Income Already Disclosed: ITAT Deletes Unexplained Expenses and Stock Valuation Addition [Read Order]

The Nagpur Bench of the Income Tax Appellate Tribunal (ITAT) deleted unexplained expenses and stock valuation addition made by the Assessing Officer (AO) citing that the income had already been disclosed during search proceedings.

Shrigopal Rameshkumar Sales Pvt. Ltd. (assessee), engaged in the business of running a ginning mill and trading in cotton, filed its return of income declaring Rs. 2,90,56,100. A search and seizure operation under Section 132 of the Income Tax Act, 1961, was conducted leading to the discovery of certain documents reflecting unexplained cash payments and stock.

The AO made the following additions which included unexplained cash payments under Section 69C Rs. 37,47,574 recovery from farmers not recorded in the books Rs. 33,26,574 and Cash received but not recorded Rs. 4,58,000.

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Aggrieved by the AO’s order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) deleted these additions by observing that the assessee had already disclosed an additional income of Rs. 1.25 crore during the search proceedings, out of which Rs. 50 lakh was offered in the computation of income.

Aggrieved by the order the CIT(A), the revenue filed an appeal before ITAT. The two-member bench comprising V. Durga Rao (Judicial Member) and K.M. Roy (Accountant Member) observed that taxing both the source and application of the same income would amount to double taxation.

The Tribunal observed that the AO had failed to account for stock valued at Rs. 1,82,77,000 at Parbhani and had also undervalued trading stock by considering it at Rs. 4,45,80,545 instead of the actual value of Rs. 7,95,04,621.

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The Tribunal observed that the CIT(A) had rightly deleted the additions amounting to Rs. 70,74,148 on the ground that the income had already been disclosed. The tribunal observed that the surrendered income of Rs. 50 lakh during search sufficiently covered the unexplained payments and other additions.

The Tribunal upheld the order of the CIT(A), deleting the additions made by the AO under Section 69C and other heads. The tribunal accepted the assessee’s claim that the income had already been disclosed.

The appeal of the Revenue was dismissed.

To Read the full text of the Order CLICK HERE

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