2017 (2) TMI 265 - AT - Income Tax

Addition on sale of shares - Held that - The amount received by the assessee company from M/s. Finorg Chemicals Ltd. is not in the nature of unexplained cash credit u/s 68 of the Act as it has received the amount on account of sale consideration received from M/s. Finorg Chemicals Ltd. for the sale of shares of M/s. Sahil Stock Broking Ltd. for ₹ 18,00,000/-, for sale of shares of M/s. Jyoti Global Pvt. Ltd. for ₹ 5,00,000/- and for sale of shares of M/s. Sethi Estate Pvt. Ltd. for ₹ 5,00,000/- during FY 2001-02 relevant for AY 2002-03. Assessee filed confirmation of accounts of M/s. Finorg Chemicals Ltd. containing GIR number, assessment details, Form No.2, now available at page 100 and 101 of the paper book. Moreover, in order dated 19.12.2006 passed in case of Sanjay Rastogi for AY 2002-03 by ld. CIT (A) it is categorically mentioned by ld. CIT (A) that there is no material to establish the link between Sanjay Rastogi and Finorg Chemicals Ltd. So, we are also of the considered view that the addition of ₹ 28,00,000/- is not sustainable. Thus amount received by the assessee company from M/s. Finorg Chemicals Ltd. on account of sale of shares has already been taxed in its hands and as such, this addition is not sustainable, hence we delete the addition - Decided in favour of assessee Addition on incomplete confirmation bearing incomplete date and PAN from M/s. Kishan Chand Ferro Steel Pvt. Ltd. - Held that - Even no cogent evidence has been produced during first appellate proceedings before the ld. CIT (A) by the assessee. So, we hereby confirm the addition made by the AO and affirmed by the ld. CIT (A). - Decided against the assessee. Disallowance of expenses - assessee company has failed to submit necessary evidence - Held that - No cogent material to support the expenditure claimed by the assessee company has been brought on record. So, we find no ground to interfere into the findings returned by the AO as well as by the ld. CIT (A) in making ad hoc disallowance of ₹ 3,34,560/- on account of certain expenses. So, we hereby determine against the assessee.

Summary

Issues:
1. Addition of ?28 lakhs received from M/s Finorg Chemicals Ltd.
2. Addition of ?1,07,000 as an opening balance in the account of Kishan Chand Ferro Steels Ltd.
3. Disallowance of expenses of ?2,34,560 on an ad hoc basis.

Issue 1 - Addition of ?28 lakhs from M/s Finorg Chemicals Ltd.:
The Assessing Officer (AO) added ?28 lakhs received from M/s Finorg Chemicals Ltd. as unexplained cash credit. The company was found to be engaged in providing accommodation entries in a hawala business scheme. The Director of the assessee company admitted to these transactions being bogus. The Tribunal noted that the commission income had already been taxed in the hands of the Director, and taxing it again in the company's hands would be double taxation. The Tribunal held that the addition was not sustainable as the income had already been taxed and deleted the addition.

Issue 2 - Addition of ?1,07,000 from Kishan Chand Ferro Steels Ltd.:
The AO made an addition of ?1,07,000 due to incomplete confirmation provided by Kishan Chand Ferro Steels Ltd. The incomplete details and lack of evidence led to the confirmation of this addition by the AO and the Commissioner of Income-tax (Appeals) [CIT (A)]. The Tribunal upheld this addition, ruling against the assessee.

Issue 3 - Disallowance of expenses of ?2,34,560:
The AO disallowed ?3,34,560 of expenses claimed by the assessee due to the non-production of supporting vouchers and evidence. The CIT (A) confirmed this disallowance. The Tribunal found no new evidence presented during the appeal to support the expenses claimed. Therefore, the Tribunal upheld the disallowance of ?3,34,560, ruling against the assessee.

In conclusion, the Tribunal partly allowed the appeal based on the above findings, deleting the addition of ?28 lakhs but confirming the additions related to Kishan Chand Ferro Steels Ltd. and the disallowance of expenses. The judgment was pronounced on November 3, 2016, by the Tribunal.