2011 (1) TMI 943 - HC - Income Tax

Addition on account of fall in GP - Held that - AO was not justified in rejecting the books of accounts under Section 145(3) of the Act by estimating the assessee s turnover at Rs.1.20 crore instead of Rs.85,04,823/- as declared by the assessee - Based on this conclusion, the CIT(A) ordered for deletion of addition of Rs.34,95,177/- made by the AO - Decided in favour of assessee. Unexplained unsecured loans - Held that - As the assessee has furnished sufficient documents to prove not only the identity of the loan creditors but also the creditworthiness and genuineness of these transactions. The source is also explained by the Assessee in the hands of the loan creditors because loans are given by these persons to the assessee out of refund received by those loan creditors from one Shri Satish Jindal - Decided in favour of assesse. Unexplained sundry creditors - the assessee failed to furnish the confirmation from the creditor, i.e., M/s.Carborundrum Universal Ltd. before the AO however, relevant record in this regard was produced by the assessee before the CIT(A) - Held that - From the orders of the CIT(A) and that of ITAT, it transpires, as a matter of fact, that the assessee had given a credit of this amount in the books on account of purchase of goods from M/s.Carborundrum Universal Ltd., but the goods were in transit and hence the same was not debited in the P&L Account by the assessee - The CIT(A) was satisfied with the record produced by the assessee in this regard including that of accounts of M/s.Carborundrum Universal Ltd., stock in transit account, copies of bills and evidence of payments of Rs.1,55,203/- in the subsequent year and also confirmation certification from M/s.Carborundrum Universal Ltd - Decided in favour of assessee.

Summary

Issues:
1. Appeal under Section 260 A(1) of the Income Tax Act against ITAT order.
2. Addition of income on various accounts by AO.
3. Rejection of books of accounts under Section 145(3) of the Act.
4. Addition of unexplained unsecured loans.
5. Addition under Section 69 of the Act.

Analysis:
1. The case involved an appeal under Section 260 A(1) of the Income Tax Act against the ITAT order. The respondent, engaged in manufacturing, had offered income for taxation after a survey under Section 133A. The AO made additions on various accounts, which were challenged before the CIT(A) and then the ITAT. The CIT(A) allowed the appeal, leading to the Department's appeal before the ITAT.

2. The additions made by the AO included fall in GP, unexplained unsecured loans, and unexplained sundry creditors. The CIT(A) considered the objections raised by the AO and the reply by the assessee, ultimately concluding that the AO was not justified in rejecting the books of accounts under Section 145(3) of the Act. The CIT(A) ordered the deletion of the addition made by the AO.

3. Regarding the addition of unexplained unsecured loans, the AO made additions under Section 68 of the Act. The CIT(A) disagreed with the AO's findings, emphasizing that the assessee had provided relevant details to establish the identity, creditworthiness, and genuineness of the transactions, and had explained the source of the loans. The ITAT upheld the CIT(A)'s decision, stating that the judgment cited by the AO was not applicable in this case.

4. The addition under Section 69 of the Act was related to a sum for which the assessee failed to file confirmation initially. However, the relevant records were produced before the CIT(A), showing that the amount was credited in the books for goods in transit. The CIT(A) and the ITAT were satisfied with the evidence provided by the assessee, leading to the deletion of this amount.

5. The judgment concluded that no question of law had arisen in the appeal, and therefore, it was dismissed. The findings on various additions and deletions were considered as pure questions of fact, with both the CIT(A) and the ITAT confirming the decisions made.