2019 (2) TMI 1949 - AT - Income Tax

Addition u/s 40A(2)(a) - HELD THAT - Since the facts and circumstances of the instant ground are mutatis mutandis similar to those of the immediately preceding year respectfully following the precedent we uphold the action of the ld. CIT(A) in holding that the provisions of section 40A(2) were not attracted and it is further held that the gross profit rate of 0.63% (0.54% as declared by the assessee plus addition of 0.09%) be applied. Thus the grounds raised by the Revenue are dismissed and those of the assessee are partly allowed. Deemed dividend addition u/s 2(22)(e) - HELD THAT - As similar issue came up for consideration before the Tribunal in assessee s own case for the A.Y. 2010-11. A detailed discussion has been made in the order for such year and eventually the matter has been restored to the file of AO for a fresh a decision. Admittedly the facts and circumstances of the ground for the instant year are similar to those of the preceding year. Respectfully following the precedent we set-aside the impugned order on this score and remit the matter to the file of AO for deciding this issue in conformity with the directions given by the Tribunal in its order for the preceding year. Disallowance of interest u/s.36(1)(iii) - HELD THAT - As AR submitted that similar issue was raised in the preceding year as well and the Tribunal was pleased to decide it against the assessee. In view of the candid admission made by the ld. AR we countenance the impugned order on this score. This ground is not allowed.

Summary

Issues:
1. Addition made under section 40A(2)(a) of the Income-tax Act, 1961.
2. Addition under section 2(22)(e) of the Act.
3. Disallowance of interest under section 36(1)(iii) of the Act.

Issue 1: Addition made under section 40A(2)(a) of the Income-tax Act, 1961:
The judgment revolves around cross-appeals concerning an addition made by the Assessing Officer (AO) under section 40A(2)(a) of the Income-tax Act. The assessee, a trader in Gold, Silver, Diamond, and Precious Stones, contested the addition related to purchases from sister concerns. The AO disallowed a total of ?11.21 crore under section 40A(2) of the Act. The assessee argued that the AO's calculation was flawed, as it did not consider transactions where purchases were below standard rates. The CIT(A) agreed with the assessee's contentions and deleted the addition under section 40A(2). However, the CIT(A) directed the AO to apply a GP rate of 0.80% on total sales, resulting in a fresh addition of ?5,89,29,258. The Tribunal upheld the CIT(A)'s decision, citing similar actions taken for preceding assessment years. The Tribunal dismissed the Revenue's appeal and partially allowed the assessee's appeal.

Issue 2: Addition under section 2(22)(e) of the Act:
The second issue pertains to the confirmation of an addition under section 2(22)(e) of the Act. The AO found that the assessee received loans from specific entities, treating them as deemed dividends. The CIT(A) upheld the addition, mirroring a similar decision from the preceding year. The Tribunal, considering the similarity in circumstances, set aside the order and remitted the matter to the AO for a fresh decision in line with directions from the preceding year's order.

Issue 3: Disallowance of interest under section 36(1)(iii) of the Act:
The final issue involves the disallowance of interest amounting to ?3,01,295 under section 36(1)(iii) of the Act. The Tribunal noted that a similar issue was raised in the preceding year, decided against the assessee. The Tribunal upheld the impugned order on this issue, disallowing the ground raised by the assessee.

In conclusion, the judgment addresses multiple issues including additions under different sections of the Income-tax Act, with the Tribunal upholding certain decisions while setting aside and remitting others for fresh consideration.