2020 (11) TMI 859 - AT - Income Tax

Reopening of assessment u/s 147 - Deduction u/s 80IB - Disallowance of difference in opening stock outside the books of accounts - CIT-A deleting the disallowance admission of additional evidence without giving an opportunity to the AO - HELD THAT - The additional evidence was rightly admitted by the CIT (Appeals) as the copies/documents which were not available during the assessment proceedings were produced at the time of appellate proceedings before the CIT (Appeals). There is a clear finding by the CIT (Appeals) that in the balance sheet of the assessee company as on 31.03.2011 an amount of ₹ 18,85,46,088/- was shown as receivable from M/s. Abhinav Steels Limited. The transfer of inventory of ₹ 6,09,43,809/- was duly recorded in its books of accounts and thus the same cannot be regarded as the stock sold outside the books of accounts. These documents were very well available before the Assessing Officer as well. In the financial statements of the assessee, all these calculations and the inventory specifications were given which was placed before the CIT (Appeals). Since the demerger has taken place on book value, therefore, there is no capital gain/loss as per the provisions of the Income Tax Act. Thus, there is no need to interfere with the finding of the CIT (Appeals). Hence, appeal of the Revenue is dismissed.

Summary

Issues:
1. Disallowance of difference in opening stock outside the books of accounts.
2. Admission of additional evidence under Rule 46A without giving an opportunity to the Assessing Officer.

Analysis:

Issue 1: Disallowance of Difference in Opening Stock
The case involved an appeal by the Revenue against the order passed by the Commissioner of Income Tax (Appeals) for the assessment year 2011-12. The Revenue contested the deletion of disallowance of ?6,09,43,809 made by the Assessing Officer due to a difference in opening stock outside the books of accounts. The Assessing Officer reopened the assessment based on the discrepancy in opening and closing stock, along with an excess deduction claimed under Section 80IB of the Income Tax Act. The assessee explained that the difference in inventory was due to the transfer of stock to another entity, which was duly recorded in the balance sheet. The CIT (Appeals) partly allowed the appeal of the assessee, leading to the Revenue's challenge. The Revenue argued that the excess deduction was rightly disallowed as the assessee failed to provide justification during the assessment proceedings. However, the CIT (Appeals) found in favor of the assessee, noting that the transfer of inventory was disclosed in the financial statements, and there was no need to interfere with this finding. Consequently, the appeal of the Revenue was dismissed.

Issue 2: Admission of Additional Evidence
The second issue revolved around the admission of additional evidence under Rule 46A without giving an opportunity to the Assessing Officer. The Revenue contended that the CIT (Appeals) erred in admitting additional evidence without providing a chance for the Assessing Officer to respond. However, the CIT (Appeals) found that the additional evidence submitted by the assessee was crucial to the case and was not available during the assessment proceedings. The CIT (Appeals) noted that the documents presented during the appellate proceedings clarified the transfer of inventory and its recording in the books of accounts. The CIT (Appeals) emphasized that all necessary calculations and inventory details were available in the financial statements provided to the Assessing Officer as well. Ultimately, the CIT (Appeals) upheld the admission of additional evidence, leading to the dismissal of the Revenue's appeal on this ground as well.

In conclusion, the Appellate Tribunal upheld the decision of the CIT (Appeals) on both issues, resulting in the dismissal of the Revenue's appeal. The judgment highlighted the importance of proper disclosure in financial statements and the admissibility of additional evidence to clarify discrepancies in assessments.