2018 (1) TMI 1454 - AT - Income Tax

Addition u/s 41 - Addition on account of non-genuineness of the creditors - genuineness of sundry creditors was not established as the assessee failed to furnish the addresses of creditors - HELD THAT - In the instant case, there is no ambiguity that the assessee has not written off the sundry creditors pertaining to the television division though the same was shut down long time ago. But the balance of sundry creditors is very much reflecting in the books of the assessee. These sundry creditors were brought forward from the earlier years which imply that these were accepted in the earlier years. Thus non-furnishing of address of such sundry creditors cannot be the reason for invoking the provision of section 41(1) of the Act. Hence, the ground of appeal filed by the Revenue is dismissed. Addition on account of undisclosed income - Difference in interest income shown by assessee and interest income as disclosed in form 26AS - HELD THAT - A detailed reconciliation statement was filed by the assessee before the Ld. CIT(A) on the basis of which the relief was given. But the same does not amount to additional evidence in view of the order of Mumbai Tribunal in the case of Swift Freight India Limited 2015 (1) TMI 738 - ITAT MUMBAI . Thus we hold that no additional document was filed before the Ld. CIT(A). The Ld. DR has not brought anything on record contrary to the finding of the Ld. CIT(A). Thus, we hold that no additional document was admitted by the Ld. CIT(A) in contravention to the provision of the Rule 46A of the Income Tax Rules. Hence, we respectfully following the consistent view of the Tribunal decline to interfere with the order passed by the Ld. CIT(A) on this account and accordingly the ground take by Revenue is regretted. Addition on account of undisclosed rental income - assessee has not accounted for the income of TDS deducted by the parties - HELD THAT - We note that the addresses of both the parties namely Nokia India Pvt. Ltd. and Nokia Siemens Network Pvt. Ltd. were available before the AO at the time of assessment but the AO has not exercised power given u/s 133(6) and 131 of the Act to verify whether any income has accrued to the assessee or not. The affidavit furnished by the assessee before the ld. CIT(A) does not amount to additional evidence in view of the order of Mumbai Tribunal in the case of Swift Freight India Limited 2015 (1) TMI 738 - ITAT MUMBAI . Thus, we hold that no additional document was filed before the Ld. CIT(A). Thus, in view of the above, we do not find any infirmity in the order of Ld. CIT(A). Hence, the ground of appeal raised by the Revenue is dismissed.

Summary

Issues Involved:
1. Deletion of liability written off for ?59,75,631/-.
2. Deletion of addition of ?9,20,543/- on account of undisclosed income.
3. Admission of additional evidence regarding undisclosed interest income without referring to AO for remand report.
4. Deletion of addition of ?3,66,340/- on account of undisclosed rental income.

Issue-wise Detailed Analysis:

1. Deletion of Liability Written Off for ?59,75,631/-:
The first issue raised by the Revenue was the deletion by the CIT(A) of the addition made by the AO regarding non-genuineness of creditors amounting to ?59,75,631/-. The assessee, a limited company engaged in renting immovable properties, had shown sundry creditors of ?69,74,254.20, out of which ?59,75,631/- pertained to its closed television business. The AO added this amount under section 41(1) of the Income Tax Act, 1961, due to the absence of creditor addresses, suggesting cessation of liability. The CIT(A) deleted this addition, citing that the liabilities were still reflected in the books and had not been written off. The Tribunal upheld the CIT(A)'s decision, emphasizing that the conditions under section 41(1) were not met, as there was no remission or cessation of liability by the assessee.

2. Deletion of Addition of ?9,20,543/- on Account of Undisclosed Income:
The second issue involved the deletion of an addition of ?9,20,543/- made by the AO for undisclosed interest income. The AO observed a discrepancy between the interest income shown by the assessee and the amount reflected in Form 26AS. The CIT(A) deleted the addition, accepting the assessee's explanation that the income was shown in the subsequent assessment year and supported by a reconciliation statement. The Tribunal confirmed this, noting that the reconciliation statement did not constitute additional evidence and was properly considered by the CIT(A).

3. Admission of Additional Evidence Regarding Undisclosed Interest Income Without Referring to AO for Remand Report:
This issue was intertwined with the second issue, where the Revenue contended that additional evidence was admitted by the CIT(A) without referring it to the AO. The Tribunal found that the reconciliation statement provided by the assessee did not amount to additional evidence but was a clarification of existing records. Thus, the Tribunal upheld the CIT(A)'s decision without the need for a remand report.

4. Deletion of Addition of ?3,66,340/- on Account of Undisclosed Rental Income:
The third issue concerned the deletion of an addition of ?3,66,340/- made by the AO for undisclosed rental income. The AO added this amount based on TDS deductions by two parties, which were not reflected in the assessee's income. The CIT(A) deleted the addition, accepting the assessee's claim that the income was not received and supported by an affidavit. The Tribunal upheld this decision, noting that the AO did not utilize available powers to verify the claim, and the affidavit did not constitute additional evidence.

Conclusion:
The Tribunal dismissed the Revenue's appeal on all grounds, affirming the CIT(A)'s decisions to delete the additions made by the AO. The Tribunal emphasized the importance of proper verification and the non-applicability of section 41(1) in the absence of cessation or remission of liability. The Tribunal also clarified that the reconciliation statements and affidavits provided did not amount to additional evidence requiring a remand report.