2018 (8) TMI 340 - AT - Income Tax

Addition on account of difference in purchase made - CIT-A deleted the addition violating Rule 46A of the IT Rules 1962 - Held that - As find that the AO in his remand report has not completed his investigations in a proper manner. The appellant was always ready to submit all vouchers as demanded. It cannot expected from the Appellant that gunny bags of vouchers would be brought to the office for verification. He should have asked for some vouchers for a test check basis. This has been done and produced before me hence find force in the contentions of the of the appellant. All their sanctions are noted duly in their notings which matches with their revised reconciliation. As find no basis for the disallowance in the purchases and hereby delete the amount which was disallowed by the A.O. Hence the amount is deleted - no infirmity in the impugned order of the CIT-A and it is justified. Ground raised by the revenue is dismissed

Issues Involved:
1. Justification of CIT-A in deleting the addition of ?2,93,79,530/- made on account of difference in purchase by the AO violating Rule 46A of the IT Rules 1962.
2. Cross Objections by the assessee supporting the CIT-A's order.
3. Similar issues in another appeal for a different assessment year.

Detailed Analysis:

Issue 1: Justification of CIT-A in Deleting the Addition of ?2,93,79,530/-
The primary issue was whether the CIT-A was justified in deleting the addition of ?2,93,79,530/- made by the AO due to a difference in purchase amounts. The AO had added this amount to the assessee's total income, citing a failure to establish genuineness through supporting documents like ledgers and proof of payments. The CIT-A deleted this addition, considering the assessee's submissions, including item-wise purchase reconciliation and a remand report from the AO. The AO, however, maintained that the reconciliation statement lacked sufficient documentary evidence such as bills and vouchers.

The assessee argued that it had provided a reconciliation of purchases and that the AO had arbitrarily added the entire purchase amount without considering this reconciliation. The CIT-A, after reviewing the item-wise and party-wise reconciliation statements and the remand report, found that the AO did not properly verify the documents. The CIT-A noted that the assessee, being a state-level cooperative society, conducted transactions with proper note sheets and sanctions from authorities, which were scrutinized by various government bodies. Due to the high volume of transactions, it was impractical to produce all bills and vouchers immediately. The CIT-A accepted the revised reconciliation statements and deleted the addition, stating that the AO should have conducted a test check rather than demanding all vouchers at once.

Issue 2: Cross Objections by the Assessee Supporting the CIT-A's Order
The assessee filed cross objections supporting the CIT-A's order. Since the Tribunal upheld the CIT-A's order, the cross objections required no further adjudication and were dismissed.

Issue 3: Similar Issues in Another Appeal for a Different Assessment Year
In another appeal (ITA No. 108/Kol/2018) for a different assessment year, the issue raised was similar to the one in ITA No. 2386/Kol/2016. Following the same reasoning, the Tribunal upheld the CIT-A's order and dismissed the grounds raised by the revenue. Consequently, the cross objections filed by the assessee in this appeal were also dismissed.

Conclusion:
The Tribunal found no infirmity in the CIT-A's order and upheld it, dismissing the revenue's appeals and the assessee's cross objections. The CIT-A's decision to delete the addition of ?2,93,79,530/- was justified based on the revised reconciliation statements and the impracticality of producing all bills and vouchers due to the high volume of transactions. The Tribunal emphasized the need for a proper verification process by the AO, including test checks rather than demanding all vouchers at once.

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