2012 (10) TMI 152 - AT - Income Tax

Unexplained investment in closing stock - CIT(A) deleted the addition by treating it as covered in the surrender of Rs.20 lakh made in the account of investment in property - Held that - The assessee himself admitted before the CIT(A) that there was a mistake on the part of the assessee for not incorporating the declared amount of Rs.20,00,000/-. Even otherwise also, the CIT(A) noted the details that the assessee has failed to furnish evidence in support of the reduction of the disclosure made at the time of survey. The assessee himself incorporated and declared the full amount in building construction/investments. The assessee did not furnish convincing reasons for not declaring the amount of Rs.20,00,000/- surrendered at the time of survey. There is no material on record against the order of the CIT(A) therefore no infirmity in the order of the CIT(A) on the issue - against Revenue. Bogus purchases and creditors - CIT(A) deleted the addition - Held that - Wherever the assessee furnished details of evidences and got reconciled with the accounts in assessee s books of account and creditors books of account, the CIT(A) deleted the addition. However, where the CIT(A) found that the assessee has failed to reconcile the difference amount in between the books of account of assessee and the books of account of the two creditors, to that extent the addition has been confirmed. Since it is a matter of reconciliation and the CIT(A) after detailed examination of each and every party s account, the addition has been sustained and accordingly balance addition has been deleted. The Revenue and assessee both have failed to point out any contrary material to the finding of the CIT(A), nor any such material is available on record.

Issues Involved:
1. Deletion of addition on account of unexplained investment in closing stock.
2. Deletion of addition on account of bogus purchases and creditors.
3. Addition on account of un-reconciled discrepancies in the account of creditors.
4. Addition on account of investment in construction of building.
5. Opportunity of being heard.

Issue 1: Deletion of Addition on Account of Unexplained Investment in Closing Stock

The A.O. made an addition of Rs.3,75,506/- based on the difference in closing stock valuation between the survey report and the books of account. The CIT(A) deleted this addition, reasoning that the discrepancy was due to incorrect valuation and the transfer of goods between the assessee's wholesale and retail sections. The CIT(A) noted that the assessee had already surrendered Rs.20,00,000/- during the survey, which was accepted by the A.O. The tribunal upheld the CIT(A)'s decision, confirming that no separate addition was warranted given the circumstances.

Issue 2: Deletion of Addition on Account of Bogus Purchases and Creditors

The A.O. added Rs.3,85,978/- due to returned letters/summons under section 133(6) to four parties. The CIT(A) found that invoices from these parties were inventoried during the survey, indicating regular business dealings. The tribunal agreed with the CIT(A) that the returned summons alone did not justify treating the purchases or creditors as bogus, especially since the assessee had already disclosed Rs.20,00,000/-.

Issue 3: Addition on Account of Un-reconciled Discrepancies in the Account of Creditors

The A.O. made an addition of Rs.5,93,805/- due to discrepancies between the assessee's books and information from creditors. The CIT(A) reduced this to Rs.97,341/- after examining each party's account and finding that the assessee failed to reconcile certain differences. The tribunal confirmed the CIT(A)'s detailed examination and decision to sustain the addition of Rs.97,341/-, as the assessee did not provide sufficient evidence to counter the discrepancies.

Issue 4: Addition on Account of Investment in Construction of Building

The A.O. added Rs.5,00,000/- each for both assessees, as they disclosed only Rs.15,00,000/- out of the Rs.20,00,000/- surrendered during the survey. The CIT(A) upheld these additions, noting that the assessees admitted their mistake and failed to provide valuation reports or other evidence to support their claims. The tribunal confirmed the CIT(A)'s decision, finding no material to contradict the addition.

Issue 5: Opportunity of Being Heard

One assessee claimed that no proper opportunity of being heard was provided. The tribunal found that the CIT(A) had considered the submissions and provided opportunities for hearing. The assessee also failed to appear before the tribunal. Thus, this ground was rejected for lack of substance.

Conclusion:

The tribunal dismissed all appeals from both the assessees and the Revenue, confirming the orders of the CIT(A) on all issues. The decisions were based on detailed examinations of discrepancies, the assessee's admissions, and the lack of contrary evidence.

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