2017 (11) TMI 176 - AT - Income Tax

Tribunal upholds deletion of stock variation; remits sales suppression issue; validates Section 153A assessments.

The Tribunal partly allowed the revenue's appeal by upholding the deletion of the addition towards the variation in closing stock. The issue of ... Assessments made u/s 153A - seizure of incriminating material from the search - Held that:- The assessing officer made the addition on the basis of invoices seized during the course of search relating to non tax invoices issued without collection of VAT to the dealers of Gold / Bullion. According to the Ld.AR, the invoices raised on sales made to dealers (Tax invoices) were not seized by the department, hence there was a difference. During the appeal hearing, the assessee had submitted all the details of sales made in paper book and the same were placed before the AO at the time of hearing. The assessee has submitted the complete details on the sales made with regard to tax invoices i.e. dealers with address and amount which is enclosed in page no.51 of paper book. From the grounds of appeal and the submissions made before the Ld.CIT(A), it is evident that the assessee has canvassed the case on merits but not on legal grounds. Therefore, we have no hesitation to hold that the Ld.CIT(A) while deciding the appeal has considered the issue both on legal grounds as well as on merits. Hence, we hold that the case need not be remitted back to the file of the Ld.CIT(A). Addition towards valuation in closing stock - unexplained investment - difference in stock with reference to the bill books and invoices - Held that:- The assessee has produced both the bill books before the assessing officer along with books of accounts, but the assessing officer did not find any defect in the books of accounts. As per the invoices, the purchases and sales are tallied and there was no difference. The assessing officer having verified books of accounts with the bill books, no defect was found by the assessing officer. All the purchases and sales are accounted and there was no discrepancy in the stock. There was no dispute with regard to the purchases. The assessee had declared the sales inclusive of 62 bars in sales account and furnished the details with address to the AO. The AO did not make any enquiry with regard to the sales and no difference was found. Therefore we hold that there is no case for making the addition on account of unexplained investment. The assessing officer made the addition as unexplained investment but the assessing officer did not make out a case that the purchases were made from the unaccounted sources. When the purchases were made from the business funds and duly accounted in the books of accounts, there is no case for making addition as unexplained investment. Additions of suppression of sales due to a difference in VAT return and the income tax returns - Held that:- The assessing officer drawn his conclusion based on original VAT return filed by the assessee. The assessing officer did not consider the revised VAT return though it was filed before the AO during the assessment proceedings. Therefore, we remit the matter back to the file of the assessing officer, directing the assessing officer to consider the revised VAT return and decide the issue afresh on merits. Thus ground allowed for statistical purpose. Issues Involved:1. Validity of assessments made under Section 153A based on material found during the search.2. Deletion of addition towards variation in closing stock.3. Deletion of additions of suppression of sales and unexplained investment in purchases due to differences in VAT returns.Issue-wise Detailed Analysis:1. Validity of assessments made under Section 153A based on material found during the search:The revenue argued that the assessments were made based on material found during the search, and the CIT(A) erred in holding that the additions were not based on incriminating material. The revenue contended that the Assessing Officer (AO) has the power to compute taxable income based on the material on record, even if such material was not found during the search. The CIT(A) was criticized for deciding the issue on legal grounds without considering the merits and without providing the AO an opportunity to respond. The Tribunal held that the CIT(A) considered both legal grounds and merits while deciding the appeal, and thus, there was no need to remit the case back to the CIT(A).2. Deletion of addition towards variation in closing stock:The AO observed a discrepancy in the closing stock based on seized sales invoices, which indicated a stock of 52 gold bars that were not declared by the assessee. The AO valued the 52 gold bars at Rs. 84,24,000/- and added this amount as unexplained investment. The CIT(A) deleted this addition, stating it was not based on any incriminating material found during the search. The Tribunal found that the assessee had explained the discrepancy by providing details of sales made to VAT dealers, which were not considered by the AO. The Tribunal noted that the AO did not find any defects in the books of accounts or the sales invoices provided by the assessee. Hence, the Tribunal upheld the CIT(A)'s decision to delete the addition, as there was no evidence of unaccounted purchases or sales.3. Deletion of additions of suppression of sales and unexplained investment in purchases due to differences in VAT returns:The AO made additions for suppression of sales amounting to Rs. 7,31,878/- and unexplained investment in purchases amounting to Rs. 10,84,161/- based on differences between the original VAT returns and the income tax returns. The CIT(A) deleted these additions. The Tribunal found that the AO did not consider the revised VAT returns filed by the assessee, which explained the discrepancies. Therefore, the Tribunal remitted the matter back to the AO to consider the revised VAT returns and decide the issue afresh on merits.Conclusion:The Tribunal partly allowed the revenue's appeal. The deletion of the addition towards variation in closing stock was upheld, while the issue of suppression of sales and unexplained investment in purchases was remitted back to the AO for reconsideration based on the revised VAT returns. The assessments made under Section 153A were deemed valid, and the CIT(A)'s approach of considering both legal and merit grounds was affirmed.