2014 (4) TMI 847 - HC - Income Tax

Addition u/s 69 of the Act Unexplained investment Purchase of clothes for processing and bob charges paid Evasion of excise duty Held that - Tribunal rightly held that there is no basis with the AO for drawing adverse conclusions - Though the Excise authorities have quantified the amount of duty evasion, there is no material on record to suggest that the assessee did collect the amount from its customers assessee submitted that it did not claim the amount as expenditure in its Profit and Loss account - the AO could not make any addition of the amount of Excise duty evasion quantified by the Excise authorities - the tribunal s view is based on material on record and gives rise to no question of law Decided against Revenue.

Summary

Issues:
1. Addition of Rs.13.74 lakhs under section 69 of the Income Tax Act, 1961 for alleged investment in purchase of clothes for processing and job work charges.
2. Addition of Rs.24.80 lakhs for alleged evasion of excise duty.

Analysis:
1. The first issue revolves around the addition of Rs.13.74 lakhs under section 69 of the Income Tax Act. The Assessing Officer made this addition based on unaccounted production, applying a gross profit rate of 19%. The CIT(A) confirmed this addition, but the tribunal reversed it. The tribunal found that the AO made the addition solely on presumption without any supporting material, which is essential for invoking section 69. The tribunal noted the lack of evidence of unrecorded investments by the assessee and directed the AO to delete the addition.

2. The second issue concerns the addition of Rs.24.80 lakhs for excise duty evasion. The AO added this amount based on the excise department's findings that the assessee engaged in unauthorized processing and removal of goods without paying excise duty. However, the tribunal disagreed with this addition as well. It noted that there was no proof that the assessee collected the alleged amount from customers or claimed it as an expenditure in the Profit and Loss account. The tribunal found no basis for the AO's adverse conclusions and directed the deletion of this addition.

3. Overall, the tribunal's decisions on both disputed additions were based on the lack of concrete evidence and material to support the AO's claims. The tribunal's reasoning was grounded in the absence of necessary documentation or proof of unaccounted investments or collected excise duty amounts. The tribunal's verdicts were deemed to be supported by the available record and did not give rise to any legal questions. Consequently, the tax appeal was dismissed, upholding the tribunal's decisions to delete both contested additions.