2018 (8) TMI 1419 - AT - Income Tax

Tribunal Upholds Income Tax Addition for Inaccurate Accounting

M/s. Ghosh Trading Versus Income Tax Officer

M/s. Ghosh Trading Versus Income Tax Officer - TMI Issues:1. Correct computation of income based on purchases and sales figures.2. Rejection of trading account submitted by the assessee.3. Inclusion of commission in purchases and its impact on profit calculation.4. Valuation of closing stock.5. Accrual basis for sales and cash basis for purchases.6. Reimbursement of expenditure claimed as commission.7. Appeal against additions confirmed by the CIT(A).Analysis:1. The appeal was filed against the CIT(A)'s order for the A.Y. 2010-11 regarding the assessment completed by the Assessing Officer under section 250 of the Income Tax Act, 1961. The assessee, a distributor of recharge vouchers and SIM cards, disclosed income of &8377; 1,38,763/-, but the AO determined the total income as &8377; 11,66,730/- based on discrepancies in purchases and sales figures.2. The CIT(A) rejected the assessee's trading account due to discrepancies in accounting for purchases from Bharti Airtel Limited. The AO added &8377; 55,414/- as gross profit and &8377; 3,73,845/- as undisclosed commission based on information from Bharti Airtel Ltd. The claim of receiving easy load recharge vouchers as expenditure reimbursement was rejected.3. The assessee raised grounds of appeal related to the rejection of purchase and sale figures, claiming that the closing stock was not revised, and the commission was included in purchases. The DR argued that the commission was part of purchases and no evidence supported the reimbursement claim.4. The Tribunal found that the purchase figures did not reflect actual expenditure due to inclusion of income from Bharti Airtel Ltd. The valuation of closing stock needed revision to exclude commission. The commission accrued at the point of purchase, not sale, and the claim lacked evidence, leading to rejection.5. The Tribunal set aside the issue of suppressed profit for fresh computation by the AO. The assessee failed to prove that the commission was not reimbursement or pertained to an earlier period. Consequently, the appeal was dismissed, upholding the additions confirmed by the CIT(A).6. The judgment highlighted the importance of accurate accounting, proper valuation, and substantiated claims in income tax assessments, emphasizing the need for evidence to support deductions and expenses claimed by taxpayers.