2018 (9) TMI 1312 - AT - Income Tax

Difference between the figure in the profit & loss account and in Form 26AS - Held that - The amount of sundry debtors as on 31/03/2009 tallies with the amount of bills raised at the close of earlier year except for a small difference in the amount of Birla Sunlife Insurance Co. This information also supports the contentions of assessee. AO has partly utilized this information to allow part relief and has conveniently ignored the part reply which is not correct as per law. In view of these facts and circumstances it can safely be said that there is no major difference between the figure in the profit & loss account and in Form 26AS as the figures had been duly reconciled. At the most the addition could have been made to the tune of ₹ 38,933/- which is the difference between ₹ 71,64,243/- and ₹ 72,25,310/-. The addition of ₹ 16,11,266/- is restricted to ₹ 38,933/- as the balance difference was duly reconciled and the reconciliation was already with Assessing Officer. Addition u/s 68 - Held that - For making addition u/s 68 the Assessing Officer has to satisfy himself that the sum credited in the books of the assessee are unexplained. or the explanation offered by him is not satisfactory. In the present case we observe that assessee has received huge amounts as fee for providing services to these parties and therefore, payments received from these companies cannot be termed as ingenuine. The Assessing Officer in his order has not doubted the creditworthiness, identity or genuineness of transactions. He has made the addition only due to difference in amounts relating to two companies and for remaining two companies he had made addition as the notices issued to them u/s 133(6) had returned back. This action of Assessing Officer is not justified as the differences in balances confirmed in two companies cannot be termed as unexplained credits without doubting the identity, creditworthiness and genuineness of transactions. Moreover, only the difference has been added back u/s 68 whereas transactions has not been doubted. This difference coulc have been due to debit or credit notes. Moreover, the Assessing Officer did not confront these confirmations to assessee. Therefore, no addition could have been made by Assessing Officer due to differences u/s 68 of the Act.

Issues Involved:

1. Confirmation of addition of ?16,11,266/-.
2. Treatment of ?16,11,266/- as business receipts or undisclosed receipts.
3. Confirmation of addition of ?24,56,630/-.
4. Double addition issue involving ?16,11,266/-.
5. Justification of addition of ?24,56,630/-.
6. Addition of ?30,000/- under Section 40a(ia).
7. Adequate opportunity for the appellant to present their case.

Issue-wise Detailed Analysis:

1. Confirmation of addition of ?16,11,266/-:

The assessee argued that the amount of ?16,11,266/- was already included in the creditors shown in the Balance Sheet and had been previously added along with ?24,56,630/-. The Assessing Officer (A.O.) observed discrepancies between the receipts recorded in Form-26AS and the profit & loss account. The assessee provided a detailed statement showing that the bills raised in the previous financial year were acknowledged and credited by the insurance companies in the current year. The A.O. accepted part of the reconciliation but ignored submissions regarding other companies, leading to the addition of ?16,11,266/-. The tribunal found that the A.O. had not considered the complete information, which reconciled the difference to ?38,933/-. Hence, the addition of ?16,11,266/- was restricted to ?38,933/-.

2. Treatment of ?16,11,266/- as business receipts or undisclosed receipts:

The assessee contended that even if ?16,11,266/- were treated as undisclosed receipts, only the profit element should be taxed. The tribunal did not specifically address this argument but focused on the reconciliation of the amounts, ultimately reducing the addition to ?38,933/-.

3. Confirmation of addition of ?24,56,630/-:

The A.O. observed credit balances totaling ?1,04,52,273/- and issued letters under Section 133(6) to five parties, receiving confirmations from three. The A.O. made additions for the unconfirmed balances from ING Vysya Life Insurance and SBI Life and for differences in balances with ICICI Life Insurance and MAX Life. The assessee argued that these were established companies and the transactions were genuine, with payments received through cheques. The tribunal found that the A.O. did not doubt the identity, creditworthiness, or genuineness of the transactions and had not confronted the assessee with the differences. The tribunal held that the addition under Section 68 was not justified and directed its deletion.

4. Double addition issue involving ?16,11,266/-:

The assessee claimed that ?16,11,266/- was included in the ?24,56,630/-, leading to double addition. The tribunal’s reconciliation of the amounts effectively addressed this issue by reducing the addition related to ?16,11,266/-.

5. Justification of addition of ?24,56,630/-:

The tribunal found that the A.O. had not adequately justified the addition of ?24,56,630/- under Section 68, as the transactions were genuine and the companies involved were well-established. The tribunal referenced judicial precedents, emphasizing that non-response to notices under Section 133(6) cannot be held against the assessee if the transactions are genuine.

6. Addition of ?30,000/- under Section 40a(ia):

The tribunal did not specifically address the addition of ?30,000/- under Section 40a(ia) in the detailed order provided.

7. Adequate opportunity for the appellant to present their case:

The assessee argued that they were not provided reasonable and sufficient opportunity to present their case. The tribunal’s findings indicated that the A.O. had not fully considered the assessee’s submissions and had not confronted the assessee with discrepancies, thus supporting the assessee’s claim of inadequate opportunity.

Conclusion:

The tribunal partly allowed the appeal, reducing the addition of ?16,11,266/- to ?38,933/- and deleting the addition of ?24,56,630/-. The tribunal emphasized the importance of considering complete information and following due process in making additions under Section 68.

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