Tribunal rules in favor of assessee for assessment years 2008-2010, partly allows for 2011.

The Tribunal allowed the assessee's appeals for the assessment years 2008-09, 2009-10, and 2010-11, directing the deletion of the notional addition on account of alleged suppression of income from the sale of wastage. However, for the assessment year 2011-12, the Tribunal partly allowed the appeal, upholding the addition related to the alleged distribution of unaccounted surplus based on the shortage of stock of empty bottles. The order was pronounced on 23rd August 2019.

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Issues Involved:
1. Notional addition on account of alleged suppression of income from the sale of wastage.
2. Addition on account of the alleged distribution of unaccounted surplus computed based on the shortage of stock of empty bottles.

Issue-wise Detailed Analysis:

1. Notional Addition on Alleged Suppression of Income from Sale of Wastage:
The assessee, a public limited company engaged in the spirits, liquor, and power generation business, filed appeals against the CIT(A)'s orders for multiple assessment years, challenging the notional addition of Rs. 36,29,637/- made by the Assessing Officer (AO) on account of alleged suppression of income from the sale of wastage. The AO had enhanced the rate for the sale of cattle fodder by Rs.0.09 per kg based on ex-parte enquiries without sharing the results with the assessee or pointing out defects in the books of account. The AO observed that the assessee sold wastage generated in the form of organic manure at Rs.0.73 per kg but declared an additional amount at Rs. 1.13 per kg in the return filed under section 153A of the Income Tax Act. The AO made an addition based on a difference in the sale value of wastages not credited in the books of accounts. The CIT(A) confirmed the AO’s addition.

During the Tribunal hearing, the assessee argued that the AO's rate adoption was without evidence and not comparable to other cases. The Tribunal found that the AO's rate of Rs. 1.22 per kg was unsupported by concrete proof and that the assessee's rate of Rs. 1.13 per kg was adopted to avoid litigation. The Tribunal concluded that the AO's addition lacked cogent evidence and directed the deletion of the addition, allowing the assessee's appeal for the assessment year 2009-10. The same decision applied to the appeals for assessment years 2008-09 and 2010-11.

2. Addition on Alleged Distribution of Unaccounted Surplus Based on Shortage of Stock of Empty Bottles:
For the assessment year 2011-12, the AO found a shortage of stock of empty bottles during a survey on the bottling plant of M/s N.V. Distilleries & Breweries Ltd., which bottled products for the assessee. The AO made an addition of Rs. 56,21,468/- based on the distributable surplus computed from the shortage of bottles. The CIT(A) upheld this addition, noting that the bottles found short were allegedly sold outside the books of accounts, and the profit was shared between the bottling plant and the assessee.

The assessee argued that the shortage was not related to them but to M/s N.V. Distilleries & Breweries Ltd., with whom they had a bottling agreement. The Tribunal found that the assessee could not satisfactorily explain the shortage and that the business tie-up with M/s N.V. Distilleries & Breweries Ltd. involved interrelated transactions. The Tribunal upheld the CIT(A)'s decision, confirming the addition made by the AO.

Conclusion:
The Tribunal allowed the assessee's appeals for the assessment years 2008-09, 2009-10, and 2010-11, directing the deletion of the notional addition on account of alleged suppression of income from the sale of wastage. For the assessment year 2011-12, the Tribunal partly allowed the appeal, upholding the addition related to the alleged distribution of unaccounted surplus based on the shortage of stock of empty bottles. The order was pronounced on 23rd August 2019.

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