2022 (4) TMI 578 - AT - Income Tax

Disallowance u/s. 69C on account of purchase of raw material and stores - two purchases transactions could not be substantiated by it in the course of proceedings before the lower authorities - HELD THAT - Now when it was claimed by the assessee that it had purchased goods prior to the date of survey on 29.03.2011 and had though entered the same in the stock register, but inadvertently omitted to record the same in the purchase account, then, the onus was cast upon it to substantiate its aforesaid claim on the basis of irrefutable documentary evidence. As observed by us herein above, the assessee despite specific directions by the AO to produce the stock register wherein the receipt of goods in question were entered by him, had however, failed to do the needful. We concur with the view taken by the lower authorities that the assessee in the grab of its claim of having made purchases had in fact tried to neutralize the amount of undisclosed income that was surrendered by it in the course of the survey proceedings - we find no infirmity in the view taken by the CIT(Appeals) who had on the basis of well-reasoned order sustained the addition made by the Assessing Officer. We, thus, in terms of our aforesaid observations uphold the order of the CIT(Appeals) qua sustaining of the addition made by the Assessing Officer. - Decided against assessee.

Issues:
1. Disallowance of expenses under section 69C on account of purchase of raw material and stores.
2. Validity of the appeal order.
3. Failure to produce supporting documentary evidence for claimed purchases.

Analysis:
1. The appeal was against the disallowance of expenses amounting to ?13,75,203 under section 69C for the purchase of raw material and stores. The Assessing Officer found a discrepancy in the trading account and called for an explanation from the assessee. The assessee claimed that the purchases were made before the survey but were omitted from the books of account. Despite being directed, the assessee failed to produce the stock register as evidence. The Assessing Officer viewed the claim as an attempt to inflate expenses. The CIT(Appeals) upheld the disallowance, and the Tribunal concurred, stating that the assessee failed to substantiate the claim with documentary evidence, leading to the dismissal of the appeal.

2. The validity of the appeal order was challenged by the assessee on grounds of being bad in law and on facts. However, as the assessee did not appear for the hearing, the Tribunal proceeded with the appeal as per the rules. The Tribunal examined the contentions raised in the appeal order but found no merit in them, ultimately dismissing the appeal.

3. The failure of the assessee to produce supporting documentary evidence for the claimed purchases was a crucial issue. Despite asserting that the purchases were made before the survey and entered in the stock register, the assessee could not provide irrefutable evidence to substantiate the claim. The Tribunal emphasized the importance of documentary evidence in such cases and upheld the lower authorities' decision to disallow the expenses. The failure to produce the stock register played a significant role in the Tribunal's decision to uphold the addition of ?13,75,203 to the total income under section 69C.

In conclusion, the Tribunal upheld the disallowance of expenses for the purchase of raw material and stores, citing the lack of substantiating evidence as a key factor. The failure to produce the stock register and supporting documents led to the dismissal of the appeal. The decision highlights the importance of maintaining accurate records and providing documentary evidence to support claims in tax assessments.

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