2018 (12) TMI 579 - AT - Income Tax

Addition u/s.68 - Held that - We find that the assessee has taken loan from Shri M.Mehta, Proprietor of Amit Handling Agencies on October 19th, November 22nd and December 19th total to ₹ 14 lakhs. The perusal of bank statement shows that the assessee Shri M.Mehta has deposited cash of ₹ 2 lakhs on 19.10.2002, ₹ 5.5 lakhs on 22.11.2002 and ₹ 6.5 lakhs on 19.12.2002 and immediately thereafter cheques were given to the assessee on respective date. This fact is also confirmed by the Shri M.Mehta recorded on oath u/s.131 of the Act wherein he deposed that he has given 3 cheques to Shri Latif Ayub Kewar, partner of M/s.Kewar Handling and Transporting Company and he deposited those in his bank account and he was the person who deposited those amount in his bank account and got the cheqeus cleared, the addition confirmed by the CIT(A) as therefore upheld. Accordingly, this ground of appeal of the assessee is dismissed. With regard to ground of Revenue we find that the assessee has furnished details like copy of ledger account acknowledgment receipts, IT Return, Bank Statement and Cash Book, audited report. Further, the AO has also given a finding that the transaction is genuine in his remand report as mentioned in the para 5 of the appellate order. Therefore, merely because the person concerned were not appeared before the AO does not mean that the aforesaid creditors are not genuine. In the light of these facts, we find no reason to interfere with the findings of the ld.CIT(A), accordingly same is upheld, therefore, ground no.1 of the Revenue of appeal is also dismissed. Addition of labour expenses - NP estimation - Held that - Cash must be paid to these labourers and truck drivers from source which are not disclosed to the data. This, itself states that there is no doubt in genuineness of the expenditure but AO had made estimation of the undisclosed sources for such expenditure. We further find that on similar facts in the case of sister concern of the assessee ITAT had estimated the net profit @1.4%.

Summary

Issues:
1. Addition of ?14 lakhs made under section 68 of the Act.
2. Confirmation of addition of ?3,03,017/- out of labour expenses.

Analysis:

Issue 1: Addition of ?14 lakhs under section 68 of the Act
The appeal was against the order of the Commissioner of Income Tax (Appeals) regarding the addition of ?14 lakhs under section 68 of the Act. The Assessee accepted unsecured loans but failed to provide satisfactory explanations. The CIT(A) considered various submissions and explanations, including a remand report from the AO. The CIT(A) found discrepancies in the evidence provided by the Assessee and upheld the addition of ?14 lakhs, citing lack of creditworthiness. However, certain additions in favor of the Assessee were deleted due to primary evidence provided, such as PAN details and loan repayment proofs. The Tribunal upheld the CIT(A)'s decision, dismissing the Assessee's appeal and the Revenue's appeal against the deletion of certain additions.

Issue 2: Confirmation of addition of ?3,03,017/- out of labour expenses
The second issue pertained to the confirmation of an addition of ?3,03,017/- out of inflated unpaid expenses. The AO had added ?2,18,71,865/- as unpaid expenses, suspecting they were paid in cash from unaccounted income. The CIT(A) considered the Assessee's submissions, including references to similar cases in sister concerns. Following the ITAT's orders in those cases, the CIT(A) directed the AO to estimate net profit at 2% instead of 1.79% declared by the Assessee, thereby restricting the addition to ?3,03,017/-. Both the Assessee and the Revenue appealed against this decision. The Tribunal upheld the CIT(A)'s decision, citing the genuineness of the expenses and the estimation of undisclosed sources for such expenditure based on previous rulings.

In conclusion, the Tribunal dismissed both the Revenue's and the Assessee's appeals, upholding the CIT(A)'s orders on both issues.