2015 (2) TMI 543 - HC - Income Tax

Unrecorded purchases - ITAT confirmed deletion of addition done by CIT(A) - Held that - Both the authorities were guided by the peculiar nature of the transactions involved where the assessee purchased raw and semi-finished products and thereafter sent them for embroidery and other work before the finished products were made available to it for sale. No fresh ground has been made out in the present appeal to show why the ITAT s reasoning, is unsustainable in law. The ITAT confirmed the view of the CIT(Appeals) after an elaborate discussion, based on its own appreciation as is evident from the above extracts. - Decided against revenue. Addition of own recorded sales - rejection of books of accounts - Held that - The GP disclosed by assessee having been accepted; no specific instances of deficiency of sale or purchase in a/c books; no proof of unrecorded purchases or sales having been brought on record, we see no justification for rejection of books of the assessee. The rejection of books by lower authorities is only on surmises and not supported by any cogent or objective reasons. Consequently, we delete the additions in respect of rejection of books, estimation of sales/purchases and consequent estimation of GP in the result assessee s ground in this respect succeeds - Decided against revenue.

Summary

Issues involved:
- Deletion of addition relatable to unrecorded purchases
- Rejection of the sum added by the Assessing Officer on account of gross profit rate
- Deletion of addition claimed as expenses towards embroidery charges

Analysis:

Deletion of addition relatable to unrecorded purchases:
The dispute revolved around the rejection of the assessee's books of account by the Assessing Officer (AO) and subsequent additions made to the income. The ITAT and CIT(Appeals) found the AO's suspicions unjustified and based on assumptions. The ITAT confirmed the CIT(Appeals) view after detailed discussions, emphasizing the peculiar nature of the transactions where raw and semi-finished products were purchased, sent for embroidery, and then sold as finished products. The reasoning provided by the ITAT and CIT(Appeals) was considered valid, and no fresh ground was presented to challenge it. Consequently, no substantial question of law was deemed to arise on this issue.

Rejection of the sum added by the Assessing Officer on account of gross profit rate:
The ITAT held that the rejection of the assessee's books of account with regard to sales was unwarranted as no evidence of undisclosed sales was presented. The rejection was based on surmises and assumed discrepancies in closing stock, which the assessee reasonably explained. Since no concrete evidence of unrecorded purchases or sales was provided, the rejection of books by the lower authorities was deemed unjustified. The ITAT concluded that the disclosed gross profit was acceptable, and no additions were necessary. The revenue's argument for detailed re-appreciation of facts was rejected as impermissible under the Income Tax Act, and no question of law was found to arise.

Deletion of addition claimed as expenses towards embroidery charges:
Similar to the previous issues, the deletion of expenses claimed towards embroidery charges was upheld by the ITAT based on the reasoning that no substantial question of law was evident. The decision was supported by the lack of concrete evidence to challenge the assessee's claims and the absence of justifiable grounds for rejecting the expenses. The ITAT reiterated that the rejection of books and estimations made by the lower authorities lacked sufficient support and objective reasoning. Consequently, no substantial question of law was identified in this regard.

In conclusion, the appeal was dismissed, affirming the decisions made by the ITAT and CIT(Appeals) regarding the three issues raised by the revenue.