2023 (2) TMI 112 - AT - Income Tax

Estimation of income - Suppression of sales - suppression of sales to sister concern determined by the AO - HELD THAT - As in view of lack of appropriate explanation submitted by the assessee justifying the incurrence of loss of 26.6% in the month of March on sales to its sister concern as against average profit of 1.85% in earlier period, the AO was justified in estimating the average profit at 1.48% taking into consideration the profit declared in the earlier period and determining the suppressed sales to sister concern which has been brought to tax. Even during the appellate proceedings before the CIT(A), assessee didn't furnish any explanation supported by appropriate documentation to rebut the findings of the AO. No justifiable basis to interfere with the findings of the Ld. CIT(A) and the same is herby confirmed. Appeal of the assessee is dismissed.

Summary

Issues involved:
Appeal against order of Ld. CIT(A) - Dismissal of appeal by Ld. CIT(A) - Addition of Rs. 37,12,424 as suppression of sales - Non-compliance by assessee - Lack of interest in prosecuting appeal - Justification of estimated profit - Lack of explanation by assessee - Confirmation of Ld. CIT(A)'s findings.

Analysis:
The appeal was filed against the order of Ld. CIT(A) regarding the assessment year 2014-15. The grounds of appeal included the dismissal of the appeal by the Worthy Commissioner of Income Tax (Appeals)-I and the confirmation of an addition of Rs. 37,12,424 as suppression of sales by the Assessing Officer. Initially, no one appeared on behalf of the assessee, leading to the dismissal of the matter due to non-prosecution. However, after a Miscellaneous Application was filed by the assessee, the order was recalled, and multiple opportunities were provided for hearing. Despite various attempts to engage the assessee, including notice issuance and adjournments, there was continuous non-compliance, indicating a lack of interest in pursuing the appeal.

During the hearing, the Ld. DR highlighted that the AO's findings, including the estimation of suppressed sales to a sister concern, were duly examined by the Ld. CIT(A). The AO's analysis revealed losses incurred by the appellant on high seas sales to the sister concern, leading to the addition of Rs. 37,12,424. The appellant's justifications were deemed insufficient, with no concrete proof provided to support the claims of price fluctuations and losses incurred. The Ld. CIT(A) upheld the addition, emphasizing the lack of explanation from the appellant during both assessment and appellate proceedings.

Considering the material on record and the submissions made, the Accountant Member found no valid reason to interfere with the Ld. CIT(A)'s decision. The failure of the appellant to provide a satisfactory explanation, supported by relevant documentation, regarding the significant loss incurred in contrast to earlier profits, led to the confirmation of the addition. Consequently, the appeal was dismissed, and the Ld. CIT(A)'s findings were upheld, emphasizing the importance of substantiated explanations in such matters.