2022 (10) TMI 684 - AT - Income Tax

Rejection of books of account u/s 145 - HELD THAT - AO has rejected the books of account on the fact that the assessee has failed to maintain proper records and owing to other irregularities, the Assessing Officer has made the assessment in the manner provided in section 144 of the Act by invoking the provisions of section 145 as the books maintained by the assessee were not reliable. The same has been confirmed by the Ld.CIT(A). We do not find any infirmity in the order of the Ld.CIT(A) in rejecting the books of account of the assessee, thereby we uphold the order of the Ld.CIT(A) and reject ground 2 of the appeal filed by the assessee. Estimation of Income - Bogus purchases transactions - addition being 2% of the bogus sales and on the disallowance of deduction claimed under Chapter VIA - HELD THAT - The confirmation letters from the parties produced by the Ld.AR, in our opinion, needs to be thoroughly examined and enquired into by the Assessing Officer as to the genuineness of the said documents. We also observe that the said confirmation letters did not have details of name, PAN, etc of the persons, who have signed them. We further observe that some signature in the said confirmation letters were found to be identical with that of others. On this note, we direct the Assessing Officer to make a thorough enquiry pertaining to the said additional evidences to be furnished by the assessee and also to examine the genuineness of the persons furnishing the confirmation letters. With these observations, we remand this issue to the file of the Assessing Officer for admitting additional evidences and for considering this issue on merits based on the submission of the assessee. We also direct the Assessing Officer to consider on merits as to how 2% commission on the estimated sales has been arrived at by the Assessing Officer, in case the submission of the assessee on additional evidence is not to the satisfaction of the Assessing Officer. This ground of appeal is allowed, for statistical purpose. Disallowance of deduction claimed under Chapter VIA - AR contended that the donation made to charitable trust was disallowed for want of documentary evidence by the Assessing Officer - HELD THAT - In the circumstances, we are inclined to dismiss this ground of appeal for lack of evidence to substantiate the claim of the assessee. In the result, ground 4 filed by the assessee is dismissed.

Issues Involved:
1. Rejection of books of account under section 145.
2. Addition of 2% commission on alleged bogus sales.
3. Disallowance of deduction claimed under Chapter VIA.
4. Addition of unsecured loan as unexplained cash credit under section 68.
5. Addition of share capital and share premium as unexplained cash credit under section 68.
6. Non-appreciation of third-party evidence by lower authorities.

Detailed Analysis:

1. Rejection of Books of Account under Section 145:
The assessee's books of account were rejected by the Assessing Officer (AO) under section 145(3) due to failure to maintain proper records and other irregularities. The AO invoked section 144 for assessment, which was confirmed by the Commissioner of Income-tax (Appeals) [CIT(A)]. The tribunal upheld the rejection of the books of account, agreeing with the lower authorities that the books were not reliable.

2. Addition of 2% Commission on Alleged Bogus Sales:
The AO added Rs.2,38,22,923/- as 2% commission on bogus transactions, rejecting the assessee's claim of receiving only 1% commission. The CIT(A) confirmed this addition. The tribunal remanded this issue back to the AO for a thorough enquiry into the additional evidence provided by the assessee, such as confirmation letters from parties. The AO was directed to consider the genuineness of these documents and re-examine the 2% commission estimation.

3. Disallowance of Deduction Claimed under Chapter VIA:
The AO disallowed a deduction of Rs.7,04,737/- claimed under Chapter VIA due to lack of supporting documentary evidence. The CIT(A) upheld this disallowance. The tribunal dismissed this ground of appeal, citing the assessee's failure to substantiate the claim with adequate evidence.

4. Addition of Unsecured Loan as Unexplained Cash Credit under Section 68:
For the assessment year 2009-10, the AO added Rs.6,72,32,000/- as unexplained cash credit under section 68 due to the assessee's failure to furnish necessary confirmations, bank accounts, and income-tax returns of loan creditors. The CIT(A) confirmed this addition. The tribunal remanded the issue back to the AO, allowing the assessee one final opportunity to provide relevant details and documentary evidence.

5. Addition of Share Capital and Share Premium as Unexplained Cash Credit under Section 68:
The AO added Rs.47,34,75,000/- as unexplained cash credit under section 68, citing the assessee's failure to prove the identity and financial capacity of the 21 parties who invested in share capital and share premium. The CIT(A) upheld this addition. The tribunal remanded this issue back to the AO for a final opportunity for the assessee to substantiate its claim with necessary evidence.

6. Non-Appreciation of Third-Party Evidence by Lower Authorities:
The assessee argued that the lower authorities did not appreciate third-party evidence used for passing the orders and did not provide copies of such evidence. The tribunal directed the AO to furnish the assessee with copies of third-party evidence and provide an opportunity to counter the same.

Conclusion:
The tribunal partly allowed the appeals for statistical purposes, remanding several issues back to the AO for further examination and providing the assessee with an opportunity to present additional evidence. The tribunal upheld the rejection of books of account and disallowance of deduction under Chapter VIA due to lack of supporting evidence.

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