2015 (5) TMI 346 - AT - Income Tax

Income from other sources -assessee declared total export sale of ₹ 4,59,95,595/- against which certain expenses under various heads were claimed - AO considering the fact that the major expenses consisted of consumable store, dyeing and processing embroidery charges, fabrication charges, packing material and labour charges etc. and guided by the fact that in the preceding assessment year, it had been held that the major expenses were bogus wherein the export sale were also found to be not genuine - CIT(A) deleted addition - Held that - There is no adverse finding specifically regarding the parties from whom the material was procured and also regarding the parties to whom payment for expenses were made or incurred. Once the evidences in support of the claim of purchases/expenses were produced before the AO and that after production of the same, the AO is not satisfied, he is required to give cogent reasons to reject the evidences produced. The burden of procuring the confirmations of such parties and also of producing the same for examination cannot be shifted on the assessee, as these are third parties who for various reasons may not choose to heed to the assessee's request for appearance before Income Tax authorities. In the appellant's own case wherein it was held that the adverse findings of earlier years were applicable with reference to those particular parties only and if those parties do not appear in the other years, no cognizance of the adverse findings in earlier years can be imported in the assessment of other years in absence of adverse material on record in this year. Thus AO had no material or evidence to reject the purchases and other expenses claimed in the P&L Account when such expenses were duly reflected in the audited books of accounts produced and the same being supported with the vouchers produced before the AO. Therefore, allow the above ground of appeal in favour of the appellant and accordingly, the addition of ₹ 4,59,94,594/- is directed to be deleted. - Decided in favour of assessee. Introduction of further capital - CIT(A) deleted addition - Held that - So far as sources of other credits in the bank account are concerned, the same is duly supported with the audited accounts. The AO's objection in the remand report regarding source of credits in the Bank A/c of UTI Bank from which withdrawal has been made for making investment for ₹ 12,88,000/- has been examined from the Cash Book and the Bank A/c at UTI Bank and the same was found to be explained. It is however, relevant to note that the source of credits in Bank A/c of the appellant was not the subject matter of addition in this appeal, which was related to the credits in capital account. Regarding addition of ₹ 10 lakh made by way of FDR provided by the husband of the appellant, the same issue also appears in the appeal of the husband, Shri Anil Dhingra and it is found that the husband has confirmed handing over of FDR of ₹ 10 lakh to wife and the same has been credited by her in her capital account. The explanation regarding the source of FDR for ₹ 10 lakhs has been accepted in the appeal order dated 02.05.2011 in Appeal No. 393/07-08 in case of Shri Anil Dhingra. Therefore, the question of any additional investment by way of this FDR does not arise in appellant's case. In view of above discussion, the additions of ₹ 12,88,000/- and the ₹ 10,00,000/- stand deleted. - Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of addition made by the AO on account of income from other sources.
2. Deletion of addition made by the AO on account of introducing further capital without evidence or confirmation.

Detailed Analysis:

1. Deletion of Addition on Account of Income from Other Sources:

The Revenue challenged the deletion of Rs. 4,59,94,594/- added by the AO as income from other sources. The AO's addition was based on the preceding year's findings where major expenses were deemed bogus and export sales were found non-genuine, supported by an in-depth investigation. The AO required the assessee to produce parties and confirmations, which the assessee failed to do. Consequently, the AO treated the purchases as bogus and the income from export sales as income from other sources.

The CIT(A) found that the AO had not provided adequate time for the assessee to produce the required confirmations and had not conducted any independent enquiry. The CIT(A) noted that the assessee had produced all necessary books of accounts and vouchers, which the AO did not dispute. The CIT(A) also considered affidavits confirming that the parties involved in the current year were different from those found non-genuine in earlier years. The CIT(A) concluded that the AO's reliance on past history without considering current evidence was incorrect and deleted the addition.

The Tribunal upheld the CIT(A)'s decision, emphasizing that past history should not override current evidence. The Tribunal noted that the AO's requirement for confirmations from 82 parties within 35 days was unreasonable and that the AO had not pointed out any specific infirmity in the primary vouchers or supporting evidence. The Tribunal agreed with the CIT(A) that the AO's approach was arbitrary and based on conjectures and surmises.

2. Deletion of Addition on Account of Introducing Further Capital:

The Revenue also challenged the deletion of Rs. 22,88,000/- added by the AO as unexplained investment. The AO added this amount to the assessee's income, stating that the source of the addition to the capital account was not explained, nor were any confirmations furnished.

The assessee provided a detailed chart explaining the sources of the investment, which included cash withdrawals from bank accounts and an FDR provided by the assessee's husband. These details were forwarded to the AO, who objected on the grounds that these were fresh evidences. The CIT(A) admitted these evidences, noting their relevance and materiality. The CIT(A) found that the sources of the credits in the bank accounts were explained and supported by the audited accounts. The CIT(A) also noted that the FDR provided by the husband was confirmed in his assessment proceedings.

The Tribunal upheld the CIT(A)'s decision, finding no specific infirmity in the CIT(A)'s reasoning. The Tribunal noted that the AO's objections in the remand report had been addressed, and no adverse facts were referred to. The Tribunal concluded that the CIT(A) had rightly deleted the addition.

Conclusion:

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s deletion of both additions. The Tribunal emphasized the importance of considering current evidence over past history and found the AO's approach to be arbitrary and based on conjectures. The Tribunal also supported the CIT(A)'s admission of relevant and material evidence in explaining the sources of the capital addition.