2012 (10) TMI 1197 - AT - Income Tax

Summary

Issues Involved:
1. Rejection of book results u/s 145(3) of the Act and sustenance of addition.
2. Admission of additional ground of appeal regarding disallowance of Rs. 40,42,634/-.
3. Deletion of addition of interest income of Rs. 15,61,615/-.

Summary:

Issue 1: Rejection of Book Results u/s 145(3) and Sustenance of Addition
The assessee company, engaged in trading goods, was subjected to a search/survey operation u/s 132(1) and 133A. The A.O. observed that the assessee was involved in providing accommodation bills, rejecting the books of accounts u/s 145(3) and estimating income from commission at Rs. 47,20,929/-. On appeal, the CIT(A) reduced the profit rate to 0.5% from 1%, reducing the income by Rs. 23,60,464/-. The Tribunal, referencing the case of M/s Easy Mercantile Pvt. Ltd., found no cogent evidence to substantiate the allegation of providing accommodation bills and deleted the addition sustained by the CIT(A).

Issue 2: Admission of Additional Ground of Appeal
The assessee filed an additional ground of appeal regarding the disallowance of Rs. 40,42,634/-. The Tribunal admitted this additional ground following the Supreme Court decision in National Thermal Power Co. vs. CIT, which allows raising a legal issue at any stage if it arises from the facts on record. However, since the Tribunal deleted the entire addition made by the A.O. under the head business income, the additional ground was rejected due to the absence of material to show the allowability of the business expenditure.

Issue 3: Deletion of Addition of Interest Income
The A.O. had separately assessed interest income of Rs. 15,61,615/- without considering the interest paid by the assessee of Rs. 31,60,783/-. The CIT(A) directed the deletion of the addition since the interest payment exceeded the interest received. The Tribunal upheld this decision, finding no contrary material against the CIT(A)'s findings.

Conclusion:
The Tribunal partly allowed the assessee's appeal by deleting the addition related to the alleged accommodation bills and rejected the additional ground of appeal regarding business expenditure. The Revenue's appeal was dismissed, upholding the deletion of the interest income addition.