2014 (9) TMI 200 - AT - Income Tax

Addition of unaccounted money shown as booking deposit Failure to produce details - Held that - CIT(A) was of the view that assessee has received in Akshar Corporation and in Akshar Enterprise during the year - assessee has failed to provide proper and complete addresses of the customers from whom booking advances has been received during the year and thereby assessee has completely failed to discharge the onus cast upon it and has not established the identity, the genuineness of the transaction and the creditworthiness of the creditors - with respect to the balance amount which was received in earlier years and the assesee had not discharged the onus proving the identity, genuineness of the transaction and creditworthiness of the creditors held that the same can be taxed in the year of receipt - the amounts were stated to have been received in earlier years, the AO is directed to verify the booking advance received in the relevant year and if the assessee fails to furnish the requisite details/evidences and satisfactory explanation and thereby to prove the identity of creditors and creditworthiness of the transaction, the AO was directed to make addition in the year of receipt the order of the CIT(A) is upheld Decided against revenue. Bogus liability of sundry creditors disallowed Held that - CIT(A) has noted that the creditors namely, Mahalaxmi Pipe Suppliers, Dhaval Steel, were outstanding since 01-0-2004 and in case of Patel Hardware, assessee had made purchases in A.Y. 2006-07 and 2007-08 - the addition u/s. 41(1) can only made when the creditor confirms the waiving for all dues receivable and in the year in which the creditor waives of the debts - Revenue has not brought any material to demonstrate that the creditors waived off the amounts due to him nor have they brought any material to controvert the findings of CIT(A) the order of the CIT(A) is upheld Decided against revenue. Bogus liability of unsecured loan disallowed Held that - Assessee shown the liability of unsecured loans which has been stated to be from ex-partners - CIT(A) has given a finding that the Assessee has not been able to furnish the addresses or whereabouts of the persons claimed to be ex-partners nor has furnished any proof like partnership deed, audit report of earlier years to prove that the said persons were his ex-partners - assessee has failed to prove that the amounts credited in their accounts were share of profits for earlier years - no material has been placed on record by either parties to controvert the findings of CIT(A) the order of the CIT(A) is upheld Decided against revenue. Reopening of assessment for booking advances u/s 150(1) Held that - CIT(A) has directed the AO to reexamine addition in respect of booking advance, creditors for goods and in respect of balance outstanding in the name of ex-partner pertaining to the balances brought forward for earlier years and in the case the assessee is not able to discharge the onus then make the addition in the respective years of its receipts - no material has been placed to demonstrate that pursuant to the directions of CIT(A), the AO has initiated reassessment proceedings - the challenge of re-opening is pre-mature and the Assessee may take due legal recourse if so advised in appropriate proceedings Decided against assessee.

Summary

Issues Involved:
1. Deletion of addition of Rs. 1,87,18,267/- on account of unaccounted money shown as booking deposit.
2. Deletion of addition of Rs. 2,32,474/- on account of disallowance of bogus liability in respect of sundry creditors.
3. Deletion of addition of Rs. 3,10,000/- on account of disallowance of bogus liability in respect of unsecured loan.
4. Addition of Rs. 4,60,540/- being booking advances received from prospective buyers.
5. Issuing directions for reopening assessments under Section 150(1) of the Income Tax Act.
6. Addition of Rs. 12,73,450/- in respect of credits in the accounts of retired partners.

Detailed Analysis:

1. Deletion of Addition of Rs. 1,87,18,267/- on Account of Unaccounted Money Shown as Booking Deposit:
During the assessment proceedings, the AO noticed that the Assessee had shown booking deposits aggregating to Rs. 1,87,18,267/- in the proprietary concerns Akshar Corporation and Akshar Enterprise. The AO concluded that these deposits were unaccounted money as the Assessee failed to provide proper addresses and confirmations of the persons from whom the deposits were received. Upon appeal, the Ld. CIT(A) held that the Assessee failed to discharge the onus under Section 68 of the Act but directed the AO to verify the booking advances received in the relevant year and make additions in the year of receipt if the Assessee fails to provide satisfactory explanations. The tribunal found no reason to interfere with the order of Ld. CIT(A) and dismissed the Revenue's ground.

2. Deletion of Addition of Rs. 2,32,474/- on Account of Disallowance of Bogus Liability in Respect of Sundry Creditors:
The AO added Rs. 2,32,474/- to the total income, noting that the Assessee failed to prove the genuineness of sundry creditors. The Ld. CIT(A) held that addition under Section 41(1) could not be made unless the creditor confirms waiving off the dues and directed the AO to verify the genuineness of the purchases and make necessary disallowances in the respective years. The tribunal upheld the Ld. CIT(A)'s order, finding no reason to interfere.

3. Deletion of Addition of Rs. 3,10,000/- on Account of Disallowance of Bogus Liability in Respect of Unsecured Loan:
The AO added Rs. 15,86,450/- shown as unsecured loans from ex-partners, as the Assessee failed to prove the genuineness, capacity, and creditworthiness of the lenders. The Ld. CIT(A) sustained the addition to the extent of Rs. 12,76,450/- credited during the year and directed the AO to verify and make additions in the respective years for the balance amount. The tribunal upheld the Ld. CIT(A)'s order.

4. Addition of Rs. 4,60,540/- Being Booking Advances Received from Prospective Buyers:
The Assessee's appeal challenging the addition of Rs. 4,60,540/- was dismissed by the tribunal, as it was connected with the Revenue's ground regarding booking deposits, which had been dismissed.

5. Issuing Directions for Reopening Assessments Under Section 150(1) of the Income Tax Act:
The Assessee challenged the Ld. CIT(A)'s directions for reopening assessments in respect of booking advances, creditors for goods, and balances of ex-partners. The tribunal held that the challenge was premature as no material was placed to demonstrate that the AO had initiated reassessment proceedings. The tribunal dismissed this ground, allowing the Assessee to take legal recourse in appropriate proceedings.

6. Addition of Rs. 12,73,450/- in Respect of Credits in the Accounts of Retired Partners:
The Assessee's appeal against the addition of Rs. 12,73,450/- was dismissed by the tribunal, as it was connected with the Revenue's ground regarding unsecured loans, which had been dismissed.

Conclusion:
The appeals of both the Revenue and the Assessee were dismissed. The tribunal upheld the Ld. CIT(A)'s directions for verification and potential reassessment, emphasizing the need for the Assessee to provide satisfactory explanations and evidence for the disputed amounts.