2015 (10) TMI 2436 - AT - Income Tax

Addition u/s 68 - Held that - It is clear and beyond any doubt that the unsecured cash creditors in respect of which the additions were made by the Assessing Officer u/s 68 of the Act has been examined in detail by the ld CIT(A) and he has given a clear finding that all the aforesaid cash credits were admittedly old and balances therein reflected only the brought forwarded balances. The Assessing Officer in his remand report has also not disputed this fact. In the light of these uncontroverted facts, these cash credits pertained to years prior to year under consideration. Further, in terms of section 68 and in the light to the decision of the Hon ble Rajasthan High Court Lakshman Swaroop Gupta & Bros (1972 (11) TMI 20 - RAJASTHAN High Court), the additions made by the Assessing Officer cannot be sustained as the unsecured cash credits doesn t pertain to the year under consideration.- Decided in favour of assessee. Disallowance of interest - CIT(A) deleted the addition - Held that - We have gone through the order of the ld CIT(A) and we do not feel any infirmity in the said order. Neither the revenue has brought any further facts to prove that this payment of interest to the creditors were not genuine or bogus - Decided in favour of assessee.

Summary

Issues:
1. Addition of cash credits under Sec. 68 of the Act.
2. Consideration of additional evidences by ld. CIT(A).
3. Applicability of Section 68 of the Act and relevant legal principles.
4. Disallowance of interest paid to creditors.

Analysis:

1. Addition of Cash Credits under Sec. 68 of the Act:
The Assessing Officer (AO) added a sum found credited in the books of the assessee as income under Sec. 68 of the Act due to lack of satisfactory explanation and absence of confirmations. However, during appellate proceedings, the ld. CIT(A) admitted additional evidences in the form of confirmation letters. The ld. CIT(A) noted that the cash credits were old and reflected only brought forward balances, leading to the deletion of the addition of the said sum. The Tribunal upheld the CIT(A)'s decision, emphasizing that the unsecured cash credits did not pertain to the year under consideration, as per the provisions of Sec. 68 and relevant legal precedents.

2. Consideration of Additional Evidences by ld. CIT(A):
The assessee submitted additional evidences in the form of confirmation letters during the appellate proceedings. Although the ld. CIT(A) admitted these evidences, it was observed that the issue could be decided without considering them. The Tribunal concurred with the ld. CIT(A)'s decision to delete the addition of the sum, highlighting that the cash credits were old and did not represent undisclosed income for the relevant year.

3. Applicability of Section 68 of the Act and Relevant Legal Principles:
Referring to Section 68 of the Act, the Tribunal analyzed the provisions and cited a decision of the Hon'ble Rajasthan High Court to elucidate the interpretation of the section. The Court's decision emphasized that unexplained cash credit entries in the assessee's books should be treated as income of the assessee's previous year if the explanation is unsatisfactory. In the present case, it was established that the unsecured cash credits were old and pertained to years preceding the assessment year, leading to the dismissal of the revenue's appeal against the ld. CIT(A)'s order.

4. Disallowance of Interest Paid to Creditors:
The revenue raised a contention regarding the deletion of the disallowance of interest paid to creditors by the ld. CIT(A). However, the Tribunal found no infirmity in the ld. CIT(A)'s order as the revenue failed to provide additional facts proving that the interest payments were not genuine or legitimate. Consequently, the Tribunal dismissed the revenue's appeal, upholding the decision of the ld. CIT(A) regarding the disallowance of interest paid to creditors.

In conclusion, the Tribunal dismissed the revenue's appeal, affirming the decisions of the ld. CIT(A) regarding the addition of cash credits, consideration of additional evidences, and disallowance of interest paid to creditors based on the provisions of Sec. 68 of the Act and relevant legal principles.