2013 (8) TMI 996 - AT - Income Tax

Tribunal upholds CIT(A)'s decisions on additions for damaged goods, non-genuine payment, and bogus purchases.

Assistant Commissioner of Income Tax Versus. M/s. Comed Chemicals Ltd.

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decisions to delete additions related to damaged/expired goods, non-genuine payment, ... Addition on account of damaged/expired goods - Held that:- It is practice in the pharmaceuticals business that some products have to be expired or damages and all the retailers are not able to sell the goods within expiry of date, even branded goods some time expired. The appellant had shown expiry of goods’ percentage more than 4%. During the year, goods expired was ₹ 7,94,441/- and goods replaced at ₹ 1,46,60,484/- which is 2.46%, is reasonable. Keeping in view the past history of the assessee, the ld. A.O. had not brought on record any evidence that the appellant had made sale outside the books. Even, no evidence during the course of search were found, which was relevant to A.Y. 2005-06. The Settlement Commission also accepted the assessee’s disclosure of further any additional disclosure on this issue Addition on account of non-genuine payment to M/s. Saffroys - Held that:- As the appellant had filed confirmation before the A.O. with signature and PAN no., if she has any doubt on confirmation, she should have verified this confirmation from her counter part at Kolkata. Ld. A.O. had given sufficient power under the IT Law, which has not been used by her. In absence of any contrary evidence against the appellant, the addition cannot be confirmed. Addition on account of bogus purchases - Held that:- The search was relevant to A.Y. 2005-06, whatever evidences found during the course were relevant to A.Y. 2005-06 not 2006-07. The appellant had furnished the confirmation with PAN no. with full address of the purchase parties. On the basis of past history, no addition can be made without brining out any contrary evidence on record. If the A.O. has any doubt about the genuineness of the purchase, she should have inquire directly form the supplier or made any inquiry as per law. The ld. A.O. had not made out the case on the basis of evidence. The addition was made on the basis of evidence found in past, cannot be sustained Issues:1. Addition of Rs. 28,85,739 on account of damaged/expired goods.2. Addition of Rs. 20,23,766 on account of non-genuine payment to M/s. Saffroys.3. Addition of Rs. 48,88,550 on account of bogus purchases.Issue 1: Addition of Rs. 28,85,739 on account of damaged/expired goodsThe appellant, engaged in the pharmaceutical business, had debited Rs. 7,94,441 under 'expired goods' in the p&l account. The Assessing Officer (A.O.) found discrepancies in the accounting treatment of goods, contrary to Income Tax Rules, following a search and seizure operation. The A.O. disallowed excess claims on damaged/expired goods exceeding 2% on sales, adding Rs. 28,85,739 to the income. The CIT(A) deleted the addition, citing lack of proper investigation and reliance on statements without corroborating evidence. The CIT(A) emphasized that estimates without seized documents cannot be upheld, especially when books of accounts were not rejected under Section 145. The Tribunal upheld the CIT(A)'s decision, considering the appellant's submissions and lack of evidence against the appellant.Issue 2: Addition of Rs. 20,23,766 on account of non-genuine payment to M/s. SaffroysThe A.O. observed a suspicious payment to M/s. Saffroys during a search operation and added Rs. 20,23,766 as a wrong deduction. The CIT(A) allowed the appeal, noting that the payment was made from a term loan account, with no debit to the profit and loss account during the relevant year. The confirmation from M/s. Saffroys contained PAN and address details, and the A.O. failed to verify its genuineness. The Tribunal confirmed the CIT(A)'s decision, emphasizing the lack of contrary evidence and the appellant's compliance with providing necessary details.Issue 3: Addition of Rs. 48,88,550 on account of bogus purchasesThe A.O. traced bogus purchases during a search, leading to an addition of Rs. 48,88,550 to reduce tax liability. The CIT(A) deleted the addition, highlighting that the seized documents were not relevant to the assessment year and no defects were found in the appellant's books of accounts. The Tribunal upheld the CIT(A)'s decision, noting that additions cannot be made solely based on seized documents unrelated to the assessment year without incriminating evidence. The Tribunal emphasized the importance of verifying claims and lack of evidence against the appellant.In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decisions to delete the additions related to damaged/expired goods, non-genuine payment, and bogus purchases. The Tribunal emphasized the necessity of proper verification, lack of incriminating evidence, and compliance with providing necessary details in reaching its decision.