Facts of the Case

The Revenue filed appeals challenging the orders of the CIT(A) which had deleted substantial additions made by the Assessing Officer on account of alleged suppression of production in the assessee’s manufacturing business for Assessment Years 2011-12 and 2012-13.

The Assessing Officer had estimated suppressed production and corresponding undisclosed income, resulting in additions of ₹2.75 crore for AY 2011-12 and ₹5.77 crore for AY 2012-13. The assessee contested these additions as arbitrary and unsupported by factual evidence.

Issues Involved

  1. Whether additions for suppressed production can be sustained without concrete evidence of unrecorded manufacturing or sales.
  2. Whether estimation based on assumptions or theoretical calculations is legally valid.
  3. Whether appellate authorities are justified in deleting such additions when unsupported by material evidence.

 Petitioner’s Arguments (Revenue)

The Revenue contended that the CIT(A) erred in deleting the additions and that the Assessing Officer’s findings regarding suppressed production should have been upheld. It argued that the assessment order had properly quantified undisclosed production and income.

 Respondent’s Arguments (Assessee)

The assessee submitted that the additions were purely arbitrary and not based on any reliable data or corroborative evidence. It was argued that the CIT(A) had correctly appreciated the facts, past records, and findings of higher authorities while deleting the additions.

The assessee also emphasized that the issue of alleged suppression had already been examined earlier and could not be repeatedly raised without fresh material.

Court Order / Findings (ITAT Allahabad)

The Tribunal observed that the additions were made on the basis of assumptions regarding suppressed production rather than on concrete evidence of excess manufacturing or undisclosed sales.

It upheld the findings of the CIT(A) that such additions were arbitrary and unsustainable in law. The Tribunal noted that tax authorities must rely on verifiable material rather than conjecture when determining undisclosed income.

Accordingly, the appeals filed by the Revenue were dismissed, and the deletions granted by the CIT(A) were sustained.

 Important Clarification

The Tribunal reaffirmed that allegations of suppressed production must be supported by tangible evidence such as discrepancies in raw material consumption, stock records, or sales data. Mere estimation or suspicion cannot justify additions under the Income Tax Act.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1771062768_ASSTT.COMMISSIONEROFINCOMETAXCENTRALCIRCLEALLAHABADVS.MSKESARWANIZARDABHANDARALLAHABAD2.pdf

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