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2016 (1) TMI 406 - AT - Income TaxAddition on account of disallowance of non-genuine brokerage expenses - CIT(A) deleted the addition - Held that - CIT(A) is not controverted by the Revenue by placing any material on record suggesting that the payments paid by the assessee were bogus. In absence of such material establishing that the payments were not genuine or bogus, we do not see any reason to interfere with the finding of the ld.CIT(A), same is hereby upheld. - Decided against revenue. Addition u/s.68 - CIT(A) deleted the addition - Held that - From the above, it is evident that the ld.CIT(A) has given a finding on fact that the depositors were assessed to tax and the entire records were available to verify the same. Therefore, the AO treated the same as unexplained amount on the basis of superficial reasons. The ld.CIT(A) has given finding on fact that the loan is genuine, supporting evidences with regard to the identity of the creditor in the form of Income Tax Return, etc. was furnished to the authorities below, therefore, in our considered view, the AO was not justified in making the addition and disallowance of interest thereof. Therefore, we do not see any reason to interfere with the finding of the ld.CIT(A), same is hereby upheld.- Decided against revenue. Addition on account of alleged excess claim of shortage - CIT(A) deleted the addition - Held that - There is no dispute with regard to the fact that the AO has not pointed out any specific defects in the books of account. The AO has also not resorted to the rejection of books of account, however, he made estimation on the basis that the yield as declared in earlier year which was higher than as claimed in the year under appeal. The basis of such finding as per AO is that normally in textile mill processing, there is percentage of shortage at 15 to 17% in the yield. The AO has not given any basis as to why he is not accepting the contention of the assessee when the assessee has placed all details before him with regard to yield. Under these facts, we do not see any reason to interfere with the finding of the ld.CIT(A), same is hereby upheld.- Decided against revenue. Addition made u/s.69B - CIT(A) deleted the addition - Held that - We find that the AO has given finding that there was a difference between the quantity of stock furnished to its Banker and shown to the Revenue. The only question left with us is whether the information furnished to the Banker by the assessee was correct or not. The assessee has accepted the quantitative figure of stock given to its Banker and the same has been disclosed in the Audit Report which was enclosed while filing the return of income. In view of the fact that there was a quantitative difference in the stock furnished to the bank and submitted before the Revenue-Department by the assessee, we are unable to agree with the finding of ld.CIT(A), as it is not the case of assessee that the value adopted by him for bank and declared to Revenue is different but the quantity matches. Therefore, we hereby set aside the finding of the ld.CIT(A) on this issue and sustain the addition made by the AO.- Decided in favour of revenue.
Issues Involved:
1. Deletion of addition on account of disallowance of non-genuine brokerage expenses. 2. Deletion of addition made under Section 68 and disallowance of related interest expenses. 3. Deletion of addition on account of excess shortage. 4. Deletion of addition made under Section 69B for stock difference. 5. General grounds to uphold the Assessing Officer's order. Issue-wise Detailed Analysis: 1. Deletion of Addition on Account of Disallowance of Non-genuine Brokerage Expenses: The Revenue contested the deletion of Rs. 20,90,908/- added due to disallowance of brokerage expenses. The Assessing Officer (AO) observed that a significant amount of commission was paid in March without corresponding bill numbers and that the recipients were related to the assessee. The AO argued that brokers typically demand their commission as soon as sales are realized, making the assessee's explanation implausible. The CIT(A) found that the assessee provided sufficient documentary evidence, including payment through banking channels and TDS deductions. The CIT(A) concluded that the AO's grounds were flimsy and unsupported by any defects in the books of account. The Tribunal upheld the CIT(A)'s findings, noting the absence of evidence from the Revenue to prove the payments were bogus. 2. Deletion of Addition Made Under Section 68 and Disallowance of Related Interest Expenses: The Revenue challenged the deletion of Rs. 13,00,000/- added under Section 68 and the disallowance of Rs. 52,142/- in interest expenses. The AO questioned the genuineness of the transaction due to discrepancies in the addresses and signatures provided by the lender. The CIT(A) found that the assessee had submitted comprehensive documentation, including confirmation of the party, PAN, income tax returns, and bank statements showing the loan was given by account payee cheque. The CIT(A) noted that both the assessee and the creditor were assessed in the same range, making verification straightforward. The Tribunal upheld the CIT(A)'s decision, emphasizing that the AO's objections were superficial and unsupported by substantial evidence. 3. Deletion of Addition on Account of Excess Shortage: The Revenue disputed the deletion of Rs. 37,35,148/- added due to alleged excess shortage. The AO argued that the assessee's claimed shortage was higher than the industry norm of 15-17%, suggesting that higher shortages should correlate with higher sale prices. The CIT(A) observed that the AO had not rejected the assessee's books of account or identified specific defects. The CIT(A) noted that the assessee had shown better financial results compared to the previous year and that the AO's estimation was based on unsubstantiated norms. The Tribunal upheld the CIT(A)'s findings, agreeing that the AO's estimation lacked a solid basis and that the books of account were not proven to be incorrect. 4. Deletion of Addition Made Under Section 69B for Stock Difference: The Revenue contested the deletion of Rs. 3,78,690/- added under Section 69B due to a discrepancy between the stock reported to the bank and the stock shown to the Revenue. The AO highlighted a quantitative difference of 11,652 meters in the stock figures. The CIT(A) found that the AO had selectively considered figures and ignored the reconciliation provided by the assessee. The Tribunal, however, disagreed with the CIT(A), noting that the quantitative difference was acknowledged by the assessee and disclosed in the audit report. The Tribunal set aside the CIT(A)'s finding and sustained the AO's addition, emphasizing the importance of consistent stock reporting. 5. General Grounds to Uphold the Assessing Officer's Order: Grounds 5 and 6 were general in nature and did not require independent adjudication. The Tribunal did not find it necessary to address these grounds separately. Conclusion: The Tribunal upheld the CIT(A)'s deletion of additions related to brokerage expenses, unexplained cash credits, and excess shortage, finding the AO's grounds insufficiently substantiated. However, it reversed the CIT(A)'s deletion of the addition under Section 69B, emphasizing the importance of consistent stock reporting. The appeal was partly allowed.
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