2021 (9) TMI 1120 - AT - Income Tax

Over invoicing of purchases and bogus expenses - AO made the addition on the basis of statement of the director of the company wherein he stated that he has forgotten as to why the invoice for vessel MV STX Clover for 77556 MT was raised to US 57 from US 31 FOB fright charges at actual PMT in terms of agreement for sale and purchase dated 10.12.2012 - CIT- A deleted the addition - HELD THAT - CIT(A) while allowing the appeal of the assessee noted that the assessee had entered into contract with PT Almoudi Natural Resources Tradmin for supply of Indonesian coal having specification of GCV 5100-5200 Kcal/Kg vide agreement dated 10.12.2012 and subsequently the specification of the coal was changed to CGCV 5600 Kcal/Kg, which is of higher quality and due to the user requirement, by an addendum dated 18.12.2012. Accordingly, rate in the invoice was changed due to change in quality of coal. We also find that similar addendum was made for other purchases from PT Almoudi Natural Resources Tradmin which have not been doubted by the AO. Ld. CIT(A) has recorded his finding to this effect in the appellate order. Besides the Ld. CIT(A) also recorded a finding of fact that the revised rate of invoice was comparable with the international rate published by Argus - we do not find any infirmity in the order of Ld. CIT(A) and accordingly same is upheld by dismissing the ground of the Revenue s appeal.

Summary

Issues Involved:

1. Over-invoicing of purchases and bogus expenses.
2. Over-invoicing of purchases from P T Almoudi.

Issue-wise Detailed Analysis:

1. Over-invoicing of purchases and bogus expenses:

The Revenue appealed against the CIT(A)'s order deleting the additions related to over-invoicing of purchases (?11,88,27,650/-) and bogus expenses (?1,56,86,000/-). The assessee, engaged in importing coal and trading petroleum products, was subject to a search and seizure action under section 132(1) of the Act. During the search, it was found that the assessee was over-invoicing coal imports through entities in Dubai, managed by Mr. Ankit Tandon. A statement under section 132(4) was recorded from Mr. Kunal Parekh, who admitted to over-invoicing and declared additional income but did not offer this amount in the return filed. The AO issued a show cause notice and, finding evidence of over-invoicing, made additions. However, the CIT(A) deleted these additions, noting that the statement was conditional and not an admission of wrongdoing, and that the invoices from Sandy Resources Pte. Ltd. were unauthenticated and insufficient to extrapolate over-invoicing for all purchases. The CIT(A) also found that the import prices were comparable with international prices and other imports, and there was no evidence of the assessee receiving profits from the alleged over-invoicing. The Tribunal upheld the CIT(A)'s order, dismissing the Revenue's appeal.

2. Over-invoicing of purchases from P T Almoudi:

The Revenue also appealed against the CIT(A)'s order deleting the addition related to over-invoicing of purchases (?4,63,19,046/-) from P T Almoudi. During the search, an email was found showing an invoice for coal with a changed price, which was questioned by the AO. The AO made an addition based on the statement of Mr. Kunal Parekh, who initially could not justify the change but later explained that the change was due to an addendum agreement reflecting a higher quality of coal. The CIT(A) accepted this explanation, noting that the revised price was justified and supported by evidence, including international price comparisons. The Tribunal upheld the CIT(A)'s order, dismissing the Revenue's appeal.

Conclusion:

The Tribunal found no infirmity in the CIT(A)'s orders for both issues, noting that the additions were based on unauthenticated evidence and that the assessee's explanations were supported by credible documentation and international price comparisons. All appeals by the Revenue were dismissed.