2016 (7) TMI 917 - HC - Income Tax

High Court affirms CIT(A)'s profit-centric approach in discrepancies, overturns Tribunal decision on suppressed sales.

M/s. Priyam Trading & Investment Pvt. Ltd. Versus Dy. Commissioner of Income-Tax

The High Court upheld the CIT(A)'s decision in favor of the appellant, emphasizing the importance of considering profits over total sales figures in cases ... Addition on suppression of sales - Held that:- From the evidence on record, it surfaces that two Sales Bill No.77 dated 13.03.1997 for ₹ 6,79,840/- and Bill No.81 dated 20.03.1997 for ₹ 9,33,632/- showing sale of yarn and again two sales Bill No.77 and 81 dated 04.03.1997 for ₹ 4,58,902/- and ₹ 4,59,260/- totalling to ₹ 9,18,162/- were raised showing sale of cotton. In paragraph 9 as referred herein above, the CIT (Appeals) has given cogent and convincing reasons to arrive at the conclusion that only the profit has to be taken into account. In the facts of the case, we answer the question in favour of the assessee Issues:Challenge to judgment of Income Tax Appellate Tribunal regarding addition of suppressed sales.Analysis:1. The appellant, a trading company, filed its income tax return for Assessment Year 1997-98, declaring income. During assessment, discrepancies were found in sales records related to bill discounting with a sister concern. The assessing officer added an amount as suppressed sales due to discrepancies in sales figures between different entities. The CIT(A) deleted the addition, noting genuine business transactions and fund utilization. The Tribunal reversed the CIT(A) decision based on partial receipt of funds and issuance of bills to the sister concern. The appellant challenged this decision.2. The appellant's counsel argued that the Tribunal erred in rejecting the CIT(A) reasoning. The CIT(A) detailed discrepancies in sales records, fund utilization, and bill discounting, emphasizing genuine business activities. The counsel cited a previous case where reduced additions were deemed justifiable based on concurrent findings of fact. The Tribunal's decision was challenged based on the CIT(A)'s detailed analysis and legal precedents.3. The opponent's counsel contended that the Tribunal's decision aligns with Section 69 of the Income Tax Act, considering the discrepancies as suppression of income. However, the High Court analyzed the evidence, including sales bills for yarn and cotton, and upheld the CIT(A)'s decision. The Court emphasized that only profits should be considered in such cases, ruling in favor of the appellant based on the detailed reasoning provided by the CIT(A).4. The High Court, after considering the evidence and arguments, concluded that the CIT(A)'s decision was sound and restored it in favor of the appellant. The Court emphasized the importance of considering profits rather than total sales figures in cases of discrepancies. The detailed analysis by the CIT(A) regarding genuine business transactions and fund utilization played a crucial role in the Court's decision to uphold the CIT(A)'s decision and rule in favor of the appellant.