2017 (1) TMI 1370 - HC - Income Tax

Addition of undisclosed net profit - addition relying upon one piece of paper which was provisional P&L Account subject to further verification of the accounts of entire unit - Held that - It is required to be noted that as such the learned Assessing Officer did not dispute other expenses and/or the amount mentioned in the final P&L account and/or audited account. There was no other material available with the learned Assessing Officer while making addition of ₹ 2,72,78,269/-as undisclosed net profit. The provisional P&L Account was explained by the assessee in detail which has been accepted by the learned CIT(A) as well as the learned Tribunal. We are in complete agreement with the view taken by the learned CIT(A) and the learned Tribunal while deleting the addition of ₹ 2,72,78,269/-made by the learned Assessing Officer as undisclosed net profit. There was no other material available with the learned Assessing Officer while making the addition of ₹ 2,72,78,269/-as undisclosed net profit except one piece of paper / provisional P&L account which was explained by the assessee. Under the circumstances, present Tax Appeal deserves to be dismissed qua proposed question No.(1) Addition on account of difference in stock - Held that - As rightly observed by the learned CIT(A) and the learned Tribunal, the learned Assessing Officer was justified in neglecting the transactions in between the period. The learned CIT(A) also placed much reliance on the audited accounts. On reconsideration of the stock statement the stock difference was arrived at at ₹ 63,597/-and therefore, the learned CIT(A) rightly restricted the addition made on account of difference in stock to ₹ 63,597/-. Considering the aforesaid it cannot be said that both the learned CIT(A) and the learned Tribunal have committed any error. The findings recorded by the learned CIT(A) and the learned Tribunal are on appreciation of evidence and the material on record. No substantial question of law arise. We are in complete agreement with the view taken by the learned CIT(A) and the learned Tribunal while restricting the addition to ₹ 63,597/-on account of difference in stock. Under the circumstances, question No.(2) also deserves to be dismissed.

Summary

Issues:
1. Addition of undisclosed net profit based on impounded document
2. Addition on account of difference in stock

Analysis:

Issue 1: Addition of undisclosed net profit based on impounded document
The case involved an appeal by the Revenue against the deletion of an addition of &8377; 2,72,78,269/- made by the Assessing Officer as undisclosed net profit. The Assessing Officer relied on a provisional profit and loss account found during a survey, but the CIT(A) and the Tribunal found the addition unjustified. The CIT(A) noted that the Assessing Officer did not provide any evidence to support the addition and failed to consider the nature of the appellant's business. The Tribunal upheld the CIT(A)'s decision, emphasizing the lack of justification for the addition. The High Court agreed with the lower authorities, stating that the Assessing Officer's reliance on a single document without further verification was insufficient. The appeal on this issue was dismissed.

Issue 2: Addition on account of difference in stock
The second issue concerned an addition of &8377; 14,83,789/- by the Assessing Officer for a stock difference, later reduced to &8377; 63,597/- by the CIT(A) and the Tribunal. The Assessing Officer based the addition on discrepancies between survey team valuation and opening stock figures. However, the appellant presented audited balancesheet data showing a different closing balance. The CIT(A) and the Tribunal considered this evidence and reduced the addition to &8377; 63,597/-, citing neglect of interim transactions by the Assessing Officer. The High Court concurred with this reasoning, finding no error in the lower authorities' decision. Consequently, the appeal on this issue was also dismissed.

In conclusion, the High Court upheld the decisions of the lower authorities regarding both issues, dismissing the Tax Appeal filed by the Revenue.