2016 (8) TMI 1192 - AT - Income Tax

Addition u/s.68 - AO had considered the book results submitted along with return of income filed by the assessee - Held that - We find that ld.CIT(A) while deciding the issue in favour of assessee has given a finding that AO had relied on the incomplete set of accounts by ignoring the audited accounts. He has also noted that assessee had electronically filed its return of income on 31/10/2007 and thereafter order u/s.154 of the Act was passed on 25/06/2009 and survey was conducted on 19/03/2008 and thereafter the case was reopened u/s.147 of the Act which means that assessee had got its accounts audited much before the survey was conducted and while passing the rectification order u/s.154 of the Act AO had considered the book results submitted along with return of income filed by the assessee; meaning thereby that AO had accepted the book results for the same period. He has noted that on one hand AO had considered the negative cash balance from the uncompleted books whereas on the other hand he had picked up the cash payment upto 20/02/2007 from the audited books of account submitted by the assessee during the assessment proceedings which he had himself rejected as being incomplete. He has further given a finding that the additions made by the AO was without any basis. Before us Revenue has not placed any material on record to controvert the findings of the ld.CIT(A). - Decided against revenue

Summary

Issues Involved:
1. Disallowance on account of unexplained expenditure on URD purchases.
2. Deletion of addition on account of unexplained expenditure on labor payment.
3. Addition of unexplained cash credits.
4. Disallowance of cash expenses under section 40A(3).
5. Addition on account of suppressed sales.
6. Disallowance under section 40A(3) for cash payments.
7. Addition on account of unexplained investment.

Issue-wise Detailed Analysis:

1. Disallowance on account of unexplained expenditure on URD purchases:
The Revenue's appeal was dismissed on the grounds of low tax effect, as the tax effect on the impugned additions was less than ?10 lakhs, per the CBDT Circular No. 21 of 2015.

2. Deletion of addition on account of unexplained expenditure on labor payment:
Similar to the first issue, the appeal was dismissed due to the low tax effect, in accordance with the CBDT Circular.

3. Addition of unexplained cash credits:
The AO added ?1,24,88,240 as unexplained cash credit based on an impounded cash book showing negative cash balance. The CIT(A) deleted the addition, noting that the AO relied on incomplete books and ignored the audited accounts. The Tribunal upheld the CIT(A)'s decision, finding no material to contradict the CIT(A)'s findings.

4. Disallowance of cash expenses under section 40A(3):
The AO disallowed ?37,50,000 in cash payments under section 40A(3). The CIT(A) partially upheld the disallowance, directing the AO to disallow only 20% of ?8,00,000 paid to Shri H.Y. Khatri, while deleting the disallowance of ?29,50,000 paid to Shri Balabhai Bachubhai Prajapati. The Tribunal restored the issue to the AO for verification of whether the payments exceeded ?20,000 in a day.

5. Addition on account of suppressed sales:
The AO added ?1,33,83,293 for suppressed sales based on incomplete books. The CIT(A) deleted the addition, noting that the AO summarily rejected the audited accounts without justification. The Tribunal upheld the CIT(A)'s decision, citing the lack of material to contradict the CIT(A)'s findings.

6. Disallowance under section 40A(3) for cash payments:
The AO disallowed ?14,74,954 in cash payments. The CIT(A) deleted the disallowance, finding that the ledger accounts did not show any cash payments. The Tribunal upheld the CIT(A)'s decision, as the Revenue did not provide material to contradict the findings.

7. Addition on account of unexplained investment:
The AO added ?65,00,000 as unexplained investment in the name of Shri Surendrabhai Jiwarajkar. The CIT(A) deleted the addition, noting that the impounded documents indicated the payment was made by Zayba Construction Co., not the assessee. The Tribunal upheld the CIT(A)'s decision.

Summary of Results:
(i) Revenue’s appeal in ITA No.2656/Ahd/11 for AY 2007-08 is dismissed.
(ii) Revenue’s appeal in ITA No.2663/Ahd/11 for AY 2008-09 is dismissed.
(iii) Revenue’s appeal in ITA No.1694/Ahd/12 for AY 2009-10 is dismissed.
(iv) Assessee’s CO No.22/Ahd/12 for AY 2007-08 is allowed for statistical purposes.
(v) Assessee’s CO No.23/Ahd/12 for AY 2008-09 is dismissed.
(vi) Revenue’s appeal in ITA No.2251/Ahd/2011 for AY 2008-09 is dismissed.
(vii) Assessee’s CO No.208/Ahd/2011 for AY 2008-09 is dismissed.