2017 (2) TMI 545 - AT - Income Tax

Appeal dismissal due to delay, new evidence admitted, issues remanded for verification, and deletions made.

The appeal challenging the revision order under Section 263 was dismissed due to a 637-day delay. Additional evidence on legal and professional fees was ... Admission of additional evidence - remand for verification of facts - treatment of issues shown at nil value as sales - computation of undisclosed purchases on basis of bank stock statements - limitation for filing appealLimitation for filing appeal - Appeal challenging revision order passed under section 263 dismissed as barred by limitation. - HELD THAT: - The assessee's appeal against the revision order passed u/s 263 was filed beyond the prescribed period by 637 days. The only explanation-that the erstwhile tax consultant did not advise filing and a new consultant later recommended appeal-was held to be not convincing. The Tribunal declined to condone the delay and dismissed the appeal in limine. [Paras 3]Appeal in ITA No.1252/Mum/2014 dismissed as barred by limitation.Admission of additional evidence - remand for verification of facts - Whether additional documents relating to legal and professional fees should be admitted and the matter re-examined by the Assessing Officer. - HELD THAT: - The Assessing Officer disallowed legal and professional fees for want of certain details (IT return and financial statements of the payee). Those documents were later placed before the first appellate authority but were not admitted. The Tribunal observed that obtaining such documents from the payee could reasonably take time and, in the interest of natural justice, the additional evidence ought to be admitted. The Tribunal set aside the CIT(A)'s non-admission and directed the AO to examine the issue afresh considering the additional evidence and any further explanations furnished by the assessee, and to take a decision in accordance with law. [Paras 10]Issue remitted to the file of the AO for fresh examination after admitting the additional evidence.Treatment of issues shown at nil value as sales - remand for verification of facts - Whether the quantity of gold (40950.66 gms) shown as 'issued to karigars' at nil value had in fact been included in manufactured items also at nil value and therefore did not constitute unexplained sales. - HELD THAT: - The AO treated the 40950.66 grams shown as issued to karigars (zero value) as unexplained sales and made an addition by quantifying unexplained sale at the figure adopted in the CIT's revision order. The assessee explained that showing issues to karigars as sales at nil value is its normal practice and asserted that the same quantity was received back as manufactured jewellery at nil value. The assessee, however, did not furnish break-up details of manufactured jewellery to substantiate that contention before the AO. The Tribunal held that this factual contention requires verification. It directed the matter to be restored to the AO to verify whether the 40950.66 grams included in sales at nil value were also included in manufactured items at nil value; if established, no addition was to be made, otherwise the AO may act in accordance with law. [Paras 11, 12, 13]Matter remitted to the AO for verification; if the assessee proves inclusion of the quantity in manufactured items at nil value, no addition; otherwise AO to decide as per law.Computation of undisclosed purchases on basis of bank stock statements - Validity of the Assessing Officer's addition treating alleged suppressed purchases of finished goods on the basis of stock statement submitted to the bank. - HELD THAT: - The AO computed undisclosed purchases by applying average values from the stock statement submitted to the bank to the quantities of raw materials and concluded there were suppressed purchases of finished goods. The assessee explained that the bank stock statement was provisional and used average values. The Tribunal found that the AO did not examine the books of account or the quantity details of raw materials and finished goods to identify defects before making his estimate; instead the AO proceeded on surmises and conjectures. The first appellate authority had accordingly deleted the addition, and the Tribunal upheld that deletion as justified. [Paras 14]Deletion of addition for undisclosed purchases upheld; revenue's challenge on this issue rejected.Final Conclusion: The appeal challenging the revision order under section 263 is dismissed as time barred. The Tribunal admitted additional evidence relating to legal and professional fees and remitted that issue to the AO for fresh examination. The question whether 40950.66 grams shown as issued to karigars at nil value were also included in manufactured items at nil value is remitted to the AO for verification; if proved, no addition is to be made. The deletion of the addition for undisclosed purchases is upheld. Overall, the assessee's appeal is allowed in part and the revenue's appeal is partly allowed. Issues Involved:1. Limitation on the appeal filed by the assessee challenging the revision order under Section 263.2. Admission of additional evidence regarding legal and professional fees.3. Addition relating to unaccounted sales of gold.4. Addition relating to unaccounted purchases of finished goods.Detailed Analysis:1. Limitation on the Appeal Filed by the Assessee:The appeal filed by the assessee challenging the revision order passed under Section 263 of the I.T. Act was barred by limitation by 637 days. The assessee attributed the delay to the erstwhile tax consultant's failure to advise on filing the appeal. The Tribunal found this reason unconvincing and declined to condone the delay, resulting in the dismissal of the appeal in ITA No. 1252/Mum/2014 in limine.2. Admission of Additional Evidence Regarding Legal and Professional Fees:The assessee was aggrieved by the learned CIT(A)'s refusal to admit additional evidence related to the disallowance of legal and professional fees amounting to Rs. 20,77,576/-. The Tribunal noted that the Assessing Officer (AO) had disallowed the expenses due to the lack of certain details, which the assessee later provided to the CIT(A). In the interest of natural justice, the Tribunal decided that the additional evidence should be admitted. The issue was remanded to the AO for re-examination with directions to consider the additional evidence and any further information provided by the assessee.3. Addition Relating to Unaccounted Sales of Gold:The AO identified a discrepancy in the quantity details of gold consumption and finished goods, suspecting unaccounted sales of approximately 30,000 grams of gold, valued at Rs. 2,55,87,625/-. The assessee claimed a typographical error in the quantity details of 18-carat stone-studded jewelry. The AO accepted the possibility of a typographical error but was concerned with 40,950.66 grams of gold shown as issued to Karigars at zero value. The Tribunal found that the AO's quantification methodology needed further verification. The issue was remanded to the AO to verify if the 40,950.66 grams of gold issued to Karigars at zero value was included in the manufactured items also at zero value. If the assessee's contention was correct, no addition would be warranted.4. Addition Relating to Unaccounted Purchases of Finished Goods:The AO computed unaccounted purchases of finished goods based on the stock statement furnished to the bank, concluding suppressed purchases of Rs. 65,01,324/-. The assessee argued that the stock statement was provisional and the values shown were average values. The Tribunal noted that the AO did not examine the quantity details of raw materials and finished goods in the assessee's books of accounts. The CIT(A) found the AO's computation to be based on surmises and conjectures and deleted the addition. The Tribunal upheld the CIT(A)'s decision, agreeing that the AO's estimate was unjustified without finding faults in the books of accounts.Conclusion:- The appeal in ITA No. 1252/M/14 was dismissed due to the delay.- The issue regarding legal and professional fees was remanded for re-examination.- The issue of unaccounted sales of gold was remanded for verification.- The deletion of the addition relating to unaccounted purchases was upheld.Order Pronounced:The final order was pronounced in the Court on 8.2.2017, with the appeal of the assessee in ITA No. 3676/M/2014 treated as allowed, and the appeal of the revenue treated as partly allowed.