2015 (7) TMI 735 - AT - Income Tax

Addition u/s. 69C - CIT(A) deleted addition - Held that - It is an undisputed fact that the assessee has filed explanation to each and every entry recorded in the alleged pocket diary. The additions made by the AO are mechanical for example on page-10 of the seized diary marked as A-1, there is no transaction of ₹ 52,000/- on 3.8.2006 or otherwise. Thus the addition made by the AO is without any substance. Further, the allegation of the AO that the payments are without any supporting evidence is also not correct, for example payment of ₹ 28,000/- made to Shree Krupa Roadlines is supported by FAPS, which is part of the paper book filed before the Revenue authorities. We have also gone through the remand report of the AO dt. 8.2.2013. We find force in the contention of the Ld. Counsel that the AO has submitted the remand report without any verification. Considering all these facts in totality and also considering the fact that at the time of search, ₹ 10 lakhs were surrendered in the name of the assessee which has been accepted by the Revenue. Restriction of the impugned addition to ₹ 5 lakhs is justified and therefore we decline to interfere. - Decided against revenue. Disallowance of freight expenses - CIT(A) deleted addition - Held that - A perusal of the chart to consider the ratio analysis in respect of freight income vis- -vis freight charges clearly shows that the freight charges claimed by the assessee are reasonable. We, therefore decline to interfere with the findings of the Ld. CIT(A)- Decided against revenue.

Summary

Issues involved:
- Challenge to deletion of addition made under section 69C of the Income Tax Act
- Challenge to deletion of addition made on account of disallowance of freight expenses

Issue 1: Deletion of addition made under section 69C of the Income Tax Act:
- The Revenue challenged the deletion of additions made by the Assessing Officer under section 69C for assessment years 2007-08 and 2008-09.
- Search and seizure action under section 132 was carried out, leading to initiation of proceedings under section 153C.
- The AO noticed unrecorded transactions in seized documents, resulting in additions under section 69C.
- Assessee contended before CIT(A) that AO mechanically added all figures from the seized diary without proper verification.
- CIT(A) observed that AO summarily rejected explanations and restricted the addition to Rs. 5 lakhs for unexplained entries.
- ITAT considered documentary evidence and found AO's additions lacked substance, reducing the addition to Rs. 5 lakhs.
- ITAT upheld CIT(A)'s decision, dismissing Revenue's appeal.

Issue 2: Deletion of addition made on account of disallowance of freight expenses:
- The Revenue challenged the deletion of additions made by the AO on freight expenses for assessment years 2007-08 and 2008-09.
- AO disallowed 10% of claimed expenses due to lack of proper bills and vouchers, making significant additions.
- Assessee argued before CIT(A) that disallowances were adhoc and would lead to abnormally high profits.
- CIT(A) noted lack of enquiry by AO and absence of abnormal increase in expenses, deleting the addition.
- ITAT analyzed the ratio of freight income to charges over multiple years, finding the claimed expenses reasonable.
- ITAT upheld CIT(A)'s decision, dismissing Revenue's appeal for both assessment years.

Conclusion:
- The ITAT dismissed both appeals filed by the Revenue, upholding the CIT(A)'s decisions on the deletion of additions under section 69C and disallowance of freight expenses for the respective assessment years.