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2018 (12) TMI 975 - AT - Income TaxSuppression of closing stock of gold - Held that - Even after considering the reconciliation submitted by the learned authorised representative, there remains a difference of 624.33 gms in the quantity of the gold which also needs to be explained and reconciled. Therefore, in the interest of justice, the issue is sent back to the file of the assessing officer with a direction to the assessee to produce before the assessing officer the stock register maintained by the assessee along with the month wise stock statements submitted to the bankers and to demonstrate that the difference in each month is on account of unfixed gold only. The assessing officer is also directed to verify the above details, if produced by the assessee, and decide the issue in accordance with the law after giving proper opportunity of hearing. In the result ground number 1 of the appeal of the revenue is allowed with above direction. Addition applying gross profit rate at the rate of 4.328% on alleged unaccounted sale of diamond jewellery - Held that - This ground same as above to be restored to the file of the assessing officer for examining the issue afresh in light the evidences which the assessee may submit in this regard and after giving proper opportunity to the assessee before deciding the issue as per law. Addition on account of Sundry Creditors who had not responded to the summons issued u/s 131 - Held that - Although, the Ld. Sr. Departmental Representative has argued at length that the Ld. CIT (A) has erred in deleting these additions, no factual infirmity or contradiction could be pointed out by her in this regard. We find that the Ld. CIT (A) has reached a logical conclusion in this regard and these factual findings remain un-contradicted. Accordingly, we find no reason to interfere with the findings of the Ld. CIT (A) on this issue and we dismiss ground no. 3 of the department s appeal. Addition of travelling expenses - Held that - It is undisputed that the assessee failed to produce documentary evidences in respect of these expenses before both the lower authorities and nor could justify its claim that the expenses has been incurred for purely business purposes. The Ld. CIT (A) has apparently accepted the contentions of the assessee without examining the veracity of the claim in detail. This should not have been done. However, in interest of justice, we deem it appropriate to restore this issue also to the file of the Assessing Officer to examine the issue afresh and direct the assessee to establish beyond reasonable doubt that these expenses were for business purposes. The AO shall afford proper opportunity to the assessee before adjudicating this issue as per law. Accordingly ground stands allowed for statistical purposes. Disallowance u/s 40A(3) on account of salary paid to partners - Held that - Submissions of the assessee were not properly considered by the lower authorities in this regard. The Authorised Representative has drawn our attention to the submissions/documents which have been filed by the assessee to support the claim that the impugned payments were not against payment of salary but were rather debited to the capital account and were withdrawals of the partners. Apparently both the lower authorities have not considered this aspect of the assessee s submission. Accordingly, in interest of justice, we deem it fit to restore this issue to the file of the Ld. CIT (A) to verify the claim of the assessee with the books of accounts that the impugned payments were debits to the capital accounts of the partners and were not payments against salary to the partners. Addition under the head business promotion expenses - Held that - AR as drawn our attention to the submissions made before the Ld. CIT (A) in this regard and has submitted that the submissions were not properly considered by the Ld. CIT (A). A perusal of the order of the Ld. CIT (A) also shows that the submissions of the assessee have not been discussed by the Ld. CIT (A) while dismissing the ground. It is our considered opinion that interest of justice would be served if this issue is re-examined by the Ld. CIT (A) after duly considering the submissions made by the assessee Disallowance of sales promotion expenses - expenses were incurred for purchasing tickets for Commonwealth games and the assessee had claimed that this would result in expansion of the client base - Held that - Authorised Representative has drawn our attention to the detailed submissions made before the Ld. CIT (A) and it is evident that the Ld. CIT (A) has dismissed the assessee s ground without properly considering the submissions made by the assessee. Accordingly, in our considered view, this issue also needs to be restored to the file of the Ld. CIT (A) for fresh adjudication.
Issues Involved:
1. Addition on account of suppression and under valuation of stock. 2. Addition on account of unaccounted sales of diamond jewellery. 3. Disallowance of salary of partners under Section 40(A)(3). 4. Disallowance out of traveling expenses. 5. Disallowance of business promotion and sales promotion expenses. 6. Addition of Sundry Creditors. Detailed Analysis: 1. Addition on Account of Suppression and Under Valuation of Stock: The AO noticed discrepancies between the stock reported in the Tax Audit Report and the stock statement submitted to the bank. The AO added ?9,00,01,050/- to the income of the assessee for suppression of closing stock of gold. The Ld. CIT (A) deleted this addition, stating that the discrepancy in stock arose from earlier assessment years. The ITAT found the Ld. CIT (A)'s reasoning flawed, noting the necessity for a detailed reconciliation. The issue was remanded back to the AO for verification of the stock register and monthly stock statements. 2. Addition on Account of Unaccounted Sales of Diamond Jewellery: The AO made an addition of ?43,938/- by applying a gross profit rate on the alleged unaccounted sale of diamond jewellery. The Ld. CIT (A) deleted this addition, attributing the discrepancy to earlier years. The ITAT, aligning with its decision on the first issue, remanded this issue back to the AO for further examination. 3. Disallowance of Salary of Partners under Section 40(A)(3): The AO disallowed ?6,00,000/- due to cash payments exceeding ?20,000/-. The Ld. CIT (A) sustained this disallowance. The ITAT noted that the lower authorities did not properly consider the assessee's claim that these were withdrawals against the capital account. The issue was remanded to the Ld. CIT (A) for verification. 4. Disallowance out of Traveling Expenses: The AO disallowed ?2,41,242/- due to lack of evidence. The Ld. CIT (A) deleted this addition, considering the totality of circumstances. The ITAT found the Ld. CIT (A)'s reasoning insufficient and remanded the issue back to the AO for re-examination, directing the assessee to establish that these expenses were for business purposes. 5. Disallowance of Business Promotion and Sales Promotion Expenses: The AO disallowed ?1,67,356/- for payments to Mahindra Holidays and ?1,60,000/- for Commonwealth Games tickets due to lack of evidence. The Ld. CIT (A) sustained these disallowances. The ITAT noted that the Ld. CIT (A) did not properly consider the assessee's submissions and remanded both issues back to the Ld. CIT (A) for fresh adjudication. 6. Addition of Sundry Creditors: The AO added ?46,15,850/- due to non-compliance from sundry creditors. The Ld. CIT (A) deleted this addition after examining the ledger accounts and subsequent payments. The ITAT upheld the Ld. CIT (A)'s decision, finding no factual infirmity in the deletion of the addition. Conclusion: The ITAT remanded several issues back to the AO and Ld. CIT (A) for further verification and fresh adjudication, emphasizing the need for proper examination and reconciliation of discrepancies. The appeal of the department was partly allowed for statistical purposes, while the appeal of the assessee was allowed for statistical purposes.
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