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Income Tax Appellate Tribunal, RAIPUR BENCH “SMC”, RAIPUR
Before: SHRI RAVISH SOOD
आदेश / ORDER
PER RAVISH SOOD, JM:
The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 03.02.2023, which in turn arises from the order passed by the AO under Sec.143(3) of the Income-tax Act, 1961 (in short ‘the Act’) dated 24.02.2021 for the assessment year 2018- 19. The assessee has assailed the impugned order on the following grounds of appeal :
“1. That on the facts and circumstances of the case and in law, the Ld.CIT(A) erred in confirming the addition made by the Ld.AO to the tune of Rs.3,89,888.00 without appreciating the facts of the case and therefore, the impugned addition is liable to be deleted. 2.That the appellant reserves the right to add, alter or modify any grounds of appeal.
2. Controversy involved in the present appeal hinges around the sustainability of the addition of profit made by the AO on the alleged unaccounted sales of raw material/scrap of Rs. 1,39,74,484/- by the assessee company.
3. Succinctly stated, the AO in the course of the assessment proceedings observed that the assessee firm which was engaged in the business of manufacturing and trading of steel had suppressed its sale of raw material/scrap by an amount of Rs.1,39,74,484/-. The assessee company on being confronted with the variance in the sale figures as disclosed in its Form 26AS as in comparison to that disclosed in its return of income, therein came forth with an explanation as regards the same, as under:- “1. Query regarding sale- Particulars Amount as per ITR Amount as per list filed Sales net of duty or tax 10,50,36,486 11,90,10,970 Sales gross of duty or tax 14,03,21,445 In this regard it is submitted that Sale of the assessee is grouped as under- Items Amount Shown in audited financial statement Manufactured items 10,50,36,486 Schedule-M- Item wise sale is shown separately Raw material 1,39,74,484 Schedule -O- It is reduced from raw material consumption. Total Rs. 11,90,10,970 As such there is no difference in total sale amount as per list & above grouping. Relevant part of financial statement are also enclosed highlighting the sale figure reflecting in the schedule "M"&"O". I Taxes such as excise duty/VAT/GST collected in sales is adjusted with taxes (Excised duty/VAAT?GST) paid on purchase as such it is credit in GST input account & the net balance is reflecting in schedule - L of the audited balance sheet.
Query regarding Purchases- Particulars Amount as per ITR Amount as per list filed Purchase net of duty or tax 9,63,93,430 11,03,67,914
Purchase gross of duty or tax 13,03,25,962 Purchases is grouped as under the ITR- Items Amount Shown in audited financial statement Total Purchases 11,03,06,914 Schedule -O Less:Sale of raw 1,39,74,484 Schedule -O- It is reduced from material raw material consumption. Net raw material 9,63,93,430 Shown in ITR purchases As such there is no difference in total purchase amount as per list & above grouping. Relevant part of financial statement are also enclosed highlighting the sale figure reflecting in schedule-“O” Taxes such as excise duty/VAT/GST collected in sales is adjusted with taxes (Excised duty/VAT/GST) paid on purchase as such it is credit in GST input account & the net balance is reflecting in schedule-L of the audited balance sheet.
In form no. 26AS our purchase of scrap is reflecting which is uploaded by our suppliers, as such the amount of Rs.3,63,53,869/- reflecting in 26AS is our purchase of scrap (raw material) & not sales. Further amount of Rs.1,39,74,484/- is not our sale of scrap but it is sale of raw material which is already explained.”
On the basis of the aforesaid reply, it was the claim of the assessee company that the raw material/scrap of Rs.1,39,74,484/- which it had purchased was sold directly without any modification, i.e in the same form as it was purchased. It was submitted by the assessee that instead of separately reflecting the aforesaid sale of raw material/scrap of Rs.1,39,74,484/- it had reduced the said amount from the raw material purchases account. On the basis of its aforesaid explanation the assessee company tried to reconcile the impugned difference in the sales (net of duty/tax) as was pointed out by the AO. However, the AO did not find favour with the aforesaid explanation of the assessee company and held the sale of raw material/scrap of Rs.1,39,74,484/- as its undisclosed turnover. The A.O considering the fact that the assessee company had already claimed expenses against sales applied the disclosed GP rate of 2.79% on the aforesaid unaccounted sales and made the consequential addition of Rs.3,89,888/- (1,39,74,484 x 2.79%) as its net profit from sale of the aforesaid raw material/scrap to its returned income.
Aggrieved, the assessee carried the matter in appeal before the CIT(Appeals) but without success.
The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal.
I have heard the ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record.
As is discernible from the orders of the lower authorities, it is a matter of fact borne from record that the sales (net of duty/tax) of the assessee company as was gathered by the AO from Form 26AS, as against that disclosed in its return of income was higher by an amount of Rs.1,39,74,484/. On a perusal of the record, we find that the assessee had explained the aforesaid discrepancy by claiming that it had reduced the aforesaid amount of sale value of raw material/scrap that was sold without any modification (including the profit element) from the value of its purchases of Rs. 11,03,06,914 and thus, had claimed deduction of purchase of raw material at Rs.9,63,93,430/- [Rs.11,03,67,913.64 (minus) Rs. 1,39,74,484/-]. Ostensibly, the aforesaid explanation of the assessee that was filed before the AO is found to be duly substantiated, as the same also explains the discrepancy in the purchases as had surfaced on a conjoint perusal of Form 26AS as against those disclosed by the assessee in its return of income.
I have given a thoughtful consideration and perused the relevant schedules to which my attention was drawn by the ld.AR in order to fortify his aforesaid explanation, and find the said claim of his in order. In my considered view, as stated by the Ld.AR, and, rightly so, now when the assessee had reduced the sale of raw material/scrap of Rs.1,39,74,484/- from its total purchases [net of duty/tax] of Rs.11,03,67,914/-, then, the said sales could not have been dubbed as unaccounted sales transactions carried out by the assessee company outside its books of accounts. At this stage, I may herein observe that the correctness of the aforesaid explanation of the assessee company can safely be gathered from a conjoint perusal of the equal amount of discrepancy in the amount of sales vis-à-vis the amount of purchases, as disclosed in Form 26AS as against that disclosed by the assessee company in its return of income, as under:
Particulars Amount as per Income- Amount as per list Difference tax Return (i.e excess/deficit as per form 26AS vis-a vis return of income) Sales Rs. 10,50,36,486/- Rs. 11,90,10,970/- (+)Rs. 1,39,74,484/- Purchases Rs. 9,63,93,430/- Rs. 11,03,67,914/- (-)Rs. 1,39,74,484/- I, thus, in terms of my aforesaid observation set-aside the order of the CIT(Appeals) and vacate the addition of Rs.3,89,888/- made by the AO. The Ground of appeal No. 1 is allowed in terms of my aforesaid observations.
The Ground of appeal No.2 being general in nature is dismissed as not pressed.
Resultantly, the appeal of the assessee is allowed.
Order pronounced in open court on 28th day of April, 2023.