2012 (10) TMI 484 - AT - Income Tax

Tribunal remits issues to AO for fresh consideration, directs re-evaluation with proper documentation and opportunity for assessee.

The Tribunal remitted all issues back to the Assessing Officer (AO) for fresh consideration, directing a re-evaluation with proper documentation and ... Low GP ratio - Addition by rejecting books of accounts u/s 145 - Held that:- The addition for low GP has been made primarily on the ground that the proper books of accounts have not been produced by the assessee before the lower authorities whereas assessee submitted that the required books and documents were produced but were not considered, thus in the interest of justice the matter is remitted to the file of AO to consider the case afresh - in favour of assessee for statistical purposes. Disallowance of deduction u/s. 80G - Held that:- Disallowance has been made in the absence of the proper evidence submitted by the assessee. Thus it proper and fit to remit this issue to the file of the AO to consider the same afresh as assessee has now claimed to have proper documentary evidence - in favour of assessee for statistical purposes. Disallowance of expenses - advertisement, business promotion & diwali - Held that:- As the issue discussed on account of low GP has been remitted back to the file of the AO for de novo consideration, hence this issues is also to be remitted back - in favour of assessee for statistical purposes. Issues Involved:1. Addition of Rs. 91,64,692/- by rejecting books of accounts under section 145 of the Act.2. Disallowance of claim of deduction under section 80G of the Act of Rs. 34,864/-.3. Disallowance of various expenses (business promotion, Diwali expenses, advertisement expenses).Detailed Analysis:1. Addition of Rs. 91,64,692/- by rejecting books of accounts under section 145 of the Act:The Assessing Officer (AO) found discrepancies in the Gross Profit (GP) ratio, noting a decrease from 5.86% in the previous year to 4.36%. The assessee attributed this to increased sales volume and reduced margins due to pressure from multinational clients. Despite maintaining a stock register and providing some documentation, the AO was unconvinced and noted the absence of physical books of accounts and documentary evidence for expenditures. Consequently, the AO invoked section 145 of the Income Tax Act, 1961, and made an addition of Rs. 91,64,692/- to the income of the assessee.Upon appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, emphasizing that the assessee did not produce the required books of accounts and vouchers during the assessment or remand proceedings. The CIT(A) concluded that the AO's estimation of GP was justified due to the assessee's failure to substantiate the reasons for the low GP ratio.The Tribunal, after hearing both parties, noted the conflicting claims regarding the production of documents. To ensure justice, the Tribunal remitted the matter back to the AO for fresh consideration, directing the AO to re-evaluate the issue with all necessary documents and provide the assessee with an adequate opportunity to present their case.2. Disallowance of claim of deduction under section 80G of the Act of Rs. 34,864/-:The AO disallowed the deduction under section 80G, noting that the assessee failed to provide supporting evidence for the donation amounting to Rs. 80,558/-. The assessee did not furnish any exemption certificate during the assessment.The CIT(A) upheld this disallowance, noting the absence of documentary evidence both during the assessment and appeal proceedings.The Tribunal, considering the lack of evidence, remitted this issue back to the AO for fresh examination, allowing the assessee another opportunity to submit the necessary documentation.3. Disallowance of various expenses (business promotion, Diwali expenses, advertisement expenses):The AO disallowed expenses totaling Rs. 3,30,961/- (business promotion: Rs. 30,045/-, Diwali expenses: Rs. 2,68,854/-, advertisement expenses: Rs. 32,062/-) due to insufficient explanation and lack of supporting evidence from the assessee regarding the business necessity of these expenditures.The CIT(A) upheld these disallowances, noting that the assessee failed to provide corroborative evidence despite being given multiple opportunities.The Tribunal, aligning with its decision on the GP ratio issue, remitted these disallowances back to the AO for re-evaluation. The AO was directed to reconsider these expenses in light of any new submissions from the assessee, ensuring the assessee is given adequate opportunity to present their case.Conclusion:The Tribunal allowed the appeal for statistical purposes, remitting all issues back to the AO for fresh consideration, directing the AO to re-evaluate each issue de novo with proper documentation and provide the assessee with adequate opportunity to be heard.