The Division Bench of Madras High Court presided by Mr. Justice R. Mahadevan and Mr. Justice J. Sathya Narayana Prasad has upheld the addition since, relevant documents to substantiate purchase expenses lost in the flood.
The appellant, M/s. Ankit Ispat Private Limited is engaged in the business of manufacturing mild steel ingots. During the assessment, the assessee failed to furnish details regarding purchase expenses and the AO disallowed 10% on total purchases on an ad-hoc basis and added a sum of Rs.3,55,57,472/- to the total income of the assessee.
On appeal CIT(A) sustained the addition of Rs.1,32,85,764/- under the purchase account, after adopting the gross profit rate at 2.5% on the sales turnover of Rs.53,14,30,550/- and deleted the balance estimated disallowance of Rs.2,22,71,708/-. The Appellate Tribunal affirmed the findings of CIT (A) and hence, the assessee preferred to appeal before the High Court.
The counsel for the appellant submitted that the books of accounts maintained by the appellant for the assessment year in question, were supported by necessary bills and vouchers and the same were audited by an Accountant as required under section 44AB of the Income Tax Act; and as per the report of the auditor, there is no adverse comment on books of accounts as well as supporting evidence for various expenses including purchases debited into profit and loss account. The relevant records for the assessment year in question were washed away in the 2005 flood and hence, the appellant could not gather all the information relating to purchase details.
The High Court observed that the appellant did not furnish the relevant materials to substantiate their claim before the authorities below and they admitted that they were unable to produce the supporting evidence for purchases, since the relevant records about the assessment year in question, were washed away in 2015 flood.
The High court further observed that the appellant filed the auditor’s report, as per which, there was no adverse comment on books of accounts maintained by the appellant and the purchases debited into the P and L account. The opinion of CIT(A) that there was a decline in gross profit declared by the assessee for the assessment year in question compared to the earlier financial year, directed the assessing officer to restrict the disallowance of purchases to the extent of 2.5% of the total turnover.
The Tribunal has held that “there is no substantial question of law arisen for consideration. Accordingly, this tax case appeal stands dismissed against the appellant”.
Mr.N.V.Balaji appeared on behalf appellant and Mr.T.Ravikumar appeared on behalf of the respondent.
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