2022 (11) TMI 541 - AT - Income Tax

Addition u/s 68 - repayment of loan from Mamta Mohta during the year which was given in the earlier year - HELD THAT - The case of the assessee is squarely covered by the various other decisions of the Co-ordinate Benches namely ITO vs. Zazsons Exports Ltd. 2015 (4) TMI 747 - ITAT LUCKNOW and Gulf Steel Minerals 2018 (5) TMI 627 - ITAT RANCHI wherein the Co-ordinate Benches have held that no addition can be made in respect of sundry creditor where sundry creditors related to the purchases which are accepted by the AO. The Co-ordinate Benches have held that without rejecting the purchases, the sundry creditor cannot be treated as the income of the assessee besides holding that the application of Section 68 to make addition in respect of current purchases is wholly arbitrary and against the law. Moreover the G.P. addition has already been made.In view of these facts and circumstances and detailed finding given by the Ld. CIT(A) and the ratio laid down in the various decisions as discussed hereinabove ,we are inclined to uphold the order of Ld. CIT(A). Consequently ground no. 1 raised by the revenue is dismissed.

Summary

Issues:
1. General nature issue raised in ground no. 1.
2. Deletion of Rs. 6,50,000/- by Ld. CIT(A) regarding loan repayment.
3. Order of Ld. CIT(A) allowing 40% on account of expenses from understated sales.
4. Deletion of Rs. 1,65,00,311/- by Ld. CIT(A) on account of incremental sundry creditors.

Issue 1 - General Nature Issue:
The appeal was filed by the revenue against the Ld. CIT(A)'s order for the assessment year 2013-14. The issue raised in ground no. 1 was deemed general and did not require specific adjudication.

Issue 2 - Deletion of Rs. 6,50,000/- Regarding Loan Repayment:
The AO made an addition of Rs. 1,49,30,067/- towards unexplained deposits in bank accounts. The Ld. CIT(A) partially allowed the appeal by reducing the contra entries and accepting Rs. 6,50,000/- as repayment from a previous loan. The remaining amount was treated as undisclosed sales, with 40% allowed towards expenses. The Tribunal upheld the decision, stating that the loan repayment was adequately supported and did not violate any rules.

Issue 3 - Order Allowing 40% Expenses from Understated Sales:
The Ld. CIT(A) confirmed the addition of Rs. 13,38,314/- on account of understated sales by applying 60% of the amount. The Tribunal dismissed the revenue's appeal against this decision, noting that a similar estimation was accepted in a previous year's case for the same assessee.

Issue 4 - Deletion of Rs. 1,65,00,311/- on Account of Incremental Sundry Creditors:
The AO added Rs. 1,65,00,311/- as unexplained cash credit due to an increase in sundry creditors. The Ld. CIT(A) held that Section 68 did not apply to sundry creditors as they represented expenses claimed in the profit and loss account. The Tribunal agreed, citing various decisions supporting the treatment of sundry creditors differently from cash credits and upholding the Ld. CIT(A)'s order.

In conclusion, the Tribunal dismissed the revenue's appeal on all issues, affirming the Ld. CIT(A)'s decisions. The judgment provided detailed analysis and legal reasoning for each issue, ensuring a comprehensive understanding of the case.