2014 (6) TMI 74 - AT - Income Tax

Deletion made u/s 68 of the Act Unexplained creditors Held that - The assessee produced duly sworn in affidavits of 6 creditors - For the remaining, the assessee produced confirmation through affidavits etc. before the CIT(A) - the creditors have admitted their respective credits and have also explained their source(s) - unless the AO controverts the averments of the affidavits, the version given therein cannot be rejected - the evidence produced by the assessee in respect of the creditors were also considered thus, the order of the CIT(A) is setting aside the addition is upheld Decided against Revenue. Deletion of disallowance out of expenses Held that - All the expenses are in relation to the trading activities of the assessee - The AO has not rejected the books of account - AO has not doubted the receipts etc. and have accepted them Relying upon CIT Vs. Maharaja Shree Ummaid Mills Ltd. 1991 (5) TMI 46 - RAJASTHAN High Court thus, the order of the CIT(A) is upheld Decided against Revene. Deletion of low withdrawals for household expenses Held that - The addition is based on no material but on wild guess and pure estimation with reference to the size of the family and the standard of living - The AO has not brought any evidence on record, in this regard the order of the CIT(A) is upheld Decided against Revenue.

Summary

Issues Involved:
Appeal against CIT(A) order for A.Y 2008-09 - Deletion of additions u/s 68, disallowance of expenses, and household expenses.

Analysis:

Issue 1: Deletion of addition u/s 68 of the Act
The appeal pertains to the deletion of an addition of Rs. 8,16,584/- made under section 68 of the Income Tax Act. The credits reflected in the balance sheet were scrutinized, and the assessee provided affidavits from creditors to establish the genuineness of the credits. The CIT(A) admitted the additional evidence, and since the department did not challenge this aspect, the deletion was upheld. The creditors admitted their credits and explained their sources, but the assessing officer did not further examine them. As per legal principles, if the assessing officer does not counter the affidavits' contentions, the version given therein cannot be rejected. The Tribunal confirmed the deletion of the addition under section 68, as the evidence produced by the assessee supported the genuineness of the credits.

Issue 2: Deletion of addition on account of disallowance of expenses
The second ground concerns the deletion of an addition of Rs. 1,73,463/- made on account of disallowance of expenses related to the assessee's trading activities. Since the assessing officer did not reject the books of account and did not doubt the receipts, he could not disturb the expenses claimed unless specific expenses were wrongly claimed. Citing a relevant judgment, the Tribunal upheld the deletion of the addition, as the assessing officer did not find any expenses to be wrongly claimed. The deletion was supported by the legal principle that expenses cannot be rejected without proper justification when receipts are accepted.

Issue 3: Deletion of addition for low household withdrawals
The third ground pertains to the deletion of an addition of Rs. 34,500/- made due to low household withdrawals. The assessing officer based this addition on estimation without concrete evidence. As no material was presented to support the addition, the Tribunal approved the deletion. The assessing officer failed to provide any evidence regarding the household withdrawals, leading to the dismissal of this ground. The deletion was justified as the addition was made on speculation without factual basis.

In conclusion, the Tribunal allowed the revenue's appeal based on the analysis and findings regarding the deletion of additions under section 68, disallowance of expenses, and low household withdrawals. The judgment highlighted the importance of substantiating additions with concrete evidence and following legal principles in assessing expenses and withdrawals.