2018 (2) TMI 519 - HC - Income Tax

Addition on account of receipts not recorded in the books of accounts - Held that - Tribunal came to correct conclusion that the Commissioner, Income Tax (Appeal) has rightly granted part relief to the assessee as both the service and escort charges were shown separately in profit and loss account on net basis. Dis-allowance out of certain expenses on the basis of certain discrepancies found therein - A.O. has disallowed a percentage of such expenses on the ground that most of these expenses have been incurred in cash and the vouchers have been prepared in one handwriting - Held that - Both of such observation were found incorrect because while such amounts were expended both by cash and cheque, the vouchers were prepared by computers and handwritten vouchers were in many handwritings. Entries on each voucher are narrative which includes transaction detail, type of work & L.R. No. of each transaction. Payment of appellant in released by Idea cellular only after verification of work done as appearing in such vouchers. When books of accounts of appellant wereduly audited & A.O. failed to find any defects in detailed vouchers maintained by appellant, hence adhoc dis-allowance as percentage of such expenses is not at all justified - Revenue appeal dismissed.

Summary

Issues:
1. Appeal against the order of the Income Tax Appellate Tribunal regarding addition of unexplained cash credit under Section 68 of the Income Tax Act, 1961.
2. Appeal against deletion of addition made on account of receipts not recorded in the books of accounts.
3. Appeal against deletion of disallowance of certain expenses due to discrepancies found therein.

Analysis:

Issue 1:
The appellant, a company engaged in transportation business, filed an appeal against the addition of unexplained cash credit under Section 68 of the Income Tax Act. The tribunal found that the appellant had received a loan from a creditor and provided sufficient evidence to establish the genuineness of the transaction, including bank statements, ledger accounts, and relevant documents. The tribunal concluded that the appellant had discharged the onus placed upon it under Section 68, leading to the deletion of the addition. The High Court upheld the tribunal's decision, dismissing the appeal filed by the appellant.

Issue 2:
Regarding the addition of receipts not recorded in the books of accounts, the appellant had shown a difference in gross receipts between its return of income and Form 26AS. The assessing officer made an addition due to the variance in receipts. However, the appellant contended that the service tax and escort charges were separately shown in the profit and loss account, leading to the difference. The Commissioner of Income Tax (Appeals) partially allowed the appeal, sustaining only a portion of the addition. The ITAT supported this decision, emphasizing that the assessing officer had not properly verified the receipts from the books of accounts. The tribunal concluded that the relief granted to the appellant was appropriate, and the High Court dismissed the appeal.

Issue 3:
The final issue pertained to the disallowance of certain expenses due to discrepancies found therein. The appellant contested the disallowance on the basis of discrepancies, and the CIT (Appeals) granted relief after considering the vouchers and explanations provided by the appellant. The ITAT upheld the decision to delete the disallowance, stating that the vouchers were properly maintained, and the disallowance was not justified. The High Court found no substantial question of law in this regard and dismissed the appeal, affirming the decisions of the lower authorities.

In conclusion, the High Court upheld the decisions of the lower authorities in all three issues, dismissing the appeals filed by the appellant.