2016 (5) TMI 1275 - AT - Income Tax

Addition made u/s. 68 - Held that - The assessee has purchased goods worth ₹ 24.23 lakhs from M/s Ascent enterprises and has made a payment of ₹ 12.24 lakhs leaving a balance of ₹ 11.99 lakhs as the amount due to M/s Ascent Enterprises. This outstanding balance alone has been assessed as unexplained credit by the AO and the same has been confirmed by the Ld CIT(A). The reasoning given by the Ld CIT(A) to confirm this addition is that the name of M/s Ascent Enterprises finds place in the list of Hawala traders. The ingredients for making addition u/s 68 are different from the ingredient for making addition towards bogus purchases. However, the addition made u/s 68 is liable to deleted, since part of the transactions have been accepted by the AO. The addition towards bogus purchases cannot also be sustained, since parts of the purchases have been accepted and further no enquiry has been conducted to prove the bogus nature of purchases. Accordingly, we set aside the order of Ld CIT(A) and direct the AO to delete this addition. - Decided in favour of assessee Addition made u/s 40(a)(ia) - retrospectivity - Held that - We set aside the order passed by Ld CIT(A) on this issue and restore the same to the file of the AO with the direction to examine the same afresh in the light of decision in the case of CIT Vs. Ansal Land Mark Township P Ltd 2015 (9) TMI 79 - DELHI HIGH COURT and the newly inserted proviso to sec. 40(a)(ia) and take appropriate decision in accordance with the law. - Decided in favour of assessee for statistical purposes.

Summary

Issues involved:
1. Addition made under section 68 of the Income Tax Act.
2. Addition made under section 40(a)(ia) of the Income Tax Act.

Analysis:

Issue 1: Addition made under section 68 of the Income Tax Act
The appeal concerned the addition made under section 68 of the Income Tax Act. The Assessing Officer had added the outstanding balance in the names of certain creditors as income of the assessee under section 68. The CIT(A) partially confirmed the addition. The assessee contended that purchases were made from the creditors, and the authorities accepted part of the purchases without supporting material. The Tribunal noted that the assessing officer added only part of the purchases from one creditor, while accepting the balance. The Tribunal held that since part of the transactions was accepted by the assessing officer, the addition under section 68 was not sustainable. It was also noted that no further inquiry was conducted to prove the purchases as bogus. Therefore, the Tribunal directed the assessing officer to delete the addition made under section 68.

Issue 2: Addition made under section 40(a)(ia) of the Income Tax Act
The next issue involved the addition made under section 40(a)(ia) of the Income Tax Act. The assessee argued that the proviso inserted in section 40(a)(ia) by the Finance Act, 2012, is retrospective. Citing a decision of the Delhi High Court, the assessee submitted that this addition required fresh examination in light of the newly inserted provision. The Tribunal agreed with this submission and set aside the CIT(A)'s order on this issue. The matter was restored to the assessing officer for a fresh examination in accordance with the law and the Delhi High Court decision. Consequently, the appeal filed by the assessee was treated as allowed for statistical purposes.

In conclusion, the Tribunal ruled in favor of the assessee on both issues, directing the assessing officer to delete the addition made under section 68 and to reexamine the addition made under section 40(a)(ia) based on the retrospective nature of the proviso.