2022 (11) TMI 725 - AT - Income Tax

Addition u/s 68 - assessee not established the identity, creditworthiness and genuineness of the transactions - HELD THAT - Assessee has established the identity, creditworthiness and genuineness of the transactions by submitting all the details such as confirmation cum contra account the name, address, PAN details, I.T. Return, balance sheet and profit and loss account, audit report, bank statement etc. From the perusal of the record it can be seen that no loans has been taken by the assessee during the year under consideration but it was the opening balance as on 01.04.202013 which was carried forward and thus, the genuineness of cash credits were established by the assessee. The CIT(A) has given a detail finding and there is no need to interfere with the same. Ground No. 1 of Revenue s appeal is dismissed. G.P. addition - HELD THAT - As assessee has duly furnished all the details to establish the correctness of the books of accounts and also furnished ITR, Audit Report, balance sheet and Profit Loss Account. The detail of G.P. ratio and N.P. ratio for last three years also was shown to the Assessing Officer. It is pertinent to note that the Assessing Officer while rejecting the books of accounts has not recorded any proper satisfaction/reasons and therefore, the rejection of books of accounts was not justifiable. The G.P. and N.P. rate was prejudicially decrease in the present year but the turnover has increased and therefore, the same was rightly accepted by the CIT(A). Hence, Ground No. 2 of Revenue s appeal is dismissed.

Summary

Issues:
1. Deletion of addition under Section 68 of IT Act
2. Deletion of Gross Profit (G.P.) addition

Deletion of addition under Section 68 of IT Act:
The appeal was filed by the Revenue against the order passed by the Ld. CIT(Appeals)-2, Ahmedabad for A.Y. 2014-15. The Revenue raised grounds of appeal related to the deletion of addition under Section 68 of the IT Act. The Revenue contended that the CIT(A) erred in law and on facts by deleting the addition without properly appreciating the facts and evidence. The Revenue argued that the assessee failed to produce depositors along with evidence of their identity and books of accounts during the assessment proceedings, which led to a lack of discharge of onus in establishing the identity and creditworthiness of lenders and the genuineness of the transactions. However, the Ld. A.R. submitted that all necessary evidence was before the CIT(A) and the Assessing Officer, which were ignored by the Assessing Officer. The ITAT, after hearing both parties and perusing the relevant material, found that the assessee had established the identity, creditworthiness, and genuineness of the transactions by submitting various details such as confirmation, bank statements, audit reports, and more. It was noted that the loans were not taken during the year under consideration but were part of the opening balance, and the genuineness of cash credits was established. The ITAT upheld the CIT(A)'s decision to delete the addition under Section 68 of the IT Act, dismissing Ground No. 1 of the Revenue's appeal.

Deletion of Gross Profit (G.P.) addition:
Another ground of appeal raised by the Revenue related to the deletion of Gross Profit (G.P.) addition. The Revenue argued that the CIT(A) erred in law and on facts by deleting the G.P. addition without proper appreciation of the facts and evidence. The Revenue contended that the directors of the company were not produced to explain and justify their income, leading to an estimation of income by rejecting the books of accounts. The Ld. A.R. submitted that all necessary details were furnished to establish the correctness of the books of accounts, including ITR, audit reports, balance sheets, and profit & loss accounts. The ITAT noted that the Assessing Officer did not record proper satisfaction/reasons while rejecting the books of accounts, making the rejection unjustifiable. The ITAT found that the G.P. and N.P. ratios were prejudicially decreased in the present year, but the turnover had increased, which was rightly accepted by the CIT(A). Consequently, the ITAT dismissed Ground No. 2 of the Revenue's appeal related to the deletion of the G.P. addition.

In conclusion, the ITAT dismissed the appeal of the Revenue, upholding the decisions of the CIT(A) regarding the deletion of additions under Section 68 of the IT Act and the Gross Profit addition. The detailed analysis of the evidence presented by the parties led to the dismissal of the Revenue's appeal in both aspects.