2022 (8) TMI 1403 - AT - Income Tax

Addition on account of difference in receipt as per 26AS and return of income - CIT(A) considered the gross profit @ 10% and accordingly granted relief - HELD THAT - We find that CIT(A) after considering the totality of the facts had presumed the gross profit on the estimated turnover at 10% and accordingly, confirmed the addition and granted relief of the balance amount. Before us, Revenue could not point out any fallacy in the findings of CIT(A). In such a situation, we find no reason to interfere with the order of CIT(A) and thus the ground of Revenue is dismissed. Ad-hoc disallowance of certain expenses - AO considered 10% of the total expenses not allowable on account of personal use and accordingly made its additions - HELD THAT - We find that the disallowance has been made by AO at 10% on ad-hoc basis by holding the expenditure to be personal in nature. We find that CIT(A) while deleting the addition has noted that AO has not placed any material on record to support its contention about the expenditure being personal in nature. In the absence of any proof of expenditure to be personal in nature and in the absence of any fallacy being pointed by Revenue, we find no reason to interfere with the order of CIT(A) and thus the ground of Revenue is dismissed. Correct head of income - treating the interest on FDR - income from business or income from other sources - HELD THAT - We find that before CIT(A) it was inter alia submitted that the interest was earned from the fixed deposits which assessee was required to take for obtaining bank guarantees for the purpose of working capital and for the purpose of business. Before us, Revenue has not placed on record any material to controvert the findings of CIT(A). We therefore find no reason to interfere with the order of CIT(A) and thus the ground of Revenue is dismissed. Addition u/s 68 - share premium treated as income from undisclosed sources - HELD THAT - CIT(A) after considering the additional evidences submitted by assessee, the comments of the AO on the additional evidences and with respect to share premium has given a finding that share application money was not received in the year under consideration and but was received in the earlier financial year but only the allotment was done in the year under consideration. He has further given a finding that all the share allottees have been identified and creditworthiness has been proved. With respect to the addition on account of loan, CIT(A) after considering the material on record given a finding that out of the total addition part was new loan received by the assessee, the loan was received from the Directors who are tax payer, their identities have been proved as they have given their confirmation along with the postal address and PAN No. Before us, no fallacy in the findings of CIT(A) has been pointed out by Revenue. We therefore find no reason to interfere with the order of CIT(A) and thus the grounds of Revenue are dismissed.

Summary

Issues:
1. Reduction of addition on account of difference in receipt and return of income.
2. Deletion of ad-hoc disallowance of certain expenses.
3. Treatment of interest on FDR as income from business.
4. Deletion of addition on account of share premium and unsecured loans under section 68.

Issue 1: Reduction of addition on account of difference in receipt and return of income:
The Revenue appealed against the reduction of the addition on account of a difference in receipt and return of income. The Assessing Officer (AO) noted a discrepancy in TDS amounts claimed by the assessee. The AO treated the unaccounted sum as income, leading to an addition. The Commissioner of Income Tax (Appeals) (CIT(A)) considered the gross profit and granted partial relief. The Income Tax Appellate Tribunal (ITAT) upheld the CIT(A)'s decision, as Revenue failed to identify any errors in the findings.

Issue 2: Deletion of ad-hoc disallowance of certain expenses:
The AO disallowed a portion of expenses based on a presumption of personal use. However, the CIT(A) found no evidence supporting the personal nature of the expenses and deleted the addition. The ITAT upheld the CIT(A)'s decision, as Revenue failed to provide any substantial evidence contradicting the findings.

Issue 3: Treatment of interest on FDR as income from business:
The AO classified interest income on Fixed Deposit Receipts (FDR) as business income instead of income from other sources. The CIT(A) noted that the FDRs were utilized for business purposes and not for personal gain. The ITAT upheld the CIT(A)'s decision, as Revenue did not present any evidence to challenge the findings.

Issue 4: Deletion of addition on account of share premium and unsecured loans under section 68:
The AO added share premium and unsecured loans as income from undisclosed sources under section 68. However, the CIT(A) found that the assessee provided sufficient evidence to prove the genuineness of the transactions. Additional evidence submitted by the assessee supported the legitimacy of the share premium and loans. The ITAT upheld the CIT(A)'s decision, emphasizing the lack of evidence from Revenue to contest the findings.

In conclusion, the ITAT dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on all issues raised. The judgments were based on the assessment of evidence provided by the assessee and the lack of substantial evidence or challenges presented by the Revenue.