2017 (9) TMI 800 - AT - Income Tax

Addition on non-genuine creditors - Held that - During the first appellate proceeding, the assessee furnished written submission on 23.04.2014. The ld. CIT(A) after considering the submission concluded that the creditors namely Chennur Textile, S. Henil & Co. and Ishtiyak Ahmed, the assessee was unable to prove the genuineness about the creditors. The assessee has proved genuineness with respect of Santhil Kumar Textile KPM against whom a liability of ₹ 27322/- was shown. The ld. CIT(A) considering the fact deleted the addition to the extent of ₹ 27322/- and sustained the remaining addition. We have noticed that the finding of ld. CIT(A) is based on material fact available on record and do not require any further interference at our end. Thus, Ground No.1 raised by assessee is dismissed. Cash expenses disallowance - Held that - The assessee failed to substantiate his claim even before the ld. CIT(A). The ld. CIT(A) observed that the salary expenditure of ₹ 264.44 Lakhs (except expenditure of ₹ 25,000/- by cheque) has been shown in cash. Since the assessee has to failed to substantiate and provide the details before the AO as well as before the ld. CIT(A). The ld. CIT(A) however, restricted the disallowance to ₹ 8,00,000/-. Before us, the assessee failed to substantiate his claim as to why the addition be deleted. As the assessee has neither come forward nor substantiate his claim. Thus, we do not find any illegality or infirmity in the order passed by ld. CIT(A). Addition on account of estimate of G.P. @ 6% - Addition u/s 68 - CIT-A deleted both additions - Held that - CIT(A) considered and relied upon the documents which were not filed before the AO during the assessment proceeding. Considering the submission of ld. DR for the Revenue, we are of the view that the documents furnished before the ld. CIT(A) for the first time required verification by the AO. Hence, the appeal of the Revenue is allowed. The order of ld. CIT(A) to the extent of deleting the addition u/s 68 of the Act and deleting the estimate G.P. @ 6% are restored to the file of AO. The AO is directed to pass the order afresh in accordance with law

Summary

Issues:
Cross appeal under section 253 of Income Tax Act against CIT(A) order for AY 2011-12.

Analysis:
1. The assessee, a partnership firm in the business of Textile trading, filed its return for AY 2011-12 declaring total income. The AO made various additions, including on nongenuine creditors, cash expenses, and cash credit u/s 68 of the Act. The CIT(A) partially sustained the additions. Both parties filed cross appeals challenging different aspects of the CIT(A) order.

2. During the hearing, no one appeared on behalf of the assessee, resulting in the Tribunal proceeding based on available records. The Revenue argued against the CIT(A)'s deletions, highlighting the lack of substantiation by the assessee regarding creditors and cash expenses. The Revenue contended that substantial relief was already granted by the CIT(A).

3. The Tribunal reviewed the submissions, orders, and material before it. Regarding the creditors, the CIT(A) found the assessee failed to prove the genuineness of certain creditors, leading to sustained additions. The Tribunal upheld this decision. Concerning cash expenses, the AO made adhoc disallowances, which the assessee could not substantiate. The CIT(A) restricted the disallowance, and the Tribunal found no reason to interfere with this decision.

4. The Revenue raised five grounds of appeal, but the Tribunal identified three substantial grounds. The Revenue argued that the CIT(A) erred in accepting additional evidence without giving the AO an opportunity and in deleting additions without sufficient reason. The Tribunal noted that the AO was not given a chance to verify the additional evidence and that certain documents were not presented during the assessment. Therefore, the Tribunal allowed the Revenue's appeal, directing the AO to reexamine the deleted additions.

5. In conclusion, the Tribunal dismissed the assessee's appeal and allowed the Revenue's appeal for statistical purposes, remanding the case to the AO for further examination. The Tribunal emphasized granting the assessee adequate opportunity during the reassessment process.