No Addition can made on Account of Income received from sale of Scrap/Waste: ITAT [Read Order]

The Delhi bench of Income Tax Appellate Tribunal (ITAT) has recently held that no addition could be made on account of income received from sale of scrap/Waste .

Assessee New Delhi Export House is a partnership firm stated to be engaged in the business of manufacturing of ladies garments.After filing the return, AO framed assessment order under Section 143(3) of the Income Tax Act, 1961 determining the total income at Rs.5,86,93,270/- and also made addition on income received from sale of scrap /waste.

The AO,  while making addition viewed that,  in the line of business of the assessee the Scrap/Waste cloth generated is huge. Also the sale price of Scrap of Katran which was declared by the assessee was much lower than the market price.

Aggrieved by the order of AO, assessee carried the matter before CIT(A) who upheld the order of AO. Aggrieved by the order of CIT(A), assessee filed a second appeal before the  Tribunal. 

Before the tribunal, S. Sadhu, counsel for the assessee submitted that the AO made the  addition purely on the basis of suspicion, surmises and conjectures.

It was further submitted that the AO had ignored the actual quantity and price at which such Katran was actually sold by the assessee.

S. L. Anuragi, counsel for the revenue supported the order of lower authorities.

It was observed by the tribunal that the basis of working out the alleged sale value of Scrap that assessee ought to have earned is only on the basis of the search conducted by the AO on the internet.

Further, The AO has not brought any material on record to demonstrate that the Scrap Sales found by him on the internet by various other entities was engaged in dealing with similar business as of the assessee.

The two-member bench of  Anil Chaturvedi, Accountant Member and Anubhav Sharma, Judicial Member while considering the contentions of the both parties, observed that,  AO made addition on the basis on the basis of research undertaken on the internet. Thus he had not brought on record any concrete material to demonstrate that the sale of Scrap recorded by the assessee is understated.

Therefore, the bench allowed the appeal filed by the assessee and deleted the addition made by the AO.

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