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2014 (1) TMI 1624 - AT - Income TaxUndisclosed income for block period - Held that - A.O. made these additions on the basis of statement recorded u/s.132(4) of the IT Act of Shri Mahendra H Shah who admitted in his statement dated 09.12.1999 that he was in business of giving cheque to anyone against receiving cash after deducting his commission. He did not make any purchase of scrap from any ship breakers. He had given only loan entries or issued cheque after receiving cash which has been retracted by Shri Mahendra H Shah before the DDIT Bhavnagar within few days from the date of search. No material has been placed before them indicating that the concern managed by Shri Mahendra H Shah and his associates had issued cheque by way of loan to the tax payer in lieu of cash. The ld. A.O. made addition in suspicion without bringing any material on record to show that assessee had given cash and received back the cheque and had been channelized the unaccounted income through accommodation entry. The assessee had shown these loans in the regular books of account paid the interest on it and deducted TDS accordingly. Therefore we do not hesitate to reverse the order of the CIT(A). - Decided in favour of assessee.
Issues Involved:
1. Addition of Rs. 54,12,680/- as undisclosed income. 2. Consideration of various judgments by different Courts and Tribunals. Detailed Analysis: 1. Addition of Rs. 54,12,680/- as Undisclosed Income: The appellant challenged the addition of Rs. 54,12,680/- as undisclosed income for the block period ended on 7th December 1999. Originally, the assessment was passed under section 158BC read with section 158BD on 11.12.2002, determining the undisclosed income at Rs. 54,19,905/-. Upon appeal, the CIT(A) granted relief of Rs. 7,230/-, reducing the undisclosed income to Rs. 54,12,680/-. The appellant contended that the case facts were similar to Eternal Motors Pvt Ltd Vs ACIT, where the ITAT had remanded the case to the A.O. with directions to provide copies of statements and opportunities for cross-examination. A search under section 132(1) was conducted on 7.12.1999 in the group cases of late Shri Mahendra H. Shah, Hemant Shah, and their associates (Madhupuri Group). Statements revealed that Shri Mahendra H. Shah was involved in issuing accommodative entries against cash receipts. The A.O. added Rs. 52,30,000/- under section 68, finding the entries non-genuine. During reassessment, the A.O. issued notices and provided copies of statements and seized documents to the appellant. However, cross-examination of Shri Mahendra H. Shah was not possible due to his demise, and Shri Hemant Shah's whereabouts were unknown. The A.O. concluded that the appellant failed to prove the creditors' capacity and the genuineness of transactions, thus treating the funds as the appellant's unaccounted funds and adding Rs. 54,19,905/- as undisclosed income. The CIT(A) upheld the A.O.'s decision, stating that the appellant did not substantiate the genuineness of the loans or the creditors' capacity to advance such loans. The CIT(A) noted that the Madhupuri Group's creditors lacked the capacity to advance loans, as admitted by late Shri Mahendra Shah, and confirmed the addition. 2. Consideration of Various Judgments: The appellant argued that the A.O. and CIT(A) did not consider various judgments, including those of the Gujarat High Court and Ahmadabad Tribunal. The appellant cited cases like Eternal Motors Pvt Ltd Vs ACIT, Rajendra Shi Breakers P.Ltd. Vs. ACIT, International Steel Corporation Vs. DCIT, and ACIT, Circle-1, Bhavnagar Vs. Dhan Steels P. Ltd., which dealt with similar issues of accommodation entries and the genuineness of transactions. The appellant contended that the A.O. did not issue summons to the creditors and relied on the statement of Shri Mahendra H. Shah without specific material evidence. The appellant argued that no addition under section 68 could be made in block assessment without incriminating documents found during the search. The Tribunal, after hearing both parties, concluded that the A.O. made additions based on suspicion without concrete evidence. The Tribunal observed that the loans were shown in the regular books, interest was paid, and TDS was deducted. The Tribunal referenced similar cases where additions were deleted due to lack of material evidence and reversed the CIT(A)'s order, allowing the appeal. Conclusion: The Tribunal allowed the appeal, reversing the CIT(A)'s order and deleting the addition of Rs. 54,12,680/- as undisclosed income. The Tribunal emphasized the lack of concrete evidence and the appellant's compliance with regular accounting practices, including interest payment and TDS deduction.
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