Sec. 251(2) of Income-tax Act, 1961—Appeal ---  The assessee was an individual and engaged in the business of import of chemical adhesive and sales thereof. The assessee filed the return on 1st Oct., 2015. During the course of assessment proceeding, the AO noted that as per ITS details the assessee purchased material which was valued by the Custom Authorities at a higher price for levying custom duty. The AO further noted that the assessee debited purchases on account of import. The AO asked the assessee to reconcile the difference inter alia the difference between the value of imported goods and payments made for purchases. In response, the assessee produced the ledger of import/purchases as well as the evidence regarding the payments for import of goods.The AO did not accept the explanation of the assessee and accordingly made addition. The assessee challenged the action of the AO before the learned CIT(A) and reiterated his contentions that reduction of the purchases on account of defective goods cannot be held as sales out of books. The CIT(A) was not impressed with the contention and explanation of the assessee and the CIT(A) not only confirmed the addition made by the AO but also enhanced the addition on this account by disallowing 30 per  cent expenditure allowed by the AO.
That the enhancement of assessment has to be considered in the context of each issue raised in the appeal before the  CIT(A). Without going into the controversy of the validity of the order, thetribunal find that the assessee has established the facts of defective goods received from the Chinese suppliers then the addition itself would not survive and the same was deleted. Thus the appeal of the assessee was allowed. --- SHANKAR GUPTA vs. ITO[2020] 23 ITCD Online 147 (JP)