2018 (8) TMI 1365 - AT - Income Tax

Additions u/s 68 - capital introduced by the assessee in the the proprietorship firm - the amount was received from M/s. Smarsh Fasteners, a proprietorship firm where the assessee is a partner and that this was not shown in the balance sheet of the assessee. - Held that - CIT(A) observed that, the AO has examined the books of account produced by the assessee including the cash book, bank book and ledger accounts etc. as is clearly mentioned in para 3 of the assessment order. The cash repayments having been duly recorded in the cash book, there is no need for the assessee to explain the sources of such repayments .separately. It appears that the AO has not understood the implications of the entries in the books of account and made the impugned addition in a careless manner. - CIT(A) deleted the additions - no good reason to interfere with the order of the CIT(A) - Decided against the revenue. Additions of an amount which was outstanding from husband of the assessee - Assessing officer treated the same as undisclosed income - Held that - it is obvious from the accounts of the assessee as well as of her husband that no amount was outstanding against the husband of the assessee as on 31.3.2013. Hence, in the balance sheet of the assessee, there was no entry showing any outstanding amount due from the assessee s husband. - Additions made by the AO was not proper - Decided against the revenue.

Issues Involved:
1. Deletion of addition towards undisclosed income of ?3,50,000/-
2. Deletion of addition under the head "cash in hand" of ?14,29,711/-
3. Deletion of addition under the head "unsecured loan and interest therein" of ?12,06,080/-
4. Deletion of addition towards undisclosed income of ?55,10,000/-

Issue-Wise Detailed Analysis:

1. Deletion of Addition Towards Undisclosed Income of ?3,50,000/-:
The Assessing Officer (AO) added ?3,50,000/- to the income of the assessee, citing it as undisclosed income. This amount was transferred from M/s. Smarsh Fasteners, where the assessee is a partner, to the assessee's proprietary concern, M.S. Sachdeva & Co. The AO disbelieved the assessee's explanation that the amount was repaid in cash before the end of the financial year, leading to no entry in the balance sheet. On appeal, the CIT(A) deleted the addition, stating that the repayments were duly reflected in the books of account and the AO misunderstood the entries. The Tribunal found no specific error in CIT(A)'s order and upheld the deletion, confirming that the AO failed to bring any positive material to counter the assessee's explanation.

2. Deletion of Addition Under the Head "Cash in Hand" of ?14,29,711/-:
The AO questioned the substantial cash in hand of ?14,29,711/- shown in the balance sheet as of 31.3.2013, suspecting it as unexplained given the assessee's multiple bank accounts. The assessee explained that the cash was inherited from her father. The CIT(A) deleted the addition, noting that the cash in hand was duly reflected in the audited books of account and the AO failed to provide evidence against it. The Tribunal found no error in CIT(A)'s findings, confirming that the cash in hand was properly explained and reflected in the books of account, thus dismissing the revenue's appeal.

3. Deletion of Addition Under the Head "Unsecured Loan and Interest Therein" of ?12,06,080/-:
The AO added ?12,06,080/- to the income of the assessee, questioning the genuineness and creditworthiness of unsecured loans from the assessee's sons. The assessee stated that the loans were obtained prior to assessment year 2005-06 and were reflected in the audited balance sheet. The CIT(A) deleted the addition, emphasizing that the loans were never questioned in earlier years and no addition under Section 68 can be made for loans obtained in previous years. The Tribunal upheld CIT(A)'s order, noting that the AO failed to provide material evidence to challenge the genuineness of the loans, thus dismissing the revenue's appeal.

4. Deletion of Addition Towards Undisclosed Income of ?55,10,000/-:
The AO added ?55,10,000/- to the income of the assessee, treating it as undisclosed income since it was not reflected in the balance sheet. The assessee explained that the transactions with her husband were duly reflected in both their books of account and the accounts were squared off by year-end. The CIT(A) deleted the addition, stating that the AO misunderstood the accounting entries and there was no outstanding amount due from the husband as on 31.3.2013. The Tribunal found no error in CIT(A)'s findings, confirming that the AO's addition was based on a misinterpretation of facts, thus dismissing the revenue's appeal.

Conclusion:
The Tribunal upheld the CIT(A)'s decisions on all grounds, dismissing the revenue's appeal and confirming the deletions of the additions made by the AO. The Tribunal found no specific errors in the CIT(A)'s orders and noted that the AO failed to provide positive material to support the additions.

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