2015 (9) TMI 1407 - AT - Income Tax

Addition on account of difference in the balance of one debtor M/s. Sen 1 lakh observing that the payment made by the concerned debtor having not been accounted for by the assessee in its books of account the same might have been spent out of books of accounts or was available with the assessee. He accordingly held that the addition to the extent of 1 lakh was liable to be made under section 69A or 69C of the Act. In my opinion this altogether new basis adopted by the ld. CIT(A) while sustaining the impugned addition was not supported by any evidence and the same being based on mere surmises and conjectures is not tenable. Therefore delete the addition made by the AO on this issue and sustained by the ld. CIT(A) - Decided in favour of assessee

Summary

Issues:
1. Addition of Rs. 1 lakh made by the AO and sustained by the CIT(A) on account of difference in the balance of one debtor, M/s. Sen & Associates.

Detailed Analysis:
The appeal was filed against the order of the Commissioner of Income-Tax (Appeals) for the assessment year 2010-11 regarding the addition of Rs. 1 lakh due to a difference in the balance of a debtor, M/s. Sen & Associates. The AO found a discrepancy in the debtor's balance, which the assessee tried to explain but was not accepted. The AO added the difference to the total income, considering it as a bogus balance. The CIT(A) upheld the addition partially, stating that the balance difference of Rs. 1 lakh was liable to be added under section 69A or 69C of the Act. The assessee contended that the balance was a result of sales made to the debtor and any unaccounted payment should not be treated as income to avoid double addition.

The Tribunal heard arguments and reviewed documents. It noted that the balance discrepancy arose from unaccounted payments by the debtor, which were not reflected in the assessee's books. The CIT(A) sustained the addition based on the assumption that the unaccounted amount might have been spent by the assessee outside the books or was available with the assessee. The Tribunal found this basis unsupported by evidence, relying on surmises and conjectures. Consequently, the Tribunal ruled in favor of the assessee, deleting the addition made by the AO and upheld by the CIT(A).

In conclusion, the Tribunal allowed the appeal filed by the assessee, overturning the addition of Rs. 1 lakh based on the unsupported basis adopted by the CIT(A). The Tribunal found the reasoning for sustaining the addition not substantiated by evidence and relying on mere assumptions, leading to the deletion of the disputed amount from the assessee's total income for the relevant assessment year.