2012 (9) TMI 799 - AT - Income Tax

ITAT allows appeals for re-examination under Rule 46A, grants compliance opportunity

The ITAT allowed both appeals for statistical purposes, directing the AO to re-examine the issues raised and ensuring compliance with Rule 46A. The ... Addition on unaccounted purchase - Held that:- As it appears that the assessee has not disclosed these three items i.e. Fiberisor-25 units, Electric Spares-3 units and Nut Bolts-2 units in the closing stock and the CIT(A) has also confirmed this addition after giving detailed reasonings in his order. The appellant also furnished the inventory of closing stock for A.Y. 07-08 to 09-10. The appellant requested to set aside this issue to the CIT(A)is not acceptable as the issue is related to the closing stock and it requires verification by the A.O. Therefore, this order is set aside to the A.O. for de novo. The A.O. is also directed to give reasonable opportunity to the appellant - in favour of assessee for statistical purpose. Relief of undisclosed income on the basis of fabricated evidences and overlooking the fact that entertaining fresh evidences is in contravention of rule 46A - Held that:- As grounds of revenue appeal revolve around Rule 46A & as the assessee’s appeal as discussed above, has been set aside to the A.O. Therefore, Revenue’s grievance automatically has been redressed - Revenue’s appeal is allowed for statistical purpose. Issues:1. Addition of unaccounted purchase made outside the books of accounts.2. Allowance of undisclosed income based on fabricated evidences.3. Deletion of addition on account of income from other sources.4. Deletion of addition due to unshown investment in the Balance Sheet.Analysis:Issue 1: Addition of unaccounted purchase made outside the books of accounts- The assessee's appeal challenged the addition of Rs.7,27,542 on account of unaccounted purchase outside the books of accounts for the assessment year 2008-09. The AO found discrepancies in the closing stock valuation. The CIT(A) upheld the addition, stating that the assessee failed to maintain day-to-day quantitative records and did not include the value of certain items in the closing stock. The CIT(A) directed an increase in opening and closing stock for the subsequent year unless the items were sold during that year. The ITAT set aside the order to the AO for verification, granting the appellant an opportunity to comply with queries.Issue 2: Allowance of undisclosed income based on fabricated evidences- The Revenue's appeal raised concerns regarding the allowance of undisclosed income of Rs.2,33,707 based on fabricated evidences. The CIT(A) was criticized for entertaining fresh evidence in contravention of Rule 46A. However, since the assessee's appeal was set aside for re-examination by the AO, the Revenue's grievance was considered addressed, allowing the AO to examine additional evidence submitted during the reassessment.Issue 3: Deletion of addition on account of income from other sources- The Revenue's appeal also contested the deletion of an addition of Rs.1,53,622 on account of income from other sources. The CIT(A) was accused of overlooking inconsistencies between the working submitted and the audit report. The Revenue argued that entertaining fresh evidence violated Rule 46A. However, since the assessee's appeal was remanded to the AO, the Revenue's appeal was allowed for statistical purposes.Issue 4: Deletion of addition due to unshown investment in the Balance Sheet- The final issue involved the deletion of an addition of Rs.10,00,000 due to unshown investment in the Balance Sheet. The Revenue contended that the investment was not reflected in the Balance Sheet. The CIT(A) decision to delete the addition was challenged on the grounds of violating Rule 46A. However, since the assessee's appeal was set aside for reassessment, the Revenue's appeal was allowed for statistical purposes.In conclusion, both appeals were allowed for statistical purposes, with the ITAT directing the AO to re-examine the issues raised in the appeals, ensuring compliance with Rule 46A and providing opportunities for the parties to present necessary evidence.