Tribunal orders fresh consideration of Rs. 20,00,000 addition, directions on stock verification

The Tribunal restored the issue of the Rs. 20,00,000 addition back to the AO for fresh consideration, allowing the assessee an opportunity to present evidence. The appeal was partially allowed for statistical purposes, with directions for the AO to verify the opening stock for A.Y. 2011-12 based on the revised closing stock for A.Y. 2010-11.

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Issues Involved:
1. Disallowance of Rs. 20,00,000 from current year's purchases as non-genuine and unexplained expenditure.
2. Re-computation of work-in-progress (WIP) for the financial years under consideration.
3. Verification of the opening stock for A.Y. 2011-12 based on the closing stock of A.Y. 2010-11.

Issue-wise Detailed Analysis:

1. Disallowance of Rs. 20,00,000 from Current Year's Purchases:
The assessee challenged the disallowance made by the Assessing Officer (AO) of Rs. 20,00,000 from the current year's purchases, which was upheld by the Commissioner of Income Tax (Appeals) [CIT(A)]. The AO found that the purchases from Karma Ispat Limited were non-genuine and unexplained. The assessee provided purchase invoices and delivery challans but failed to produce Lorry Receipts or Goods Receipt Notes (GRN). The CIT(A) confirmed the disallowance, citing the assessee's inability to prove the actual purchases and relying on judgments from the Hon'ble Punjab & Haryana High Court and the Hon'ble Supreme Court.

2. Re-computation of Work-in-Progress (WIP):
The AO re-computed the WIP by deducting the amount of bogus purchases from Karma Ispat Limited. For A.Y. 2010-11, the AO reduced the opening WIP by Rs. 96,88,752 and the closing WIP by Rs. 20,00,000, resulting in a revised WIP of Rs. 25,94,60,286. The CIT(A) partially disagreed with the AO, stating that the opening WIP for A.Y. 2010-11 could not be re-computed as it had already been accounted for in the previous year. The CIT(A) allowed the assessee's appeal concerning the Rs. 96,88,752 but upheld the Rs. 20,00,000 disallowance.

3. Verification of Opening Stock for A.Y. 2011-12:
The Tribunal noted that the addition of Rs. 20,00,000 in A.Y. 2010-11 would affect the closing stock, which is the opening stock for A.Y. 2011-12. The Tribunal directed the AO to verify the opening stock for A.Y. 2011-12 and pass an order afresh as per law, considering the consequential nature of the addition.

Conclusion:
The Tribunal restored the issue of the Rs. 20,00,000 addition back to the AO for fresh consideration, giving the assessee an opportunity to present evidence. The appeal was allowed in part for statistical purposes, and the AO was directed to verify the opening stock for A.Y. 2011-12 based on the revised closing stock for A.Y. 2010-11. The order was pronounced in the open court on 25/09/2017.

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