2020 (6) TMI 338 - AT - Income Tax

Addition as commission income - rejected the books of accounts of the assessee and estimated the commission income of the assessee from business of entry providing @ 0. 50% of the gross receipts - CIT-A delete the addition - HELD THAT - Assessee have been duly examined and verified by the CIT(A) during the appellate proceedings. No adverse material has been found against the assessee to hold that the assessee was not in the actual business. CIT(A) has observed that the commission income has been assessed at a higher rate merely on the basis of presumption because the assessee had shown a very small margin otherwise there was no convincing evidence before the AO to hold so. CIT(A) has duly applied his mind to the facts and evidence presented before him and has passed a well-reasoned order on this issue. We do not find any infirmity in the order of the CIT(A) in this respect. Ground of the appeal of the Revenue are therefore dismissed. Addition on account of difference in balances - AO observed that assessee had paid huge amounts to various parties under the head Loans and Advances however there were discrepancies in the amounts when compared with the balance sheet of the other parties - HELD THAT - Assessing Officer could not point out any specific discrepancy in the submission / explanation given by the assessee. Even we could not understand how the mismatch if any in figures in the balance sheet when compared with the balance sheet of other parties can automatically be assumed as unexplained income of the assessee. The Assessing Officer has neither doubted nor made any inquiries regarding the source of funds of the payments received by the assessee nor of other parties from whom the assessee received payments.- Decided in favour of assessee. Addition on account of difference in balances - CIT(A) considering the above submissions and after verifying the evidences furnished by the assessee deleted the additions - HELD THAT - CIT(A) has duly examined and reconciled the accounts. The source of the payments being from bank accounts of the respective parties has been duly proved. The ld. CIT(A) has duly and elaborately discussed the details of the entries as noted above and has also found that in the case of first two parties there were old balances outstanding and that the addition to that extent cannot be made in the assessment carried in the subsequent year and further that the share application money received during the year was transferred from the bank accounts of the respective parties. In the case of the third party no amount was advanced during the year and that the same was an old balance given out of the regular sources and appearing in the balance sheet of the preceding years. DR could not point out any distinguishing fact justifying our interference in the above well-reasoned order of the CIT(A). Addition u/s 68 - Sundry Payable - HELD THAT - As discussed by the Ld. CIT(A) the impugned additions had been made by the AO on mere suspicion without bringing on file as how the continuous and regular balances outstanding since assessment year 2010-11 onwards and reflected in the relevant balance sheets can be treated as unaccounted income of the assessee for the year under consideration. Even in the assessment carried out in the case of the creditor no doubt as to the source of the amount has been made by the AO. Without bringing any adverse evidence on the file or pointing any discrepancy in the explanations submitted by the assessee the AO was not justified in making the impugned additions. Undisclosed income u/s 68 - addition into the income under the head difference of balances - HELD THAT - The concern M/s. Vasu Trading Co. was an old existing shareholder of the assessee and the addition had been made only on the ground that it was merely entry provider whereas no adverse inference has been drawn in past when it acquired the shares of the assessee in the preceding years. That Sh. Vasu Kalia Prop. M/s. Vasu Trading Co. was a regular income tax assessees and assessment for assessment year 2012-13 was completed under scrutiny u/s 143(3) where no such adverse view was taken. Moreover the AO did not call upon the assessee or Sh. Vasu Kalia to prove the source of the funds. The addition made by the AO was only on the basis of mere doubt or suspicion which was not sustainable as per law. The Ld. CIT(A) has therefore rightly deleted the addition. Addition on account of commission income - AO then estimated the Commission income from business of entry providing @ 0. 50% of the gross receipts - CIT-A deleted the addition - HELD THAT - addition has been made by the AO merely on the basis of suspicion only without any evidence on the file that the assessee was an entry provider only. The AO did not make any effort to verify the veracity of the business transactions by summoning the concerned parties whereas the assessee duly explained its nature and manner of business and the same being accepted in the earlier years by the AO. We therefore do not find any infirmity in the order of the CIT(A) Addition on account of the sum shown as payable in the name of M/s. Metro Synthetics u/s 68 - CIT-A deleted the addition - HELD THAT - CIT(A) has duly verified the accounts of the assessee and other concerns. The Ld CIT(A) has noted that no adverse inference was drawn by the same AO while completing the assessment in the case of Sh. Rajinder Kumar Prop. M/s. Metro Synthetics for assessment year 2013-14 in respect of the outstanding balances in the name of the assessee. The books of account of the assessee were duly audited and that the assessee was regular income tax payee. No enquiry was made by the AO as to the source of M/s Metro Synthetic. In view of the above the Ld CIT(A) was justified in deleting the impugned additions.

Summary

Issues Involved:
1. Deletion of addition on account of Commission Income.
2. Deletion of addition on account of differences in balances in parties' accounts.
3. Deletion of addition on account of Sundry Payables and Loan & Advances.
4. Deletion of addition on account of Share Application Money.

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Commission Income:
The Revenue contested the deletion of additions made by the Assessing Officer (AO) on account of commission income, arguing that the assessee was merely an entry provider and that the books of accounts were not reliable. The AO had estimated the commission income based on gross receipts. However, the Commissioner of Income Tax (Appeals) [CIT(A)] deleted these additions, noting that the assessee had been engaged in the business of trading of knitted cloth and fabric for a long time, and the transactions were conducted through banking channels. The CIT(A) observed that the AO had made the additions based on assumptions without pointing out specific discrepancies in the books of accounts. The Tribunal upheld the CIT(A)’s decision, stating that the AO failed to provide convincing evidence to support the claim that the assessee was merely an entry provider.

2. Deletion of Addition on Account of Differences in Balances in Parties' Accounts:
The Revenue challenged the deletion of additions made by the AO due to discrepancies in balances shown in the assessee's books and the balance sheets of other parties. The AO had considered these discrepancies as undisclosed income. The CIT(A) deleted these additions after the assessee reconciled the accounts and provided evidence proving the source of funds. The CIT(A) noted that some balances were old and appeared in previous years' balance sheets. The Tribunal found that the AO did not make any inquiries regarding the source of funds and had made the additions based on mere suspicion. The Tribunal upheld the CIT(A)’s decision, finding no reason to interfere with the findings.

3. Deletion of Addition on Account of Sundry Payables and Loan & Advances:
The Revenue argued that the CIT(A) erred in deleting additions related to Sundry Payables and Loan & Advances. The AO had added these amounts as undisclosed income, claiming discrepancies in the balances shown in the assessee’s books and those of other parties. The CIT(A) deleted these additions after verifying the accounts and noting that the amounts were duly reflected in both the assessee’s and the concerned parties' balance sheets. The Tribunal upheld the CIT(A)’s decision, noting that the AO had made the additions without any substantial evidence and had ignored the reconciliations provided by the assessee.

4. Deletion of Addition on Account of Share Application Money:
The Revenue contested the deletion of additions made by the AO on account of Share Application Money received from various parties, arguing that the parties were entry providers with no worth of their own. The CIT(A) deleted these additions, noting that the parties were regular income tax assessees and the transactions were conducted through banking channels. The CIT(A) found that the AO had made the additions without any conclusive evidence and that the share application money was duly reflected in the balance sheets. The Tribunal upheld the CIT(A)’s decision, noting that the AO had failed to prove that the share application money was undisclosed income and had made the additions based on mere suspicion.

Conclusion:
The Tribunal dismissed all the appeals of the Revenue, upholding the CIT(A)’s decisions to delete the additions made by the AO on account of commission income, differences in balances, Sundry Payables and Loan & Advances, and Share Application Money. The Tribunal found that the AO had made these additions based on assumptions and suspicions without providing substantial evidence or conducting proper inquiries. The CIT(A)’s decisions were based on thorough verification and reconciliation of accounts, and the Tribunal found no reason to interfere with these well-reasoned orders.