2022 (4) TMI 1281 - AT - Income Tax

Rejection of books of account under section 145(3) - computing income on estimated basis @ 20% - HELD THAT - Perusal of the appellate order of the Ld. CIT(A) reveals that he was also of the view that there were various defects in the books of account and no satisfactory explanation was given by the assessee. Certain details asked for by the Ld. AO were also not provided. The creditor s details were also not reconciled as per books of account. CIT(A) concurred with the view of the Ld. AO that the books of account of the assessee were not correct and complete. He, therefore upheld the impugned addition. In the absence of any material brought on record by the assessee to rebut the contentions of the Ld. AO/ CIT(A), we decline to interfere. Debit being rent in P L account - AO, keeping in mind the nature of assessee s business came to the conclusion that there was no need for the assessee to pay any rent. He also observed that despite specific query, no details of TDS effected on the said payment were submitted except making a bald statement in the grounds of appeal that the reasons for payment of rent, TDS returns and details already filed have not been appreciated. No evidence at all in support has been submitted either before the Ld. CIT(A) or before us. Therefore, no interference is called for. Ground No. 3 is rejected. Deemed dividend under section 2(22)(e) - HELD THAT - In the grounds it is stated that M/s. Universal Buildwell Pvt. Ltd. is neither a shareholder of the assessee company nor the assessee company is holding shares of the said company and the explanation of the assessee that the transactions are genuine business transactions and are inclusive of reimbursement of expenses has been overlooked. There is no substance in what the assessee is now stating before us. Before the Ld. AO/CIT(A) the assessee did not give any proper explanation and furnished details of ₹ 12,36,429/- only. For the balance amount no explanation was given except that the amount was given for business need. The findings of the Ld. AO/ CIT(A) remained unassailed before us. We therefore endorse their findings and reject this ground as well. Denial of set off and carry forward of brought forward losses from earlier years - HELD THAT - AO did not record any reasons therefor. Therefore, the Ld. CIT(A) in para 6 of the appellate order directed the AO to verify the facts from the records and determine the brought forward losses as per law. It is thus obvious that the Ld. CIT(A) has not upheld denial of set off and carry forward of brought forward losses from earlier years as stated in the ground taken before us. We, therefore reject this ground also.

Summary

Issues:
1. Rejection of books of account under section 145(3) and computation of income on an estimated basis.
2. Disallowance of rent payment and rejection of explanation.
3. Addition of deemed dividend under section 2(22)(e) of the IT Act.
4. Denial of set off and carry forward of brought forward losses from earlier years.

Rejection of Books of Account:
The assessee's appeal challenged the rejection of books of account under section 145(3) and the computation of income at 20% of the total. Despite the absence of the assessee during the proceedings, the tribunal upheld the decision. The AO and CIT(A) found defects in the accounts and discrepancies in explanations provided. The tribunal declined to interfere, noting the absence of material to counter the authorities' contentions.

Disallowed Rent Payment:
Regarding the disallowance of rent payment, the tribunal upheld the decision to reject the payment of rent amounting to ?2,23,71,018. The AO concluded that there was no business need for the rent payment, and the assessee failed to provide supporting evidence or details of TDS. The tribunal found no grounds for interference due to the lack of substantiating evidence.

Addition of Deemed Dividend:
The addition of ?92,42,739 as deemed dividend under section 2(22)(e) was contested by the assessee, claiming the amount was not a loan or advance but business-related expenses. However, both the AO and CIT(A) upheld the addition, considering the relationship between the parties and lack of satisfactory explanations or evidence provided by the assessee. The tribunal endorsed their findings and dismissed the appeal.

Denial of Set Off and Carry Forward of Losses:
The issue of denial of set off and carry forward of brought forward losses of ?3,43,75,838 from earlier years was addressed by the CIT(A) directing the AO to verify the facts and determine the losses as per law. The tribunal clarified that the CIT(A) did not uphold the denial of set off and carry forward of losses, contrary to the grounds presented. Consequently, the tribunal rejected this ground as well.

In conclusion, the tribunal dismissed the appeal of the assessee in its entirety, upholding the decisions made by the AO and CIT(A) regarding the issues raised in the appeal.