2015 (7) TMI 289 - AT - Income Tax

Tribunal upholds addition for suppressed profits, interest levy under Sections 234B & 234C

Mr. M.L. Krupal (HUF), Prop. M/s. Associated Coffee Versus The Income Tax Officer, Ward 1, Madikeri

The Tribunal upheld the addition of Rs. 25,64,032 towards suppressed profits and the levy of interest under Sections 234B and 234C. Discrepancies in ... Differences in accounting the purchases and sales in the books of account - Held that:- On an appreciation of the material on record, we find it difficult to accept the contention of the assessee that the audited books of account have to be disregarded and the re-cast accounts are to be accepted. It is the finding emanating from the survey on 9.3.2007, that there were unaccounted purchases and sales made in the period June, 2006 to August, 2006 which has not been controverted by the assessee. Whatever may be the reasons for the unaccounted purchase and sales; the fact that there were such purchases and sales which were not reflected in the audited books of account has been fairly accepted by the assessee. We, therefore, agree with the action of the Assessing Officer in treating the unaccounted purchases and unaccounted sales as being outside the audited books of account. - Decided against assessee. How to assess the income from out of the unaccounted purchases and sales - AO determined the addition at ₹ 25,64,032 as the difference between the unaccounted sales and purchases - CIT (Appeals) had taken the profit element on the unaccounted sales at ₹ 1,69,281 (i.e. at 1% of unaccounted sales of ₹ 1,69,28,140) and considered the balance amount of the difference as unexplained investment and adjusted the same in the closing stock - Held that:- In our view, this approach of the learned CIT (Appeals) cannot be faulted as the assessee itself has adjusted the closing stock in the re-cast accounts. In this view of the matter, we concur with the findings of the learned CIT (Appeals) that the difference between the unaccounted sales and purchases would include an amount of ₹ 1,69,289 towards suppressed profits from the unaccounted transactions and the balance amount represents the undisclosed investment in unaccounted purchases.- Decided against assessee. Issues Involved:1. Addition of Rs. 25,64,032 towards suppressed profits.2. Discrepancies in purchases and sales reported in books of account.3. Condonation of delay in filing the appeal.4. Levy of interest under Sections 234B and 234C.Issue-wise Detailed Analysis:1. Addition of Rs. 25,64,032 towards suppressed profits:The assessee, a HUF trading in coffee seeds, filed a return of income declaring Rs. 1,31,940. A survey under Section 133A of the Income Tax Act, 1961, revealed discrepancies in purchases and sales, leading to an addition of Rs. 25,64,032 as suppressed profits. The assessee contended that discrepancies were due to wrong entries by semi-skilled employees. However, the Assessing Officer rejected this explanation, noting that the books of account showed no commission received from buyers and the entries were written by different persons for two concerns. The CIT (Appeals) confirmed the addition, stating that the actual sales and purchase figures from the impounded documents reflected the true transactions. The Tribunal upheld this view, agreeing that the unaccounted purchases and sales were outside the audited books of account and justified the addition as suppressed profits and unexplained investment in unaccounted purchases.2. Discrepancies in purchases and sales reported in books of account:The Assessing Officer found differences in purchases and sales for July, August, and September 2006, amounting to Rs. 1,43,64,108 and Rs. 1,69,28,140, respectively. The assessee explained these discrepancies as errors by employees and provided re-cast books of account. The CIT (Appeals) and the Tribunal found that the discrepancies were due to unaccounted purchases and sales not reflected in the audited books. The Tribunal noted that the assessee's explanations were inconsistent and unsupported by evidence, and upheld the addition as justified.3. Condonation of delay in filing the appeal:The assessee filed an appeal against the order of the CIT (Appeals) with a delay, explaining that the appellate order was not received until March 10, 2014. The Tribunal, considering the factual reasons and in the interest of justice, condoned the delay and admitted the appeal for adjudication.4. Levy of interest under Sections 234B and 234C:The assessee contested the levy of interest under Sections 234B and 234C. The Tribunal held that the charging of interest is consequential and mandatory, as upheld by the Hon'ble Apex Court in Anjum H Ghaswala (252 ITR 1). The Assessing Officer was directed to recompute the interest chargeable while giving effect to the order.Conclusion:The Tribunal dismissed the assessee's appeal, upholding the addition of Rs. 25,64,032 towards suppressed profits and the levy of interest under Sections 234B and 234C. The discrepancies in purchases and sales were attributed to unaccounted transactions outside the audited books of account, and the delay in filing the appeal was condoned in the interest of justice.