2012 (7) TMI 649 - AT - Income Tax

Restricting trading addition to Rs. 997 - applying the G.P. rate @ 2.3% - Held that - No justification for applying GP rate of 2.3 % in this case in the absence of any specific defects in the books of accounts. The only difference is of Rs. 998 and therefore trading addition of Rs. 997/- is justified, but the remaining addition by applying GP rate of 2.3% is not justified - partly in favour of assessee. Addition on account of interest income - Held that - Addition without proper examination of the facts by AO as intimated by appellant the sum of Rs. 7,72,314/- is the net figure of interest paid and received from various parties and includes interest received from Indusind Bank & ITC Ltd. Complete details of interest account are available in the ledger of appellant which has not been considered by A.O -direction to delete the addition - in favour of assessee. Addition on account of commission received from IDEA Telecommunication Ltd. and IDEA Cellular - Held that - As the commission or brokerage received by assessee from Idea Cellular has already been shown - on examination of necessary evidences by Ld. CIT (A) it was found that the AO has made the addition without applying mind or without understanding accounting system followed by assessee consistently - in favour of assessee. Addition on account of bogus unsecured creditors - Held that - CIT (A) has ascertained the factual aspects that due to clerical error, postings were made in the wrong name. However, they were rectified. Only thereafter the additions were deleted by Ld. CIT (A) - in favour of assessee. Addition on account of winning from Lottery - Held that - As AO himself had made enquiry u/s 133(6)from ITC Ltd. regarding this payment and the company confirmed payment of performance incentive to the assessee as well as to other parties of Rajasthan on the basis of turnover achieved by them. Therefore, CIT (A) found that there is no winning from lottery or from puzzle as this is a regular income which has already been accounted for by the assessee in its accounts book - in favour of assessee. Addition on account of income of M/s. Aman Enterprises - Held that - This addition has been made by A.O. without properly verifying the facts as per ledger account of appellant, total interest of Rs. 37,89,273 is paid. This amount is inclusive of sum of Rs. 11,80,780/- paid to M/s Aman Enterprises. Therefore observation of A.O. that appellant paid interest to this party without recording the same in his books of accounts is factually incorrect - - in favour of assessee.

Issues Involved:

1. Restriction of trading addition.
2. Deletion of addition on account of interest income.
3. Deletion of addition on account of commission received.
4. Deletion of addition on account of bogus unsecured creditors.
5. Deletion of addition on account of winnings from lottery.
6. Deletion of addition on account of income of M/s. Aman Enterprises.

Detailed Analysis:

1. Restriction of Trading Addition:

The department appealed against the restriction of trading addition from Rs. 1,81,515/- to Rs. 997/-. The Assessing Officer (A.O.) observed discrepancies in the assessee's accounts, including a lower Gross Profit (GP) rate compared to the previous year and unverifiable closing stock valuation. The A.O. applied a GP rate of 2.3% on the declared turnover, resulting in an arithmetical mistake in the assessment order. The Ld. CIT (A) found that the only unexplained discrepancy was Rs. 997/- and restricted the trading addition accordingly. The tribunal found no infirmity in the Ld. CIT (A)'s decision and confirmed the order.

2. Deletion of Addition on Account of Interest Income:

The A.O. added Rs. 50,208/- for interest income not included by the assessee. The Ld. CIT (A) found that the assessee had shown the net interest after deducting paid interest, supported by evidence. The tribunal confirmed the Ld. CIT (A)'s finding that the A.O. made the addition without proper examination of facts.

3. Deletion of Addition on Account of Commission Received:

The A.O. added Rs. 22,88,921/- for commission/brokerage not reflected in the books. The Ld. CIT (A) found that the assessee had already included the commission income, and the A.O.'s addition would result in double counting. The tribunal confirmed the Ld. CIT (A)'s decision, noting that the A.O. did not understand the accounting system followed by the assessee.

4. Deletion of Addition on Account of Bogus Unsecured Creditors:

The A.O. added Rs. 1,27,179/- for unsecured creditors deemed bogus after an enquiry. The Ld. CIT (A) found that the addition was due to clerical mistakes in postings, which were explained but not verified by the A.O. The tribunal confirmed the Ld. CIT (A)'s decision, noting that the findings were factual and uncontroverted.

5. Deletion of Addition on Account of Winnings from Lottery:

The A.O. added Rs. 7,50,000/- for winnings from a lottery, as per Form 16A issued by ITC Ltd. The Ld. CIT (A) found that the amount was a performance incentive related to business, not lottery winnings, and was already accounted for in the books. The tribunal confirmed the Ld. CIT (A)'s decision, noting that the findings were factual and uncontroverted.

6. Deletion of Addition on Account of Income of M/s. Aman Enterprises:

The A.O. added Rs. 11,80,780/- for interest payments to M/s. Aman Enterprises not reflected in the books. The Ld. CIT (A) found that the payments were included in the total interest paid and recorded in the books. The tribunal confirmed the Ld. CIT (A)'s decision, noting that the findings were factual and uncontroverted.

Conclusion:

The tribunal dismissed the department's appeal, confirming the Ld. CIT (A)'s orders on all issues. The findings were based on factual examinations and remained uncontroverted by the department.

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