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Income Tax Appellate Tribunal, “B” BENCH, CHENNAI
Before: HON’BLE SHRI MAHAVIR SINGH, VP & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
आयकरअपीलीयअिधकरण ‘बी’ �ायपीठ चे�ई म�। IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, CHENNAI माननीय �ी महावीर िसंह, उपा�� एवं माननीय �ी मनोज कुमार अ�वाल ,लेखा सद� के सम�। BEFORE HON’BLE SHRI MAHAVIR SINGH, VP AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
आयकरअपीलसं./ITA No.3033/Chny/2016 (िनधा�रणवष� / Assessment Year: 2012-13) Ravilla Aerospace Industries Pvt. Ltd. Income Tax Officer बनाम/ 48, Aerodrome Road Corporate Ward-3 Vs. Singanallur, Comibatore-641 005 Coimbatore �थायीलेखासं./जीआइआरसं./PAN/GIR No. AABCV-8485-C (अपीलाथ�/Appellant) : (��थ� / Respondent) अपीलाथ�कीओरसे/ Appellant by : Shri. N. Arjunraj (CA)- Ld. AR ��थ�कीओरसे/Respondent by : Shri P.Sajit Kumar (Lt. CIT) – Ld. DR सुनवाईकीतारीख/ : 20-01-2022 Date of Hearing घोषणाकीतारीख / : 24-01-2022 Date of Pronouncement आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2012- 13arises out of order of learned Commissioner of Income Tax (Appeals)- Coimbatore [CIT(A)] passed on 21.07.2016 in the matter of assessment framed by learned Assessing Officer (AO) u/s 143(3) on 27.03.2015. The assessee has filed concise grounds of appeal which read as under: - 1. The CIT (Appeals) erred in sustaining the addition of Rs.1,05,54,155/- as unexplained expenditure u/s 69C of the Act without assigning proper reasons and justification and further ought to have appreciated that the provisions of Section 69C of the Act had no application to the factual matrix of the case.
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The CIT (Appeals) failed to appreciate that the computation of the unexplained purchases on various facets was wrong, erroneous, unjustified, incorrect, invalid and not sustainable both on facts bad in law. 3. The CIT (Appeals) erred in sustaining the disallowance of Rs.13,19,853/- by invoking the provision of Section 40(a)(ia) of the Act without assigning proper reasons and justification and ought to have appreciated that the applicability of second proviso was not examined in granting an opportunity to the appellant to establish the fulfilment of the conditions therein. 4. The CIT (Appeals) failed to appreciate that the contentions and arguments put forth by the appellant were not considered while passing the impugned order. As evident the assessee is aggrieved by addition of Rs.105.54 Lacs u/s 69C and also aggrieved by another addition of Rs.13.19 Lacs u/s 40(a)(ia) for want of tax deduction at source (TDS). 2. We have heard the rival submissions and perused orders of lower authorities. Our adjudication to the subject matter of appeal would be as given in succeeding paragraphs. 3.1 The assessee being resident corporate assessee is stated to be engaged in manufacturing of precision machineries as per the clients’ specifications and requirements. The assessee received labour charges for the same. The books of accounts maintained in Tally software were impounded u/s 131(1) and difference was found in the accounts vis-à-vis return of income filed by the assessee. There was negative cash balance. The assessee submitted that the software got corrupted and therefore, cash book will not give true picture. Further, previous year’s cash balance was not considered as opening cash balance. 3.2 Regarding material purchased by the assessee, the assessee produced purchase bills for Rs.12.95 Lacs. The closing stock shown in the Balance Sheet was Rs.300 Lacs whereas opening stock was reflected as Rs.211.71 Lacs. The cost of material consumed was shown at Rs.30.20 Lacs. On the basis of this data, Ld. AO concluded that the assessee should have purchased material for Rs.118.49 Lacs as against
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the purchase bills of Rs.12.95 Lacs as produced by the assessee. The same was computed as Opening Stock + Purchases-Closing Stock=Cost of raw material consumed. Further, no amount was shown as payable to sundry creditors. Since there was no evidence for payment of material worth Rs.105.54 Lacs, it was to be presumed that expenditure was made outside the books. Accordingly, the amount of Rs.105.54 Lacs was added to the income of the assessee as unexplained expenditure u/s 69C. 3.3 The assessee was saddled with another addition of Rs.13.19 Lacs, being interest paid to private finance company. The same was made u/s 40(a)(ia) for want of deduction of tax at source. 4. During appellate proceedings, the assessee submitted that the closing stock of Rs.300 Lacs was not genuine and was inflated for bank purposes only. However, rejecting the same, Ld. CIT(A) upheld this addition as well as disallowance made u/s 40(a)(ia). Aggrieved, the assessee is in further appeal before us. 5. Upon perusal of return of income filed in ITR-6, it could be seen that the assessee has reflected year-end closing stock of raw material for Rs.250 Lacs. The Tax Auditor has adopted the quantitative details as per inventory list as certified by the director of the assessee. However, the quantitative details have not been provided anywhere. Further, in the audited Balance Sheet, the closing stock has been reflected as Rs.300 Lacs. On the basis of these facts, it could be seen that the assessee is maintaining stock records in a very casual manner and in fact, proper quantitative details are not being maintained by the assessee. There is clear discrepancy in the financial accounts as well as return of income filed by the assessee. It has casually been stated that the stock was
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inflated for bank purposes only. However, the same stock of Rs.300 Lacs is reflected in the financial statements whereas stock Rs.250 Lacs has been reflected in the return of income. Therefore, the various pleas raised by Ld. AR are not acceptable. The complete onus to reconcile the accounts including stock valuation was on the assessee and the assessee has failed to do so. At the same time, we observe that the assessee’s turnover has not been doubted by Ld. AO. The assessee is unable to explain the purchases of Rs.105.54 Lacs and could not produce any evidence in support of the same. However, all these purchases could not have been termed as income of the assessee since the material purchased by the assessee would have been consumed in the manufacturing process. The manufacturing process would require consumption of raw material. Therefore, it could be presumed that the purchases were made from unknown sources. Under these circumstances, the profit element embedded in unaccounted purchases would have to be brought to tax. Considering the facts of the case as well as the nature of assessee’s business, we estimate the profit element in unaccounted purchases of Rs.1,05,54,155/- @10% which comes to Rs.10,55,415/-. The balance addition stand deleted. The grounds stand partly allowed. 6. So far as the disallowance u/s 40(a)(ia) is concerned, Ld. AR has pleaded that the payee has taken into account the interest income while computing their income and offered the same to tax. Therefore, the benefit of second proviso to Section 40(a)(ia) would be available to the assessee. Concurring with the same, we deem it fit to restore the matter back to the file of Ld. AO so as to provide an opportunity to the assessee to demonstrate the fulfillment of conditions as imposed in second proviso
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to Sec.40(a)(ia). If the assessee succeeds, the disallowance shall stand deleted. This ground stand allowed for statisticalpurposes. 7. The appeal standspartlyallowed in terms of our above order.
Order pronounced on 24th January, 2022.
Sd/- Sd/- (Mahavir Singh) (Manoj Kumar Aggarwal) उपा�� / Vice President लेखासद� / Accountant Member चे�ईChennai; िदनांकDated : 24/01/2022 JPV आदेशकी�ितिलिपअ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ�/Appellant2. ��यथ�/Respondent 3. आयकरआयु� (अपील)/CIT(A) 4. आयकरआयु�/CIT 5. िवभागीय�ितिनिध/DR6. गाड�फाईल/GF