2018 (9) TMI 529 - AT - Income Tax

Addition towards capital introduction - Held that - CIT(A) the assessee has filed certain details in respect of salary received from his employer and bank statement maintained with Indian Bank Governorpet Vijayawada. CIT(A) after considering the bank account of the assessee he was of the opinion that there is no balance in his account except amount of 70, 240/- and therefore confirmed the order of the Assessing Officer. The assessee has not filed any details and any evidence to substantiate the source for introduction of the capital. Therefore we find no infirmity in the order passed by the ld. CIT(A). Thus this ground of appeal raised by the assessee is dismissed. Addition towards sundry creditors - Held that - On appeal before the ld. CIT(A) the assessee has not filed any evidence therefore he confirmed the order of the Assessing Officer. Even before us no evidence with regard to sundry creditors has been filed. Therefore we find no reason to interfere with the order of the ld. CIT(A). Thus this ground of appeal raised by the assessee is dismissed. Addition towards loan creditors - Held that - The reason for non-filing of confirmation letter is that the promissory note itself is sufficient however the assessee has filed confirmation letters in respect of 09 loan creditors. Therefore in our view it is not correct to say that he is not aware about the value of the confirmation letter. Therefore at this stage this evidence cannot be admitted. Even confirmation letter filed by the loan creditor Mr. S. Venkateswara Reddy is having only Ac. 4.76 of land and he has given loan of 4.00 lakh but he has not explained the source properly and genuineness of the transaction. Therefore this cannot be considered at this point of time. Accordingly the plea raised by the assessee is rejected. So far as merits of the case is concerned the ld. CIT(A) has rightly deleted the addition in respect of 09 loan creditors where confirmation letters are filed. So far as 24.00 lakhs is concerned the assessee is not able to substantiate the creditworthiness of the loan creditors and genuineness of the transaction and therefore the ld. CIT(A) confirmed the order of the Assessing Officer. We find no reason to interfere with the order of the ld. CIT(A). Thus this ground of appeal raised by the assessee is dismissed.

Summary

Issues involved:
1. Addition of capital introduction
2. Addition of sundry creditors
3. Addition of loan creditors

Issue 1: Addition of capital introduction
The Assessing Officer noted that the assessee introduced capital of ?8,82,378 without providing supporting evidence. The assessee claimed the capital came from savings accumulated while working as a Sales Manager, but failed to produce any evidence. The Assessing Officer made the addition based on lack of evidence. The CIT(A) confirmed the addition after finding no balance in the bank account except for ?70,240. The ITAT upheld the decision, as the assessee failed to substantiate the source of the capital, leading to the dismissal of the appeal.

Issue 2: Addition of sundry creditors
The Assessing Officer observed an amount of ?6,73,100 shown as sundry creditors without confirmation letters. The assessee did not provide any evidence, resulting in the addition of the entire amount to the assessee's income. The CIT(A) upheld the addition, as no evidence was presented. The ITAT found no reason to interfere with the CIT(A)'s order, leading to the dismissal of the appeal related to sundry creditors.

Issue 3: Addition of loan creditors
The Assessing Officer questioned cash deposits and asked for sources of ?63.00 lakhs deposited in the bank account. The assessee listed loan creditors, mainly small farmers, for the amount. The Assessing Officer found discrepancies in the statements of the creditors and concluded the loans were unexplained money. The CIT(A) confirmed the addition of ?24.00 lakhs, as no details or confirmation letters were provided for this portion of the loans. The ITAT upheld the decision, stating that the assessee failed to prove the creditworthiness and genuineness of the loan creditors for this amount. An additional ground raised by the assessee was rejected, and the appeal related to loan creditors was dismissed.

In a separate appeal, the tax effect involved was below ?20.00 lakhs, rendering the revenue's appeal not maintainable as per a CBDT Circular. Consequently, the appeal filed by the revenue was dismissed. Overall, both appeals filed by the assessee and the revenue were dismissed by the ITAT.