2017 (12) TMI 199 - AT - Income Tax

Unexplained investment in stock - difference in the stock statement submitted to the bank as compared to the stock statement furnished to the AO during the course of assessment proceedings - Held that - We find that before the ld. CIT(A) as well as before the Assessing Officer assessee has duly explained that difference amount of 5, 10, 30, 357/- which has been added by the Assessing Officer was firstly on account of plant 3, 64, 66, 010/- which has been shown in Schedule VIII of the balance sheet; and secondly advance to the suppliers shown at 1, 45, 64, 347/- reflected in Schedule XI of the balance sheet. Thus there is no such difference apparently in the value of closing stock. It is also an admitted fact that there is no difference in the quantum and in the actual value of the closing stock as appearing in the books of account and there is no cash element on such difference because the amount aggregating to 5, 10, 30, 357/- is on account of payment given to the suppliers for purchase/expenses incurred through account payee cheques from the bank account and such payments have been shown as amount recoverable and no expenses including purchase have been debited to the profit genuineness and creditworthiness. Simply because Directors or the authorized persons from the said company could not be produced no adverse inference could have been drawn. Looking to the entire fats and circumstances of the case and on the basis of the plea taken by the ld. counsel for the assessee and in the interest of substantial justice we feel that the issue of share application money of 90 lakhs should be set aside to the file of the Assessing Officer and assessee will try to produce the concerned from the said entities to confirm the said transaction. Addition on basis of documents found in search - Held that - A document was seized from the premises of the assessee which mentioned sale transaction of land which reflected that property was registered for a consideration of 21.25 lakhs and other expenses like stamp duty of 1, 64, 300/-. In the said seized document there is a figure of 62 which has been read as 62 lakhs which has been presumed to be made in cash. We at the outset agree that the presumption is raised against the assessee in terms of section 132(4A) and 292C that documents belongs to the assessee and onus is upon the assessee to rebut such presumption however such a presumption is a rebuttal presumption which assessee has to explain with cogent evidence that it belongs to someone else but here assessee has only denied the transaction without rebutting it by way of proper evidence. However in the interest of justice we are of the opinion that since no proper opportunity was given by the Assessing Officer therefore the matter should be remanded back to the file of the Assessing Officer to examine this issue afresh

Summary

Issues Involved:
1. Deletion of addition on account of unexplained investment in stock.
2. Addition on account of unexplained credit on account of share application money.
3. Validity of reopening under section 147 and satisfaction under section 151.
4. Addition on account of undisclosed investment in property.
5. Deletion of addition on account of value of stock for assessment year 2009-10.
6. Deletion of addition on account of cash deposit for assessment year 2009-10.
7. Deletion of addition on account of unaccounted advance given to A-One Machine Components (P) Ltd.
8. Addition on account of undisclosed investment in property for assessment year 2009-10.

Detailed Analysis:

1. Deletion of Addition on Account of Unexplained Investment in Stock:
The Revenue challenged the deletion of ?5,10,30,537/- made by the Assessing Officer (AO) on account of unexplained investment in stock. The AO noted a discrepancy between the stock value reported to the bank (?10,08,30,357/-) and the stock value in the tax audit report (?4.98 crores). The assessee explained that the difference included plant & machinery and advances to suppliers, which were duly reflected in the books of accounts. The CIT(A) accepted this explanation, noting that the stock statement to the bank was for credit facility purposes and did not reflect any discrepancy in quantity or item-wise stock. The Tribunal upheld the CIT(A)'s decision, stating that the addition could not be made based on the difference in stock value reported to the bank and the tax audit report.

2. Addition on Account of Unexplained Credit on Account of Share Application Money:
The assessee challenged the addition of ?90 lakhs on account of share application money received from four entities. The AO made the addition due to the assessee's failure to produce the directors of the share applicant companies. The Tribunal noted that the AO raised the query at the fag-end of the limitation period, providing insufficient time for the assessee to comply. The Tribunal remanded the matter back to the AO, directing a fresh examination and providing the assessee an opportunity to produce the concerned persons.

3. Validity of Reopening under Section 147 and Satisfaction under Section 151:
The assessee raised legal grounds challenging the validity of reopening under section 147 and the satisfaction required under section 151. The Tribunal observed that these grounds were not raised before the AO or CIT(A) and required verification from records. The Tribunal remanded the matter back to the AO for adjudication in accordance with the law, after giving due opportunity to the assessee.

4. Addition on Account of Undisclosed Investment in Property:
The AO made an addition of ?62 lakhs based on a seized document indicating a cash payment for property purchase. The CIT(A) upheld the addition, relying on the presumption under section 132(4A) and 292C. The Tribunal noted that the assessee was not given a proper opportunity to rebut the presumption and remanded the matter back to the AO for fresh examination, allowing the assessee to provide evidence to rebut the presumption.

5. Deletion of Addition on Account of Value of Stock for Assessment Year 2009-10:
The AO made an addition of ?9,15,99,354/- based on discrepancies in stock value reported to the bank and in the books of accounts. The CIT(A) deleted the addition, noting that the difference was due to advances to suppliers and freight expenses included in the stock value reported to the bank. The Tribunal upheld the CIT(A)'s decision, affirming that the difference in stock value could not be added in the assessment year 2009-10.

6. Deletion of Addition on Account of Cash Deposit for Assessment Year 2009-10:
The AO made an addition of ?9,50,000/- on account of unexplained cash deposits. The CIT(A) deleted the addition, and the Tribunal upheld this decision, noting that the assessee had provided sufficient explanation and evidence for the cash deposits.

7. Deletion of Addition on Account of Unaccounted Advance Given to A-One Machine Components (P) Ltd.:
The AO made an addition of ?1,26,49,249/- based on a credit balance in the name of A-One Machine Components (P) Ltd. The CIT(A) deleted the addition, noting that the assessee had provided confirmation and supporting documents for the transaction. The Tribunal upheld the CIT(A)'s decision, affirming that the transaction was genuine and duly reflected in the books of accounts.

8. Addition on Account of Undisclosed Investment in Property for Assessment Year 2009-10:
The AO made an addition based on a seized document indicating a cash payment for property purchase. The CIT(A) upheld the addition, and the Tribunal remanded the matter back to the AO for fresh examination, allowing the assessee to provide evidence to rebut the presumption.

Conclusion:
The Tribunal upheld the CIT(A)'s decisions on various issues, remanding certain matters back to the AO for fresh examination and providing the assessee an opportunity to present additional evidence. The appeals of the Revenue for assessment year 2007-08 were dismissed, while those for assessment year 2009-10 were partly allowed for statistical purposes. The appeals of the assessee for both assessment years were allowed for statistical purposes.