2018 (5) TMI 1598 - AT - Income Tax

Disallowance of expenses by the AO - CIT(A) allowed the claim of assessee - Held that - initiation of proceedings made u/s 148 by issuing notice cannot be held to be invalid merely stating that it was issued after passing of 7 days from the date of survey operation - assessee objected to issue of notice which needs to be disposed off in the light of decision of Hon Tale Supreme Court in the case of M/s GKN Driveshaft Co. Ltd. - assessee has attended the course of re-assessment proceedings - thus appeal is dismissed Addition on account of difference in FDR as per bank and as per balance sheet - Held that - AO was not justified in issuing the letter dated 06.03.2014 which was received at 01 30PM and the appellant was asked to submit the details of FDR by 05.00 PM on same date itself - thus addition made by the AO is hereby deleted - decided in favor of assessee Additions on the ground that the shares were held by a non-existent company - Held that - assessee have enclosed the company master data in his submission, but failed to provide these requisite details at the time of assessment proceedings before the AO - thus AO was justified in adding ₹ 2,00,000/- on account of unexplained share capital - Decided against the assessee Chargeable of interest u/s 234B - Held that - as per the decision of Hon ble High Court in the case of Ajay Prakash Verma in TA no. 38 of 2010 reported in 2013(1) TMI 140, AO is directed to modify the interest calculation u/s 234B - appeal is partly allowed.

Summary

Issues Involved:
1. Deletion of addition on account of estimated disallowance of expenses.
2. Deletion of addition on account of difference in investments in Fixed Deposits.
3. Deletion of addition on account of bogus purchase.
4. Application of provisions of section 234B as amended in 2006.

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Estimated Disallowance of Expenses:
The Revenue challenged the deletion of ?43,43,805/- added by the Assessing Officer (AO) due to estimated disallowance of expenses. The AO had disallowed 2% of the total expenses of ?21,71,90,173/- on the grounds that the expenses were unverifiable and deemed self-made. The CIT(A) observed that the AO did not identify specific defects in the books of account nor provided material evidence to justify the addition. The CIT(A) concluded that the AO's addition was based on conjecture and surmises, which is not legally sustainable. Therefore, the CIT(A) deleted the addition, and the Tribunal upheld this decision, noting that the AO failed to conclusively prove the expenses were not attributable to business purposes.

2. Deletion of Addition on Account of Difference in Investments in Fixed Deposits:
The AO added ?3,01,703/- due to a discrepancy between the Fixed Deposit Receipts (FDRs) as per the bank and the balance sheet of the assessee. The assessee explained that the difference was included in the opening balance of the FDRs. The CIT(A) found that the AO's demand for an immediate explanation within a few hours was unreasonable. The assessee provided a satisfactory explanation later, which the CIT(A) accepted. Consequently, the addition was deleted, and the Tribunal upheld this decision, agreeing that the AO's approach was unjustified.

3. Deletion of Addition on Account of Bogus Purchase:
The AO added ?52,82,611/- on account of bogus purchases. However, the CIT(A) found that the AO did not provide sufficient evidence to support the claim that the purchases were bogus. The CIT(A) noted that the assessee had maintained proper books of accounts, which were audited, and no specific faults were found. The Tribunal upheld the CIT(A)'s decision to delete the addition, as the AO's conclusions were not substantiated with concrete evidence.

4. Application of Provisions of Section 234B as Amended in 2006:
The AO's application of interest under section 234B was contested. The CIT(A) directed the AO to modify the interest calculation in line with the decision of the Hon’ble High Court in the case of Ajay Prakash Verma. The Tribunal upheld the CIT(A)'s directive, ensuring the interest calculation complied with the judicial precedent.

Conclusion:
The Tribunal, after considering the submissions and findings of both the AO and CIT(A), upheld the CIT(A)'s reasoned order. The Tribunal dismissed the Revenue's appeal, affirming the deletions of the additions and the directive regarding the interest calculation under section 234B.

Result:
The appeal of the Revenue was dismissed.

Order Pronounced:
The order was pronounced in the open court on 24/05/2018.