2020 (6) TMI 694 - AT - Income Tax

Addition on account of capital - gifts received from relatives - HELD THAT - CIT (A) has correctly accepted and found it correct regarding the amounts received as gifts from husband and from her father-in-law. CIT (A) confirmed the remaining amount owing to non-substantiation of the amounts received. Addition of loan - HELD THAT - AO had doubts in his mind about the genuineness of these creditors and therefore provided an opportunity to the appellant to substantiate her claim by producing the respective creditors. The process of confirmation by post was initiated only to facilitate the appellant but even this exercise has resulted in confirmation of credits in respect of the aforesaid four persons. Each credit appearing in the Books of Account has to be substantiated by the appellant with the help of cogent and convincing evidence. In the present case, despite number of opportunities given to the appellant there has been no compliance. The letters issued by the Assessing Officer has remained un-served or has not been responded by the respective creditors. In some cases, as mentioned above, even though the letters have been responded but the credit balance are different which would mean that the confirmations are not reliable. The appellant gets relief of ₹ 35,00,000/- in respect of the aforementioned four creditors out of the total credit amount of ₹ 1,07,00,000/- and the balance amount of ₹ 72,00,000/- is confirmed. Addition of sundry creditors - HELD THAT - Appellant failed to discharge initial onus' of proving genuineness of its sundry creditors. Even during enquiry by the AO and this office only three creditors confirmed balance. In consideration of the facts above, out of total addition of rupees ₹ 67,07,216/- on account of sundry creditors, the appellant gets a relief Addition of commission paid owing to the absence of details of the persons to whom the commission has been paid - HELD THAT - The appellant merely claimed that evidence has been lost in tire but at the same time she could have led secondary evidence by producing such parties and obtaining details from such parties about the payment of the said sum. The initial onus has not been discharged because by merely providing list no fruitful enquiry can be conducted until and unless further details are given. These agents were allegedly in fiduciary relationship with the appellant and it was much easier for her to obtain confirmation of accounts from the said agents. She has not taken any such steps and therefore prima facie genuineness of expenditure is in doubt. Further, the business purpose of the expense has also to be demonstrated besides the payment which is missing in this case because none of the agent has been examined by the appellant. Under these circumstances the AO has correctly disallowed the expense claimed Disallowance of Advertisement expenses - HELD THAT - We find from the record that the assessee has not produced any evidence to support the claim of expenditure. In the absence of any evidences or proof submitted by the assessee, these expenses cannot be allowed as utilized for the purpose of business. The order of the ld. CIT (A) is confirmed on this ground.

Summary

Issues Involved:
1. Addition on account of capital introduction.
2. Addition on account of unsecured loans.
3. Addition on account of sundry creditors.
4. Addition on account of commission/minimum guarantee.
5. Addition on account of advertisement and other expenses.

Detailed Analysis of the Judgment:

1. Addition on Account of Capital Introduction:
The Commissioner of Income Tax (Appeal) [CIT (A)] confirmed an addition of ?42,05,216 out of ?49,55,216 made by the Assessing Officer (AO). The CIT (A) accepted gifts from the assessee’s husband and father-in-law totaling ?12,00,000 but confirmed the remaining amount due to non-substantiation. The CIT (A) relied on three remand reports from the AO, which found inconsistencies and lack of evidence regarding the sources of the gifts. The Tribunal upheld the CIT (A)’s decision, confirming the addition of ?42,05,216.

2. Addition on Account of Unsecured Loans:
The CIT (A) confirmed an addition of ?72,00,000 out of ?2,09,94,924 made by the AO. The CIT (A) accepted amounts received from Punjab National Bank (PNB) and Andhra Bank but confirmed the remaining amount due to non-substantiation of security deposits from dealers. The CIT (A) relied on remand reports which found that only a few parties confirmed the balances. The Tribunal upheld the CIT (A)’s decision, confirming the addition of ?72,00,000.

3. Addition on Account of Sundry Creditors:
The CIT (A) confirmed an addition of ?54,51,492 out of ?67,07,216 made by the AO. The CIT (A) accepted confirmations from three creditors but confirmed the remaining amount due to non-substantiation. The CIT (A) relied on remand reports which found that most creditors did not respond or provided unreliable confirmations. The Tribunal upheld the CIT (A)’s decision, confirming the addition of ?54,51,492.

4. Addition on Account of Commission/Minimum Guarantee:
The AO made an addition of ?55,69,337 due to the absence of details and evidence of commission payments. The CIT (A) found that the assessee failed to provide direct evidence of the payments or any secondary evidence after claiming that records were lost in a fire. The Tribunal upheld the CIT (A)’s decision, confirming the addition of ?55,69,337.

5. Addition on Account of Advertisement and Other Expenses:
The AO disallowed ?2,39,210 on account of advertisement expenses due to lack of evidence. The CIT (A) confirmed the disallowance as the assessee did not provide any additional evidence during the appellate proceedings. The Tribunal upheld the CIT (A)’s decision, confirming the disallowance of ?2,39,210.

Conclusion:
The Tribunal dismissed the appeal of the assessee and confirmed the orders of the CIT (A) on all grounds. The total additions confirmed were ?42,05,216 for capital introduction, ?72,00,000 for unsecured loans, ?54,51,492 for sundry creditors, ?55,69,337 for commission/minimum guarantee, and ?2,39,210 for advertisement expenses.