2018 (1) TMI 1721 - AT - Income Tax

Assessment u/s.144 - disallowance at 10% of the total receipts, relying on tax audit report and copies of some alleged accounts - CIT(A) has reported that during remand proceedings, the books of account were not called for verification and directed the AO to apply net profit at 3.5% of the total receipts and deleted the disallowance made by the AO - HELD THAT - Before us, D.R. could not point out any specific mistake in the order of the CIT(A) - we find no good reason to interfere with the order of the CIT(A), which is hereby confirmed. Ground No.1 of appeal is dismissed. Addition u/s 68 - assessee has failed to substantiate the identity and creditworthiness of the creditors and genuineness of transaction, the AO disallowed the same - CIT(A) observed that the assessee has furnished compete postal address and PAN particulars of the creditors and address of the creditors to the Assessing Officers with whom the creditors are assessed to tax, thus deleted addition - HELD THAT - We find that the assessee has furnished the details of the income tax returns alongwith PAN. It has also been informed that the lenders have given confirmation. Therefore, the assessee has complied with the conditions prescribed in the provisions of Sec. 68 of IT Act. Considering all especially when no adverse remarks is on record, we find no reason to reverse the findings of the ld CIT(A). Hence, we reject the ground of appeal taken by the revenue. Appeal filed by the revenue is dismissed.

Summary

Issues:
1. Disallowance of expenses incurred on purchase of materials, labour charges, transportation charges.
2. Addition of unexplained cash credit under section 68 of the Income Tax Act, 1961.

Analysis:
1. The appeal filed by the revenue challenged the order of the CIT(A) regarding the disallowance of expenses. The Assessing Officer disallowed expenses based on the non-production of books of account by the assessee, resulting in an addition to the income. The CIT(A) observed that the Assessing Officer did not verify the correctness and completeness of the claim, leading to an estimation of expenses. The CIT(A) referred to a Tribunal decision to determine the net profit rate at 3.5% and partly allowed the appeal. The Tribunal upheld the CIT(A)'s decision, emphasizing the lack of specific mistakes pointed out by the revenue, confirming the adoption of the 3.5% net profit rate.

2. Regarding the addition of unexplained cash credit under section 68, the Assessing Officer disallowed a sum received as loans due to failure in substantiating the identity and creditworthiness of the creditors and genuineness of the transaction. However, the CIT(A) noted that the assessee provided complete details of the creditors, including PAN particulars and addresses, along with confirmation from the lenders. The Tribunal, considering the compliance with Sec. 68 conditions and absence of adverse remarks, upheld the CIT(A)'s decision to delete the addition, rejecting the revenue's appeal.

In conclusion, the Tribunal dismissed the revenue's appeal on both issues, affirming the CIT(A)'s decisions on the disallowance of expenses and the addition of unexplained cash credit. The Tribunal's detailed analysis highlighted the importance of verifying claims, complying with statutory requirements, and the lack of grounds to overturn the CIT(A)'s findings.