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Income Tax Appellate Tribunal, DELHI BENCH “G” DELHI
Before: SHRI SAKTIJIT DEY & SHRI PRADIP KUMAR KEDIA
PER PRADIP KUMAR KEDIA, A.M.: The captioned appeal has been filed by the Assessee against the order of the Commissioner of Income Tax (Appeals)-XXII, New Delhi (‘CIT(A)’ in short) dated 25.05.2017 arising from the assessment order dated 01.09.2014 passed by the Assessing Officer (AO) under Section 143(3) r.w.s. 147 of the Income Tax Act, 1961 (the Act) concerning AY 2012-13. 2. As per its grounds of appeal
, the assessee has challenged the disallowance of Rs.18,49,549/- by the Assessing Officer alleging the clandestine removal of goods manufactured, i.e., ingots.
3. We have heard the rival submissions. To adjudicate this issue in dispute, few relevant facts are noted as under.
3.1 The assessee-company is engaged in the business of manufacturing and trading of iron and steel bar for the Assessment Year 2012-13 under consideration. The assessee filed its return of income declaring total income pegged at Rs.2,77,39,120/-. A Central Excise Department search was conducted at the premises of M/s. Ramayana Ispat Ltd. (manufacturer of MS/SS Ingots) on 31.07.2012. During the search, the authorities alleged that they have found some loose papers which indicated the clandestine removal of goods to the assessee-company by the supplier M/s. Ramayana Ispat Ltd. The Central Excise Authorities obtained adverse statement from the director of the assessee wherein the director has admitted the receipt of goods without recording the same in the books of account and the director of the company also agreed to deposit the central excise duty on the receipt of goods. The Director however later retracted from the statement on the ground of coercion and duress and also absence of evidence to support the allegation of evasion of excise duty. Notwithstanding the retraction, the assessee however deposited the alleged excise duty with the Excise Department. In the Income Tax assessment proceedings, the Assessing Officer took cognizance of the factual backdrop emerged as noted above and made an addition of Rs.18,49,549/- towards unrecorded alleged purchases. The CIT(A) declined to interfere with the aforesaid finding of the Assessing Officer in the first appeal.
With the assistance of the ld. counsel for the assessee, we observe that; (i) the assessee has shown a turnover in the vicinity of Rs.437.52 crore and thus the amount of alleged evasion is negligible and is plausibly a matter of reconciliation.
(ii) the books of account of the assessee were not rejected by the Income Tax Authorities, (iii) there is no independent material with the Assessing Officer to support the allegation of unaccounted purchases except the information received from Central Excise Department which, in turn, heavily depends upon the retracted statement of the director of the assessee-company. (iv) the assessee contends that no cash payment is involved and the assessee is engaged in transaction with the supplier seamlessly for a long time.
In this backdrop, we observe that the addition itself carries trapping of doubts and somewhat appears to be in the realm of contemplation. Thus, we find merit in the alternative plea propagated on behalf of the assessee that addition, if any, should be restricted to the profit element involved in the transaction rather than additions of whole amount. In the light of the statement of the director of the assessee confessing existence of transaction initially although retracted later, the addition towards profit in the alleged transaction which is stated to be Rs.1,41,737/-, would be just and proper and will balance the totality of the circumstances in right perspective. We thus modify the order of the CIT(A) and restrict the addition to the extent of profit element i.e., Rs.1,41,737/- only.
In the result, the appeal of the assessee is partly allowed. Order pronounced in the open Court on 08/06/2022.