2020 (5) TMI 165 - AT - Income Tax

Addition u/s 41 - unsecured loan taken from Standard Chartered Bank by treating the same as the liability, which was ceased to exist - HELD THAT - On a query raised by the assessee, he, however, failed to explain as to how the said liability of ₹ 74,668/- as on 01.09.2009 was increased to ₹ 2,29,065/- as on 31.03.2015 as shown by the assessee in its balance-sheet. He has also failed to point out any communication received from M/s. Saha Finlease Pvt. Limited during the period of last more than 10 years to show that the loan liability in question sold by Standard Chartered Bank was ever claimed by M/s. Saha Finlease Pvt. Limited from the assessee. The assessee thus has failed to establish the existence of the said liability and having regard to all the facts of the case said liability can be treated as ceased to have existed. Therefore, find no justifiable reason to interfere with the impugned order of the ld. CIT(Appeals) on this issue confirming the addition made by the AO. Un-reconciled difference in the account of certain sundry creditors and debtors - HELD THAT - Difference in the closing balance of M/s. Life Drug House Pvt. Limited and M/s. Indchemie Health Specialities Pvt. Limited was satisfactorily explained by the assessee and the said explanation was duly accepted by the AO after verification of the relevant record. Regarding the difference in closing balance of other two parties namely M/s. Goutam and M/s. Maa Padma Medical, the assessee, however, could not offer any satisfactory explanation as clearly stated by the AO in his remand report. Categorical findings recorded by the AO in his remand report, difference in the closing balance of the concerned parties was satisfactorily explained by the assessee and the CIT(Appeals) was not justified in confirming the addition made by the AO on this issue to that extent. Modify the impugned order of the CIT(Appeals) on this issue and restrict the addition made by the AO. Ground No. 2 of the assessee s appeal is thus partly allowed.

Summary

Issues:
1. Addition of unsecured loan taken from Standard Chartered Bank.
2. Addition due to un-reconciled difference in the account of certain sundry creditors and debtors.
3. Addition of alleged bogus debtors.
4. Claim for giving effect to the loss as certified by auditors.

Issue 1: Addition of unsecured loan taken from Standard Chartered Bank:
The appeal concerned the addition of ?1,66,735 made by the Assessing Officer and upheld by the CIT(Appeals) regarding an unsecured loan taken from Standard Chartered Bank. The Assessing Officer treated the difference between the loan amount shown by the assessee and the confirmed amount by the bank as a bogus liability. The Tribunal found that the assessee failed to explain the discrepancy adequately. The Tribunal noted that the liability ceased to exist as the assessee could not establish its existence. Consequently, the Tribunal dismissed Ground No. 1, upholding the addition made by the Assessing Officer.

Issue 2: Un-reconciled difference in the account of certain sundry creditors and debtors:
The second issue involved an addition of ?8,26,139 due to un-reconciled differences in the accounts of sundry creditors and debtors. The Assessing Officer observed discrepancies in the closing balances of specific parties. The CIT(Appeals) upheld the addition, stating that the assessee should have accounted for certain transactions in the relevant year. Upon review, the Tribunal found that the explanations provided by the assessee for two parties were satisfactory, leading to a reduction in the addition. However, for the other parties, where no satisfactory explanation was offered, the Tribunal upheld the addition partially, reducing it to ?76,955. Ground No. 2 was partly allowed by the Tribunal.

Issue 3: Alleged bogus debtors:
The third issue, concerning the addition of ?33,408 due to alleged bogus debtors, was not pressed by the assessee during the Tribunal hearing. As a result, this issue was dismissed.

Issue 4: Claim for giving effect to the loss as certified by auditors:
Regarding the claim for giving effect to a loss of ?44,723 certified by the auditors, the Tribunal directed the Assessing Officer to verify the claim and allow it in accordance with the law. Ground No. 4 was treated as allowed for statistical purposes.

In conclusion, the Tribunal partly allowed the appeal of the assessee, dismissing one issue, partially allowing another, and directing verification for the remaining issues. The Tribunal's decision was pronounced on March 13, 2020.