2018 (12) TMI 1053 - AT - Income Tax

Addition u/s 69C - difference in outstanding balance shown in the books of the assessee as well as Starflex Sealing India Pvt. Ltd - Held that - Though the assessee has made submissions before the Assessing Officer reconciling the difference, it has not be properly considered. The learned Commissioner (Appeals) has also sustained the addition in an unreasoned and mechanical manner since the assessee did not appear to represent its case. However, the issue is whether the addition can be made under section 69C of the Act. This aspect requires to be considered along with assessee s claim that even if there is a difference it has to be allowed as bad debt. Since the aforesaid aspect has not been considered by the Departmental Authorities, restore the issue to the file of the Assessing Officer for denovo adjudication Addition of bogus purchases - AO has made the addition primarily for the reason that the notices issued under section 133(6) could not be served on the concerned parties - Held that - Of course, AO has also observed that the assessee failed to produce the concerned parties before him. However, it appears from the record that the assessee has furnished quantitative tally of the goods purchased it is also a fact that the Assessing Officer has not disturbed or doubted the sales affected by the assessee. In these circumstances, the entire purchases cannot be disallowed and treated as income of the assessee. Therefore, we direct the Assessing Officer to restrict the addition to 12.5% of the bogus purchases. Ad hoc disallowance out of general expenses - Held that - Assessing Officer has not pointed out which of the expenditures are not supported by bills and vouchers. In case, the assessee was unable to produce bills and vouchers in respect of specific expenditure, the Assessing Officer should have restricted the disallowance to such expenditure. Without doing so, the Assessing Officer cannot make any ad hoc disallowance by simply observing that the assessee was unable to produce receipts bills to substantiate the expenses claimed. Accordingly, delete the disallowance Disallowance of set off of brought forward of business loss - Rectification application filled - Held that - here is no discussion either by the Assessing Officer or by the learned Commissioner (Appeals) with regard to the aforesaid claim of the assessee. Notably, though the assessee has filed an application for rectification under section 154 of the Act on 29th March 2013, however, it is still pending before the Assessing Officer. In view of the aforesaid, we direct the Assessing Officer to examine assessee s claim and dispose off the application filed under section 154 - Assessee s appeal is partly allowed.

Issues:
1. Addition under section 69C of the Income Tax Act, 1961
2. Addition on account of bogus purchases
3. Ad-hoc disallowance out of general expenses
4. Disallowance of set-off of brought forward business loss

Issue 1: Addition under section 69C of the Income Tax Act, 1961
The assessee challenged the addition of ?1,97,388 made under section 69C of the Act due to a difference in outstanding balances with Starflex Sealing India Pvt. Ltd. The Assessing Officer added back the amount as unexplained expenditure, which was confirmed by the Commissioner (Appeals) in the absence of the assessee. The Tribunal noted that the difference was reconciled by the assessee, but not properly considered by the authorities. The Tribunal directed the issue to be restored to the Assessing Officer for fresh adjudication after hearing the assessee, considering whether the difference should be treated as bad debt.

Issue 2: Addition on account of bogus purchases
The assessee challenged the addition of ?2,14,346 on account of bogus purchases from M/s. Conver Concept and M/s. Ashok Spares. The Assessing Officer added the amount as the notices issued under section 133(6) could not be served. The Tribunal observed that the assessee provided details of inventory and the Assessing Officer did not doubt the sales. The Tribunal directed the Assessing Officer to restrict the addition to 12.5% of the bogus purchases.

Issue 3: Ad-hoc disallowance out of general expenses
The Assessing Officer disallowed ?10,000 out of general expenses claimed by the assessee for lack of supporting receipts/bills. The Tribunal found that the disallowance was made without specifying unsupported expenditures and directed the deletion of the ?10,000 disallowance.

Issue 4: Disallowance of set-off of brought forward business loss
The assessee challenged the disallowance of set-off of brought forward business loss of ?6,28,304. The Tribunal noted that the claim was ignored by the authorities, and the rectification application filed by the assessee was still pending. The Tribunal directed the Assessing Officer to examine the claim and dispose of the rectification application accordingly.

In conclusion, the Tribunal partly allowed the assessee's appeal, addressing the issues raised and providing directions for further assessment and consideration of claims.

← Previous Next →