2024 (11) TMI 561 - AT - Income Tax

Non-disclosure of income - involvement of undisclosed income - Reconciliation of imports - difference in the reconciliation of gross assessable value - HELD THAT - From the chart submitted by the assessee, we observed that the assessee has recorded all the imports in its books of account and the difference observed by the AO without considering the credit notes. AO presumed that assessee has not declared the value of import as per the export-import summary data and he failed to recognise that the information contained in the data is only imports. Since the value of duty paid by the assessee is perfectly matching and the difference in gross value of invoice mentioned in CBEC which is only a gross assessable value. What is relevant is the actual cost to the assessee which has to be recognised in its books of account. We observed that merely relying on the export-import summary data, the AO has made the addition without proper verification and rejected explanation submitted by the assessee at the face value. After considering the detailed submission of the assessee, we do not see any reason to sustain the addition made by the AO. AO has not substantiated how recording of imports in the books of account will lead to under valuation and suppression of income of the assessee. Thus, in the present case, even though there may be some difference in the reconciliation of gross assessable value, this will not lead to non-disclosure of income involved. Therefore, we are inclined to decide the issue in favour of the assessee as there is no involvement of undisclosed income.

Issues Involved:

1. Reconciliation of import-export data with books of account.
2. Validity of assessment order without proper show-cause notice.
3. Legality of addition under Section 69C for unexplained expenditure.
4. Use of ITS data for assessment without detailed verification.
5. Alleged enlargement of scrutiny scope without approval.

Issue-wise Detailed Analysis:

1. Reconciliation of Import-Export Data:
The primary issue involved the reconciliation of the import-export data submitted by the assessee with the books of account. The Assessing Officer observed discrepancies between the values reported by the assessee and those in the ITS statement. The assessee contended that the differences arose due to adjustments for credit notes and different bases for assessable value calculations. However, the Assessing Officer found the explanations unsatisfactory and added the difference of Rs. 1,03,45,076/- to the income. The appellate authority upheld this addition, citing unexplained expenditure under Section 69C, as the assessee failed to provide sufficient documentary evidence to reconcile the discrepancies.

2. Validity of Assessment Order Without Proper Show-Cause Notice:
The assessee argued that the assessment order was invalid due to the lack of a proper show-cause notice, as mandated by CBDT Instruction No. 2012015. The assessee claimed that the assessment was based on a limited scrutiny which was allegedly expanded without the necessary approval from the Principal Commissioner of Income Tax (PCIT). The tribunal found that the Assessing Officer had indeed issued a show-cause notice, although the assessee maintained it was insufficient. The tribunal did not find merit in the assessee's argument regarding the procedural lapse.

3. Legality of Addition Under Section 69C for Unexplained Expenditure:
The tribunal examined whether the addition under Section 69C was justified. The assessee contended that the imports were made through banking channels, and no unexplained expenditure was involved. The tribunal observed that the Assessing Officer had relied on gross assessable values from the ITS data without considering the actual cost recorded in the books of account. The tribunal found that the duty paid by the assessee matched the export-import data, suggesting no undisclosed income. Consequently, the tribunal concluded that the addition under Section 69C was unwarranted and decided in favor of the assessee.

4. Use of ITS Data for Assessment Without Detailed Verification:
The tribunal noted that the Assessing Officer used raw ITS data, which required further verification, as it might contain duplicate entries or errors. The tribunal highlighted the absence of bill-wise bifurcation in the ITS statement, making it challenging for the assessee to reconcile the data accurately. The tribunal referenced a similar case adjudicated by the ITAT Rajkot Bench, which held that reliance on unverified ITS data without detailed verification was inappropriate. The tribunal emphasized that the Assessing Officer failed to substantiate how the recording of imports led to undervaluation or suppression of income.

5. Alleged Enlargement of Scrutiny Scope Without Approval:
The assessee argued that the scrutiny scope was improperly expanded without PCIT approval, rendering the assessment order unlawful. However, the tribunal did not find explicit evidence supporting this claim in the proceedings. The tribunal focused on the reconciliation and verification issues rather than procedural aspects related to the scrutiny scope.

In conclusion, the tribunal allowed the appeal filed by the assessee, finding that the addition based on ITS data discrepancies was not substantiated and that there was no involvement of undisclosed income. The tribunal's decision emphasized the need for detailed verification and proper reconciliation of data before making additions to the assessee's income.

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