2017 (12) TMI 1864 - AT - Income Tax

Addition u/s 68 - unexplained unsecured loans - HELD THAT - As carefully gone through the copy of ledger account of all the creditors. We find that inadvertently the tax auditor has treated the aforementioned persons under the head unsecured loan whereas, in fact, all the above persons are trade creditors and with whom the assessee has done some contract business including supply of labourers on contractual payments. We find that tax has been deducted at source as per the provisions of law. On given facts, we do not find this to be a fit case for the additions u/s 68. Disallowance of 5% of the expenses claimed in trading account - CIT(A) deleted the addition - HELD THAT - It is true that the assessee did not file all the details of expenditure during the course of assessment proceedings. It is equally true that all the necessary details were furnished before the CIT(A) who had called for a remand report from the Assessing Officer. Once the details have been furnished and transmitted to the AO, and the same were examined by the CIT(A), we do not find any reason to interfere with the findings of the CIT(A). Appeal of revenue dismissed.

Summary

Issues:
1. Disallowance of expenses claimed in trading account
2. Deletion of unexplained unsecured loans

Analysis:
1. The Revenue challenged the order of CIT(A) regarding the disallowance of expenses claimed in the trading account and unexplained unsecured loans for the assessment year 2010-11. The Assessing Officer disallowed 5% of expenses claimed in the trading account and another 5% in the Profit & Loss Account, totaling Rs. 86,55,134. The CIT(A) directed the Assessing Officer to delete this addition, stating that the disallowance was baseless and unjustified, as no discrepancies were found in the details provided by the assessee during the assessment proceedings.

2. Regarding the unexplained unsecured loans, the Assessing Officer treated the amount of Rs. 17,07,145 as unexplained cash credit under section 68 of the Act. However, the CIT(A) found that the alleged cash creditors were actually trade creditors of the assessee, for whom contractual work was done or laborers were supplied. The CIT(A) verified the genuineness of the credits and deleted the addition of Rs. 17,07,145. The Revenue appealed, but the Tribunal dismissed the appeal, stating that the tax auditor mistakenly categorized the creditors as unsecured loans, while they were actually trade creditors. Tax had been deducted at source as required by law, and thus, no additions under section 68 were warranted.

In conclusion, the Tribunal upheld the CIT(A)'s decision to delete both the disallowance of expenses claimed in the trading account and the unexplained unsecured loans. The appeal filed by the Revenue was dismissed, and the order was pronounced on December 13, 2017.