2022 (10) TMI 847 - AT - Income Tax

Unexplained income outside the books of accounts - Addition made to the returned income on account of Undisclosed net income - CIT-A deleted the addition - HELD THAT - As observed that this amount has already been offered to tax by the assessee in the return of income under the head other receipts . Therefore, Ld. CIT(Appeals), in our view has correctly held that the said amount cannot be brought to tax as gross receipts in the hands of the assessee company again, since the same would amount to double taxation of the same receipts. Whether the expenses against the same are to be allowed, or whether it can be inferred from the statement of the Partner of the assessee firm that the said amount represents net income of the assessee firm, and accordingly no further expenses my be allowed against the same ? - CIT(Appeals) has correctly observed that from the statement recorded of the Partner of the firm, it cannot be inferred that the said amount of ₹ 11 crores represents net income of the assessee firm, and therefore, the assessee is not eligible to claim any expenses against the same. Once the position is admitted that the assessee has offered the undisclosed sum in the return of income, and during the course of detailed assessment, the assessing Officer has not doubted the genuineness of expenses claimed in the return of income, then such expenses should be allowed against the undisclosed income offered by the assessee in the return of income. Accordingly, in our considered view, Ld. CIT(Appeals) has not erred in facts and in law in granting relief to the assessee in respect of this addition referred to above. Addition towards interest expenditure incurred - Since the Ld. CIT(Appeals) in the immediately preceding year has accepted the deposits from five companies as genuine and further in the present year, Ld. CIT(Appeals) has also allowed the assessee s claim of expenditure under section 36(1)(iii) of the Act, with respect to the above interest expenditure, we find no infirmity in the order of the Ld. CIT(Appeals), while granting relief the assessee.

Issues Involved:
1. Deletion of addition of Rs. 11,00,00,000/- on account of undisclosed net income.
2. Deletion of addition of Rs. 44,80,634/- on account of interest expenses on unexplained cash credit.

Issue 1: Deletion of addition of Rs. 11,00,00,000/- on account of undisclosed net income

The Revenue challenged the deletion of Rs. 11,00,00,000/- added as undisclosed net income by the Assessing Officer (AO). The AO argued that the amount disclosed during the survey should be treated as net income without allowing any expenses. The AO observed that the assessee firm had disclosed Rs. 11 crores as undisclosed income in its return but had also claimed substantial expenses against this amount. The AO concluded that the Rs. 11 crores represented net income and no further expenses should be allowed. The AO added Rs. 11 crores to the total income of the assessee on this basis.

The assessee contended that the Rs. 11 crores represented undisclosed booking money/other contract receipts, which were already offered in the return of income as "other receipts." The assessee argued that the partner's statement did not specify that the disclosed amount was net income and that legitimate business expenses should be allowed against the disclosed income. The assessee also pointed out that the AO had not rejected the books of accounts or doubted the genuineness of the expenses claimed.

The CIT(A) agreed with the assessee, stating that the Rs. 11 crores were disclosed as additional income in the books and should not be added again as net income. The CIT(A) noted that the AO had not deleted the Rs. 11 crores from the income shown in the books but had added it again, resulting in double addition, which is not permissible.

The Tribunal upheld the CIT(A)'s decision, concluding that the Rs. 11 crores had already been offered to tax and adding it again would result in double taxation. The Tribunal also agreed that the partner's statement did not indicate that the amount represented net income, and the expenses claimed by the assessee were genuine and allowable.

Issue 2: Deletion of addition of Rs. 44,80,634/- on account of interest expenses on unexplained cash credit

The AO had disallowed interest expenses of Rs. 44,80,634/- on unexplained cash credits of Rs. 4.10 crores, which were added under section 68 of the Act in the previous assessment year (2013-14). The CIT(A) had already decided in favor of the assessee for the previous year, holding that the deposits were fully explained and genuine. Consequently, the CIT(A) allowed the interest expenses for the current year as well.

The Tribunal reviewed the CIT(A)'s order for the previous year, which confirmed the genuineness of the deposits and directed the AO to delete the addition. Since the deposits were accepted as genuine, the interest expenses on such deposits were also allowable under section 36(1)(iii) of the Act.

The Tribunal found no infirmity in the CIT(A)'s decision to allow the interest expenses and dismissed the Revenue's appeal on this issue.

Conclusion:

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on both issues. The additions of Rs. 11,00,00,000/- and Rs. 44,80,634/- were correctly deleted by the CIT(A), as the former would have resulted in double taxation and the latter was based on genuine deposits previously accepted by the CIT(A).

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