2012 (9) TMI 1093 - AT - Income Tax

Addition on account of unaccounted advances - CIT-A allowed the appeal of the assessee by granting benefit of peak credit. From the facts and circumstances of the case, we do not have any reasons to confront the view of the learned CIT(A). Therefore, we are inclined to follow the decision of the learned CIT(A). Addition on account of bad debts u/s 36(1) (vii) - Held that - This issue is covered by the decision of the Hon ble Apex Court in the case of T. R. F. Ltd. Vs CIT 2010 (2) TMI 211 - SUPREME COURT wherein it was held that it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough, if the bad debt written off as irrecoverable in the account of the assessee. Accordingly, we delete the addition Addition on account of payment made to persons specified u/s 40A (2) (b) deleted as relying on assessee s own case 2011 (5) TMI 1049 - ITAT AHMEDABAD Unexplained advances/loans - Held that - Though the entries in the records seized from third party and his confirmatory statement may raise suspicion but cannot prove that it is assessee s income , which seems to be squarely applicable to the facts of this case. Further, the question raised by the learned AR remains to be unanswered that there was no interpretation made by the learned AO for the balance amount of ₹ 2,15,60,000/- advanced out of the total amount of ₹ 2,78,60,000/- decoded as amount advanced, whereas the learned AO treated ₹ 63,00,000/- pertaining to the assessee. Additions deleted Addition on account of interest income on unaccounted loans - Held that - CIT(A) deleted the addition as he held that there was no reason for making the addition of ₹ 63,00,000/- in the hands of the assessee for the alleged advances made through Shri Mihir Shah. Since, we have also concurred with this view of the learned CIT(A) (supra) and this addition of ₹ 1,34,940/- being consequential for the addition made for ₹ 63,00,000/-, we delete the same. Addition on account of unaccounted payments/advances - Held that - This issue pertains to the granting of benefit of peak credit to the assessee for the advances made and advances returned. Both the parties submitted that the this issue is the same as considered for the AY 2006-07 wherein the learned AO did not grant the benefit of peak credit considering that there was no rotation of money involved, however, the learned CIT(A) had allowed the appeal in favour of the assessee. Thus we follow the same and allow the appeal in favour of assessee Addition on account of silver coins purchased - Held that - There is no dispute with respect to the year in which the silver coins were procured i.e. during the year 1995. If these coins were purchased for the purpose of distribution as gift by the assessee and distributed as such during that year, the assessee may have been entitled to claim it as expenditure for that year. If a portion of the same is not distributed, then the same ought to have appeared as asset in the balance sheet of the assessee. Thus, whatever may be the position then, the effect in the profit & loss account might have been correctly or incorrectly presented in that year which does not have any bearing on the year under consideration. Further, there is no dispute that the silver coins were purchased during the year 1995 from the declared source of income. Addition on account of excess physical stock over the stock book - Held that - CIT(A) has considered the issue judiciously. The learned CIT(A) has adjusted the shortage of stock with the excess stock i.e. value of shortage of stock of ₹ 20,03,436/- ( ) value of excess stock of ₹ 7,10,626/- which amounts to ₹ 12,92,810/- and calculated 6% on the same to be income accrued for the discrepancy in stock which works out to ₹ 77,568/-. However, the learned CIT(A) estimated the addition to ₹ 1,00,000/- as against the addition of ₹ 8,30,826/- made by the learned AO. Thus, the learned CIT(A) deleted the addition of ₹ 7,30,826/-. We concur with this view of the learned CIT(A)

Issues Involved:
1. Deletion of addition on account of unaccounted advances.
2. Deletion of addition on account of bad debts.
3. Deletion of addition on account of disallowance of payment made to persons specified u/s 40A(2)(b).
4. Deletion of addition on account of unexplained advances/loans.
5. Deletion of addition on account of interest on unaccounted loans.
6. Deletion of addition on account of unaccounted payments/advances.
7. Deletion of addition on account of silver coins purchased.
8. Deletion of addition on account of excess physical stock over stock book.

Detailed Analysis:

1. Deletion of Addition on Account of Unaccounted Advances:
The Assessing Officer (AO) added Rs. 78,55,000/- as unaccounted advances based on seized documents. The assessee argued that Rs. 29,00,000/- was already disclosed as peak credit. The CIT(A) accepted the assessee's peak credit calculation based on seized documents and deleted the addition, relying on the decision of the Gujarat High Court in Pipush Kumar O. Desai Vs CIT. The ITAT upheld the CIT(A)'s decision, noting that the AO did not provide cogent reasons to reject the peak credit principle.

2. Deletion of Addition on Account of Bad Debts:
The AO disallowed Rs. 32,160/- claimed as bad debts, citing insufficient evidence of debt becoming bad. The CIT(A) deleted the addition, noting that the debts written off were small relative to the sales and were in the nature of business adjustments. The ITAT upheld the CIT(A)'s decision, referencing the Supreme Court's ruling in T.R.F. Ltd. Vs CIT, which states that it is sufficient if the bad debt is written off as irrecoverable in the accounts.

3. Deletion of Addition on Account of Disallowance of Payment Made to Persons Specified u/s 40A(2)(b):
The AO disallowed Rs. 9,34,062/- paid as interest to specified persons at a higher rate than others. The CIT(A) deleted the addition, relying on previous ITAT decisions and the Gujarat High Court's ruling in Kaushik Kotak. The ITAT upheld the CIT(A)'s decision, noting consistency with prior rulings in the assessee's own case for earlier years.

4. Deletion of Addition on Account of Unexplained Advances/Loans:
The AO added Rs. 63,00,000/- based on seized documents from a third party. The CIT(A) deleted the addition, noting that the documents were not found with the assessee and the AO did not cross-examine the concerned persons. The ITAT upheld the CIT(A)'s decision, referencing the principle that entries in third-party records cannot be presumed as the assessee's income without further evidence.

5. Deletion of Addition on Account of Interest on Unaccounted Loans:
The AO added Rs. 1,34,940/- as interest on the unexplained loans. The CIT(A) deleted the addition, linking it to the deletion of the principal amount of Rs. 63,00,000/-. The ITAT upheld this decision, as the primary addition was not sustained.

6. Deletion of Addition on Account of Unaccounted Payments/Advances:
The AO did not grant peak credit benefit, resulting in an addition of Rs. 1,18,92,500/-. The CIT(A) allowed the peak credit claim, and the ITAT upheld this decision, consistent with its ruling for AY 2006-07.

7. Deletion of Addition on Account of Silver Coins Purchased:
The AO added Rs. 6,36,650/- for silver coins found during the search, not shown in closing stock. The CIT(A) deleted the addition, noting the coins were purchased in 1995, outside the assessment period. The ITAT upheld the CIT(A)'s decision, confirming the coins were procured from declared sources in 1995.

8. Deletion of Addition on Account of Excess Physical Stock Over Stock Book:
The AO added Rs. 7,30,826/- for excess stock found during the survey. The CIT(A) adjusted the excess against the shortage and estimated an addition of Rs. 1,00,000/-. The ITAT upheld the CIT(A)'s approach, finding it judicious.

Conclusion:
The ITAT dismissed both appeals by the revenue, upholding the CIT(A)'s decisions on all grounds. The judgment emphasized adherence to established legal principles and thorough examination of evidence.

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