2014 (12) TMI 638 - HC - Income Tax

Additions of inflated labour charges and unproved cash credits Genuineness of expenses not proved - Held that - Assessee had met the entire expenditure towards labour charges in cash and had not produced any vouchers to prove the genuineness of the expenditure claimed the AO made addition of ₹ 1.00 lakh out of ₹ 17,28,696/- claimed by the assessee - assessee had also accepted the same at the time of assessment thus, the Tribunal is upholding the order of assessee is correct. Addition made u/s 68 on unsecured loans - Held that - The assessee had proved the creditworthiness of majority of lenders except 19 persons, from whom the assessee had borrowed funds - assessee is able to prove the creditworthiness of majority of lenders, but there is no material to prove the creditworthiness of the remaining persons - after considering the explanation submitted by various lenders enclosing the cash book indicating the date of lending, the AO allowed the claim in part - in respect of the persons who have not shown any material to prove the genuineness of the loan given, the AO declined to grant the benefit - thus, the Tribunal is upholding the order of assessee is correct the issues raised by assessee are pure questions of fact and does not raise any substantial question of law Decided against assessee.

Summary

Issues:
1. Addition of estimated inflation of labour charges
2. Acceptance of additions at the time of assessment
3. Addition of unproved cash credits under Section 68 of the Income Tax Act

Analysis:

Issue 1: Addition of estimated inflation of labour charges
The appellant contested the addition of Rs. 1,00,000 towards estimated inflation of labour charges. The Assessing Officer found discrepancies in the labour expenses claimed by the assessee and added the said amount. The Commissioner of Income Tax (Appeals) upheld this addition, stating that the appellant had accepted the addition during assessment. The Income Tax Appellate Tribunal also confirmed this addition, noting the lack of evidence to support the genuineness of the claimed expenditure. The High Court agreed with the lower authorities, emphasizing that the appellant failed to produce vouchers to substantiate the labour charges. Therefore, the Court upheld the addition of Rs. 1,00,000 towards inflated labour charges.

Issue 2: Acceptance of additions at the time of assessment
The appellant raised a specific ground before the Commissioner of Income Tax (Appeals) that only a concession was granted regarding the additions made. However, the Tribunal held that the appellant had accepted the additions at the time of assessment, leading to the confirmation of the Assessing Officer's findings. The High Court concurred with the Tribunal's decision, stating that the appellant's acceptance of the additions during assessment was evident from the records. Consequently, the Court dismissed the appellant's argument regarding the acceptance of the additions.

Issue 3: Addition of unproved cash credits under Section 68 of the Income Tax Act
Regarding the addition of Rs. 3,14,800 under Section 68 of the Income Tax Act for unproved cash credits, the appellant failed to establish the creditworthiness of 19 lenders out of the total creditors. The Assessing Officer allowed the claim in part but denied the amount related to the unproven lenders. The Tribunal upheld the Assessing Officer's decision, emphasizing the lack of evidence to support the creditworthiness of the remaining lenders. The High Court noted that the appellant could not prove the genuineness of the loans from these 19 persons, leading to the confirmation of the addition by the Tribunal. As the issue was factual and no substantial question of law arose, the Court dismissed the appeal, upholding the Tribunal's decision on the unproved cash credits under Section 68 of the Income Tax Act.