Appeal dismissed, under-invoicing upheld, bank interest disallowed.

The Tribunal dismissed the appeal, upholding the rejection of books under section 145, the addition of Rs. 21,93,618 for under-invoicing of sales, and the disallowance of Rs. 5,58,821 out of total bank interest. The Tribunal found the assessee's explanations lacking evidence and validity, supporting the Revenue authorities' decisions.

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Issues Involved:
1. Rejection of books under section 145 of the Income Tax Act.
2. Addition of Rs. 21,93,618/- on account of alleged under-invoicing of sales.
3. Disallowance of interest of Rs. 5,58,821/- out of total bank interest of Rs. 15,23,823/-.

Issue-wise Detailed Analysis:

1. Rejection of Books under Section 145 of the Income Tax Act:
The assessee, a trader in milk powder and milk products, filed a return of income for the Assessment Year 2013-14, which was selected for scrutiny assessment. The Assessing Officer (AO) noticed discrepancies in the sales transactions, particularly with M/s. Jai Durga Bhandar (JDB), where the assessee sold milk powder at a loss of Rs. 38.40 per kg. The AO rejected the books of accounts under section 145, concluding that the accounts did not represent a correct picture. The assessee's explanation of committing to sell at a lower price due to anticipated price fluctuations was not supported by documentary evidence. The Tribunal upheld the rejection of the books, noting that the assessee was incurring losses only in transactions with JDB, indicating under-invoicing.

2. Addition of Rs. 21,93,618/- on Account of Alleged Under-Invoicing of Sales:
The AO added Rs. 21,93,618/- to the assessee's income, considering the difference between the sale price to JDB and the price at which the same product was sold to other parties. The AO calculated this addition based on a margin of Rs. 40.60 per kg for 54,030 kg of milk powder. The CIT(A) and the Tribunal upheld this addition, rejecting the assessee's argument of a business commitment to sell at a lower price. The Tribunal emphasized that the assessee failed to substantiate the claim of commitment with any evidence or valid explanation, and the sales to JDB were not justified.

3. Disallowance of Interest of Rs. 5,58,821/- out of Total Bank Interest of Rs. 15,23,823/-:
The AO disallowed Rs. 5,58,821/- out of the total bank interest, noting that the assessee had diverted borrowed funds to a related party, M/s. Prakash Associates, at a lower interest rate of 2%. The AO and the CIT(A) found that the assessee did not have sufficient interest-free funds to advance to the sister concern and that the explanation provided was not satisfactory. The Tribunal upheld the disallowance, agreeing that the assessee failed to establish a nexus between the interest paid on bank loans and the interest income earned. The Tribunal found no infirmity in the orders of the Revenue authorities on this issue.

Conclusion:
The appeal of the assessee was dismissed, with the Tribunal confirming the rejection of books under section 145, the addition of Rs. 21,93,618/- for under-invoicing of sales, and the disallowance of Rs. 5,58,821/- out of the total bank interest. The Tribunal found that the assessee failed to substantiate its claims with evidence and valid explanations.

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