2012 (11) TMI 421 - AT - Income Tax

Unexplained expenditure u/s. 69C - addition to income - Held that - On the basis of the loose sheets impounded the fact that it represents expenditure is not in doubt. From the sheet it was seen that in the remarks column there were notings which indicate that in certain occasions the amounts were returned/repaid. On the basis of query from the Bench, the assessee agreed to verify the figures and after verification recalculated the figures after considering the amounts repaid/returned to the partners and the net figure of expenses worked out to ₹ 31,46,500/- also checked and confirmed by the Revenue - thus the addition made by the AO be restricted to ₹ 31,46,500/- instead of ₹ 1,32,57,366/- made by AO - partly in favour of assessee. Addition u/s.68 - Held that - The Revenue has not been able to prove that the notings in the loose sheet belong to the assessee & represents the amount received/spent by the assessee. The loose sheet being undated, unsigned, without the name nature of transaction thus cannot be considered for the basis of making addition. In view of these facts, we are of the view that no addition can be made on the basis of loose sheets - There is no evidence found by the Revenue in the form of extra cash, jewellery or investment outside the books - in favour of assessee. Unaccounted loan - Held that - the assessee has obtained aggregate loan of ₹ 5,70,000/- from six parties. The assessee had submitted the copies of confirmation of account of the lenders, copy of their pass book, copy of acknowledgement of Income tax returns in case of Income tax payers, copy of 7/12 utara, copy of PAN card etc. before the A.O. and has thus discharged the initial onus cast u/s. 68. The Revenue has not placed on record any material to controvert the submissions made by the assessee - the assessee is not required to prove the source from which the lenders have acquired the money deposited with the assessee - in favour of assessee. Non deduction of TDS - Addition u/s. 40(a)(ia) - Held that - As decided in Merilyn Shipping & Transports Versus ACIT, Range-1, Visakhapatnam the provisions of section 40(a)(ia) are applicable only to the amounts of expenditure which are payable as on the date 31st March of every year and it cannot be invoked to disallow which had been actually paid during the previous year, without deduction of TDS - issue remitted back for verification - in favour of assessee for statistical purposes. Interest u/s 234A - Held that - The assessment order reveals that the assessee filed its return of income on 28-12-2006. The due date of filing of return in the case of assessee was 31-10-2006. CBDT vide order issued u/s.119 dated 13-10-2006 extended the date of filing of return for the assessees in the state of Gujarat to 31st December, 2006. Since the assessee had filed the return of income on 28-12-2006 which is within the extended due date of filing of return, we are of the view that assessee is not liable to pay interest u/s. 234A - in favour of assessee.

Summary

Issues Involved:
1. Addition of Rs. 1,32,57,366/- as unexplained expenditure under Section 69C.
2. Addition of Rs. 25,20,000/- under Section 68.
3. Addition of Rs. 5,70,000/- as unexplained credit under Section 68.
4. Addition of Rs. 11,70,762/- under Section 40(a)(ia) for non-deduction of TDS.
5. Charging of interest under Section 234A.

Issue-wise Detailed Analysis:

1. Addition of Rs. 1,32,57,366/- as unexplained expenditure under Section 69C:
The assessee, a firm engaged in civil construction, had a survey conducted on its premises where incriminating documents were found. The Assessing Officer (A.O.) treated Rs. 1,32,57,366/- as unexplained expenditure based on loose papers impounded during the survey. The assessee contended that these papers were unsigned and did not belong to the firm. The CIT (A) upheld the addition, reasoning that the documents mentioned the names of partners and detailed expenses, implying it was business-related. However, upon appeal, the Tribunal found that after verification, the net figure of expenses was Rs. 31,46,500/- instead of Rs. 1,32,57,366/-. Consequently, the Tribunal directed the addition to be restricted to Rs. 31,46,500/-.

2. Addition of Rs. 25,20,000/- under Section 68:
The A.O. added Rs. 34,20,000/- as unexplained credit based on notings found on the stationery of the assessee during the survey. The CIT (A) corrected the figure to Rs. 25,20,000/- and upheld the addition but telescoped it against the addition under Section 69C. The assessee argued that the notings did not pertain to the firm and were rough workings of the accountant. The Tribunal, referencing various judicial precedents, concluded that the loose sheets were undated, unsigned, and lacked clear evidence of transactions. Therefore, the Tribunal directed the deletion of the addition.

3. Addition of Rs. 5,70,000/- as unexplained credit under Section 68:
The A.O. observed that the assessee received unsecured loans aggregating Rs. 5,70,000/- from six persons, who had deposited cash in their bank accounts shortly before issuing cheques to the assessee. The CIT (A) upheld the addition, stating the assessee failed to prove the identity, creditworthiness, and genuineness of the transactions. The Tribunal, however, found that the assessee had provided sufficient documentation (confirmation of accounts, bank statements, PAN cards) to discharge the initial onus under Section 68. Citing judicial precedents, the Tribunal held that the assessee need not prove the source of the lenders' deposits and directed the deletion of the addition.

4. Addition of Rs. 11,70,762/- under Section 40(a)(ia) for non-deduction of TDS:
The A.O. disallowed Rs. 11,70,762/- under Section 40(a)(ia) for non-deduction of TDS on payments made to various parties. The CIT (A) confirmed this disallowance. The assessee argued that all payments were made before the year-end, and no amount was payable at the end of the year, referencing the Special Bench decision in the case of Merilyn Shipping & Transporters. The Tribunal remitted the matter back to the A.O. for verification, directing that the deduction be allowed if the payments were indeed made during the year and not outstanding as of the balance sheet date.

5. Charging of interest under Section 234A:
The assessee filed its return of income on 28-12-2006, within the extended due date of 31-12-2006 as per the CBDT order for Gujarat. The Tribunal held that the assessee was not liable to pay interest under Section 234A and directed the A.O. to delete the interest charged.

Conclusion:
The Tribunal partly allowed the assessee's appeal, providing relief on several grounds by reducing the additions and directing further verification for others. The judgment emphasizes the importance of proper documentation and the need for clear evidence in tax assessments.