2022 (6) TMI 1323 - AT - Income Tax

Unexplained expenditure - difference in narration in the bank account - details of which were found in the Cash Transaction Record maintained in an excel sheet by Shri Ashok Sharma which was found and seized during the search in the case of the Indiabulls Group - HELD THAT - We find that there are identical expenditure which are held to be unexplained expenditure for seven years which has been deleted by CIT (A). As also the claim of the assessee that the transactions have already been offered as income before the settlement commission. CIT (A) deleted this addition for the reason that the amount has already been considered in income of the assessee and other entities before the settlement commission. In view of this we do not find any infirmity in the order of the learned CIT (A) in deleting the addition. Merely because the order of the settlement commission has been challenged before the Hon ble High Court unless that order is reversed we do not find any infirmity in the order of the learned CIT (A). Accordingly ground no. 1 to 3 of the appeal is dismissed. Allowability of deduction of education cess - HELD THAT - We find that in view of amendment by introduction of explanation 3 inserted by Finance Act 2022 with retrospective effect from 1st April 2005 assessee is not entitled for deduction of education cess. Accordingly grounds of the appeal is allowed.

Summary

Issues:
1. Addition of unexplained expenditure
2. Justification of relying on the decision of the Income Tax Settlement Commission
3. Allowability of deduction of education cess

Issue 1: Addition of Unexplained Expenditure
The appeal involved the deletion of an addition of Rs.70,000 as unexplained expenditure by the Assessing Officer for A.Y. 2012-13. The CIT (A) deleted the addition, citing that the entries were duly recorded in the regular books of account and produced by the assessee. The Assessing Officer's disbelief stemmed from differences in bank account narrations. The CIT (A) noted that similar expenditures had been previously deleted for seven years and considered by the settlement commission. As the transactions were offered as income before the commission, the CIT (A) found no fault in deleting the addition, especially since the settlement commission's order was not reversed. Therefore, the grounds related to this issue were dismissed.

Issue 2: Justification of Relying on Settlement Commission Decision
The Assessing Officer questioned the CIT (A)'s reliance on the Income Tax Settlement Commission's decision regarding other entities within the Indiabulls Group. The CIT (A) justified this reliance by pointing out that the transactions had been considered by the settlement commission and other entities had disclosed their income. The CIT (A) found no error in considering the commission's decision until challenged and reversed by the High Court. Thus, the grounds related to this issue were dismissed.

Issue 3: Allowability of Deduction of Education Cess
The appeal also addressed the deduction of education cess amounting to Rs.2,87,94,024 from the total income of the assessee. However, the Tribunal found that due to an amendment introduced by the Finance Act, 2022, with retrospective effect from 1st April, 2005, the assessee was not entitled to this deduction. Consequently, the grounds related to the allowability of the education cess deduction were allowed.

In conclusion, the appeal filed by the Assessing Officer was partly allowed, with the Tribunal dismissing the grounds related to the unexplained expenditure and the reliance on the settlement commission's decision, while allowing the grounds concerning the deduction of education cess.