2015 (10) TMI 77 - AT - Income Tax

Un-recorded sales - difference in sales as declared by the assessee to the sales tax authority and as shown in the P & L Account - Held that - As regards the explanation of the assessee that the difference is also on account of APGST and CST amounting to ₹ 5,03,441 and ₹ 1,70,070 respectively, it is noted from the final assessment order passed by the concerned sales tax authority that these taxes are separately levied on the gross turnover of ₹ 1,66,66,050 determined by them after excluding the exempted turnover of ₹ 59,99,210. The said turnover determined by the sales tax authorities thus is not of sales tax and it cannot be said that there is a difference between such sales and the sales as credited by the assessee to the P & L account which again is net of sales tax, on account of the amount of sales tax. The explanation offered by the assessee while reconciling the difference in sales to this extent thus is not acceptable. As such considering all the facts of the case and the material placed on record before us, we hold that the difference in sales to the extent of ₹ 5,91,140 being purchase of fire wood and ₹ 68,915 being sale of packaging material stands explained and the addition made by the A.O. and confirmed by the Ld. CIT(A) on this issue is required to be deleted to that extent. We therefore, modify the impugned order of the Ld. CIT(A) and allow the appeal of the assessee partly. - Decided partly in favour of assessee

Summary

Issues:
- Discrepancy in sales figures reported to sales tax authorities and shown in the P & L account

Analysis:
1. The appeal was against the addition of Rs. 12,57,688 made by the Assessing Officer (A.O.) and confirmed by the Commissioner of Income Tax Appeals (CIT(A)) due to a difference in sales figures reported to the sales tax authorities and shown in the Profit & Loss (P & L) account. The A.O. treated this difference as unrecorded sales.

2. The assessee, a company engaged in manufacturing and selling ceramic pipes, filed its income tax return declaring a total income of Rs. 10,42,830. During assessment, the A.O. noted a variance in turnover reported to sales tax authorities and the P & L account. The A.O. added Rs. 12,57,688 to the total income, considering it unrecorded sales.

3. The assessee contended that the difference was due to various factors like sales tax collected, packing charges, and duplicate invoice amounts. The A.O. did not accept the explanation, leading to the addition. The CIT(A) upheld the A.O.'s decision, stating insufficient evidence was provided by the assessee.

4. The CIT(A) received a reconciliation statement from the assessee, explaining the variance in sales figures. The statement detailed the turnover determined by sales tax authorities and adjustments for items like firewood, packing material, and taxes. The Tribunal found the explanation satisfactory for some items but not for taxes like APGST and CST.

5. The Tribunal considered the documentary evidence presented by the assessee, such as the sales tax assessment order and P & L account schedules. It concluded that the difference in sales due to firewood and packaging material was explained. However, the variance related to APGST and CST was not justified. Consequently, the Tribunal partially allowed the appeal, deleting the addition related to firewood and packaging material but upholding it for taxes.

6. The Tribunal's decision was based on a thorough review of the submissions, documentary evidence, and relevant tax assessments. The judgment clarified the acceptable explanations for the sales variance and highlighted the inadequacy of justification for certain items. The partial allowance of the appeal reflected a balanced assessment of the discrepancies in sales figures reported by the assessee.