2016 (11) TMI 1038 - AT - Income Tax

Disallowance of purchases and renovation expenses - Held that - Assessee has not been able to of fer any satisfactory explanation as regards the failure of the assesese to substantiate the claims made on account of additional purchases and renovation expenses in the revised return/accounts during the course of remand proceedings before the Assessing Officer except stating that the case of the assessee was not properly represented before the Assessing Officer during the course of remand proceedings. It is also observed that specific and pertinent questions were raised by the Assessing Officer in respect of claims made by the assessee in the revised accounts/return on account of additional purchases and renovation expenses and no explanation whatsoever was offered by the assessee to reply or clarify the same. No infirmity in the impugned order of the ld. CIT(Appeals) confirming the additions made by the Assessing Officer on account of additional purchases and renovation expenses as claimed in the revised return/accounts by treating the same as bogus -Decided against assessee Addition on account of sundry creditors written back by way of enhancement - contention raised by the assessee that the addition was already made by AO on account of sundry creditors written back on substantive basis to give effect to the order of the ld. CIT(Appeals) assed in the case of the assessee for A.Y. 2000-01 - double addition - Held that - Although this position clearly evident from the relevant two orders passed by the Assessing Officer (copies placed at page nos. 1 and 3 of the paper book) is not disputed by the ld. D.R. , he has submitted that the Assessing Officer may be given opportunity to verify this aspect. Since the ld. counsel for the assessee has not raised any objection in this regard, we restore this issue to the file of the Assessing Officer for the limited purpose of verifying the grievance of the assessee of double addition

Summary

Issues:
1. Disallowance of purchases and renovation expenses.
2. Addition of sundry creditors written back.

Analysis:

Issue 1: Disallowance of purchases and renovation expenses
The appellant, an individual engaged in the liquor business, filed a revised return for the assessment year 2004-05, claiming additional purchases and renovation expenses. The Assessing Officer disallowed these claims, citing discrepancies in the revised accounts. The appellant challenged this disallowance before the ld. CIT(Appeals), who sought a remand report. The Assessing Officer raised questions regarding the authenticity of the claims, to which the appellant's representative failed to provide satisfactory explanations. The ld. CIT(Appeals) confirmed the disallowance, treating the claims as bogus. The ITAT Kolkata upheld the ld. CIT(Appeals) decision, noting the lack of substantiation for the claims and the admission that the adjustments were made to offset gains from sundry creditors written off. Grounds No. 2 & 3 of the appellant's appeal were dismissed.

Issue 2: Addition of sundry creditors written back
The ld. CIT(Appeals) made an addition of ?6,69,517 on account of sundry creditors written back. The Assessing Officer, based on a remand report, added this amount to the appellant's total income. The appellant contended that this addition had already been made in a previous assessment year and argued against double addition. The ITAT Kolkata, noting the potential for double addition, directed the Assessing Officer to verify this claim to prevent redundancy. Ground No. 4 of the appellant's appeal was treated as allowed for statistical purposes.

In conclusion, the ITAT Kolkata partially allowed the appellant's appeal, dismissing the challenges to the disallowed purchases and renovation expenses while directing the Assessing Officer to address the potential double addition of sundry creditors written back.