Purchase reconciliation for credit notes and scheme benefits justified deletion of addition where benefits reduced effective cost.

Difference in purchase figures attributable to input VAT, credit notes and supplier scheme benefits was found to be explained by the reconciliation already placed before the tax authorities. As the disputed amount represented purchase-side benefits such as timely payment schemes and credit notes that reduced the effective purchase cost, the addition sustained on that basis was deleted in favour of the assessee.

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Issues: Whether the addition sustained on account of difference in purchases, to the extent attributable to credit notes and scheme benefits received from suppliers, was justified.

Analysis: The reconciliation showing that the differential between purchase figures arose from input VAT and from credit notes and scheme benefits was already before the Assessing Officer and the appellate authority. The amount in dispute represented purchase-side benefits such as timely payment schemes and credit notes, which went to reduce the effective purchase cost.

Conclusion: The addition sustained to the extent of the credit notes and scheme benefits was held unsustainable and was deleted, in favour of the assessee.

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