2013 (12) TMI 1309 - HC - Income Tax

Unexplained cash credit - Held that - The Assessing Officer did not record any finding regarding the explanation offered by the assessee - AO did not record that the explanation was not found to be satisfactory - Only additions were made without considering the explanation, which were found to be sufficient by the appellate authority - Decided against Revenue.

Summary

Issues:
1. Addition of Rs.11,39,000 as unexplained cash credit and Rs.68,484 as extra profit by the Income Tax Officer.
2. Justification of the Tribunal in deleting the additions made by the Assessing Officer.

Analysis:
The case involved an income tax appeal under Section 260-A of the Income Tax Act, 1961, regarding the additions made by the Income Tax Officer for the assessment year 2005-06. The Income Tax Officer added Rs.11,39,000 as unexplained increase of cash credit and Rs.68,484 as extra profit. The assessee challenged these additions, arguing that the explanation provided was satisfactory. The appellate authority found the explanation satisfactory, especially regarding the creditworthiness of the creditors. The genuineness of transactions and the identity of creditors were established during assessment proceedings.

Regarding the specific entries, the appellate authority noted that the credit entry in respect of a creditor and the transaction with M/s Mohit Agency were adequately explained. The appellant had appointed M/s Mohit Agency for stocking business, supported by documentation including bank certificates verifying transactions. The appellate authority also considered the expenditure incurred for consigning business as genuine, given the scale of operations and the expenses incurred for stocking goods.

The Tribunal, upon appeal by the Income Tax Officer, upheld the findings of the appellate authority. It found no error in the assessment and reiterated that the requirements of Section 68 of the Act were not met. The Tribunal concluded that the additions made by the Income Tax Officer lacked justification and were merely for the sake of addition without proper assessment of the explanations provided by the assessee.

In the final judgment, the High Court dismissed the income tax appeal, stating that the questions raised did not give rise to any legal consideration. The findings of the appellate authority and the Tribunal were deemed as findings of fact, not raising any legal questions for the High Court to address. The Court agreed with the contention that the books of accounts were not rejected, and the additions were made without sufficient consideration of the explanations provided, which were found to be satisfactory by the appellate authority.

Overall, the judgment focused on the proper assessment of explanations provided by the assessee, the credibility of transactions and creditors, and the adherence to the provisions of Section 68 of the Income Tax Act, 1961 in determining the legitimacy of additions made by the Income Tax Officer.