the importance of examining the voluminous evidence, including bills, ledgers, and bank statements, to ascertain the correct nature of the transactions. The appeal was allowed for statistical purposes, and the AO was instructed to decide the issue based on facts and law after providing a fair hearing to the assessee.