2010 (1) TMI 856 - AT - Income Tax

Unexplained sales - Held that - assessee has disclosed the source from which the money has been received by him, purchaser firm had purchased granite blocks from the assessee, assessee had disclosed source from where the assessee had obtained the loan; and the capacity of the creditor to lend the loan and its source - the AO was not justified in treating the entire loan amount of Rs.7781699/- as unaccounted sales and added the same to the total income of the assessee - Revenue s appeal is dismissed.

Summary

Issues involved:
- Disputed deletion of unexplained sales of granite blocks amounting to Rs.7781699

Detailed Analysis:

Issue 1: Disputed Deletion of Unexplained Sales
The appeal was against the CIT(A)-V, Bangalore's order for the assessment year 2006-07 regarding the deletion of unexplained sales of granite blocks worth Rs.7781699 by the individual assessee, a citizen of China, running a proprietary business named R V Exports. The AO raised concerns about the loan received from Far East Marbles of Thailand (FEM) and its treatment in the balance sheet. The AO alleged the loan as unaccounted sales due to various reasons, including the absence of interest payment, non-inclusion in the balance sheet, and alleged manipulation to reduce tax liability. The CIT(A) disagreed with the AO's conclusions, stating that the loan was genuine, received through banking channels, and utilized in the business. The Revenue challenged the CIT(A)'s decision, citing legal precedents. However, the ITAT, Bangalore, after considering submissions and evidence, found that the loan was genuine, routed through banking channels, and utilized for business purposes. The ITAT disagreed with the AO's treatment, emphasizing the creditor's confirmation, the genuine nature of the transaction, and the absence of evidence against the assessee. The ITAT dismissed the Revenue's appeal, upholding the CIT(A)'s decision.

This detailed analysis provides an in-depth understanding of the legal judgment, highlighting the key issues, arguments presented by both parties, and the final decision rendered by the ITAT, Bangalore.