2013 (12) TMI 130 - AT - Income Tax

Accomodation entries Held that - The assessee and his brother are engaged in providing hawala entries to the Naphtha dealers against the cash which was being deposited in the bank account and after deducting their commission income the amount was released to the dealers in the garb of sales - The relevant document were filed before the CIT(A) which show that the assessee s bank account was operated by Shri Naresh Vora the brother of the assessee - The deposit found in the assessee s bank account has been considered in the assessment of assessee s brother Shri Naresh Vora and an addition @ 4% on account of unaccounted commission has been made in the hand of the brother of the assessee - There cannot be a double addition of the same amount when it has already been made in the hand of the assessee s brother - This fact that the deposit of cash in the bank account in the case of the assessee has already been considered for addition on account of commission income in the hand of the assessee s brother Shri Naresh Vora is required to be verified at the level of the Assessing Officer The issue was restored for fresh adjudication. Cash deposits out of sale of chemicals Held that - The CIT(A) has confirmed the addition made by the AO on the ground that no document/material was available on record to support the fact of cash deposits being already included in the aggregate of cash deposits as computed in the hand of Shri Naresh Vora - Neither the AO nor the CIT(A) has given any finding on the issue that out of the total cash deposit in the bank certain amount is regarding the sales made by the assessee during the year on which the net profit has been declared in the return of income The issue was restored for fresh decision. Loan received - Addition u/s 68 Held that - No fresh loan taken by the assessee during the current year under consideration - The CIT(A) has compared the unsecured loan as on 31.3.1993 to 31.3.1995 - The outstanding balance of unsecured loan as on 31.3.1994 has not been taken into account so as to compare with the unsecured loan as on 31.3.1995 in order to find out any increase of unsecured loan during the year It would be justified to verify the amount of fresh loan taken during the year under consideration - The issue was restored for fresh decision.

Summary

Issues Involved:
1. Addition of commission income based on cash deposits.
2. Taxation of loans under Section 68 of the IT Act.
3. Verification of cash deposits related to sales of chemicals.

Detailed Analysis:

1. Addition of Commission Income Based on Cash Deposits:

The primary issue revolves around the addition of commission income based on cash deposits found in the assessee's bank account. The Revenue's appeal for the assessment year 1999-2000 contended that the CIT(A) erroneously held that cash deposits were already considered in the hands of the assessee's brother, Shri Naresh B. Vora, and thus should not be taxed again in the hands of the assessee. The CIT(A) also held that Pooja Industrial Corporation was operated by Shri Naresh B. Vora, and the entries in seized item No.a-15 pertained to the sale of chemicals SBPS, not Naptha.

The assessment was framed under Section 144 of the Income Tax Act due to non-filing of requisite details by the assessee. A survey under Section 133A revealed that the assessee and his brother were involved in providing hawala bills and accommodation entries. The Assessing Officer (AO) added unaccounted commission income at 4% of the total cash deposited, amounting to Rs.10,38,600/-. The CIT(A) deleted this addition, noting that the same entries had already been considered in the assessment of the assessee's brother.

The Tribunal upheld that there cannot be a double addition of the same amount. However, it directed the AO to verify whether the cash deposits in the assessee's bank account were already considered in the assessment of Shri Naresh Vora.

2. Taxation of Loans Under Section 68 of the IT Act:

For the assessment year 1995-96, the assessee contested the addition of Rs.3,29,342/- as undisclosed commission income and the taxation of loans under Section 68. The CIT(A) confirmed the addition, comparing the unsecured loans as on 31.3.1993 and 31.3.1995, but not considering the balance as on 31.3.1994. The Tribunal directed the AO to verify whether any fresh loans were taken during the year under consideration. If no fresh loans were taken, no addition under Section 68 should be made.

3. Verification of Cash Deposits Related to Sales of Chemicals:

For the assessment year 1994-95, the assessee argued that cash deposits included Rs.28,23,927/- from cash sales of chemicals, which were already declared in the return of income. The CIT(A) upheld the addition due to lack of supporting documents. The Tribunal directed the AO to verify whether the cash deposits were indeed from sales and to decide accordingly.

Conclusion:

The Tribunal's judgment emphasized the need for accurate verification of facts to avoid double taxation and ensure fair assessment. It directed the AO to verify the inclusion of cash deposits in the brother's assessment and the origin of loans and sales-related deposits, ensuring justice and adherence to legal principles. The appeals were allowed for statistical purposes, pending verification.