2023 (4) TMI 810 - AT - Income Tax

Unexplained cash credits u/s 68 - addition of unsecured loan - HELD THAT - As in the books of account of the assessee, sum has been credited against the said cash creditor, M/s Josh Trading Pvt Ltd, and therefore, assessee has passed journal entry in its books of account debiting M/s Garware Synthetics Pvt Ltd. Thus, it is undisputed that credit is appearing in the books of account of the assessee and, therefore, in terms of section 68 of the Act, the assessee is responsible for explaining the identity, creditworthiness and genuineness of the transaction. This claim of the assessee for limiting provisions of section 68 to the extent of loan actually received in bank account is accordingly rejected. The additional ground of appeal of the assessee is accordingly dismissed. Amount received as fees, miscellaneous income and sale of products assessed as unexplained cash credit u/s 68 - HELD THAT - When the said commission has already been credited and offered for tax, then either addition under section 68 of the Act can be retained or the income offered by the assessee as commission income can be retained. Both the income offered by the assessee in the return of income and addition under section 68 in respect of the same entry of Rs.9 lakhs cannot be retained. Section 115BBE of the Act has been introduced with effect from 01/04/2013, hence, same is not applicable in the instant assessment year under consideration, therefore, even if the said amount is added under section 68 of the Act, same is subject to normal rate of taxation.merely on the ground that services were rendered by the director of the company and not by the company, treating the said commission income as unexplained cash credit, is not justified. CIT(A) has also not identified the expenses claimed by the assessee for earning the said commission income. In the circumstances, we set aside the order of the lower authorities on the issue in dispute and direct the Assessing Officer to delete the addition made under section 68 of the Act. Miscellaneous income and sale of product the assessee failed to provide details of name and address of the parties and, therefore, the CIT(A) sustained the addition - We find that in absence of any documentary evidence, the action of the Ld.CIT(A) in upholding the addition u/s 68 is justified. Corresponding income which has already been declared in the regular return of income needs to be reduced or subtracted from the total income. Thus, the income will though be assessed under the provisions of section 68 of the Act, there will be no additional tax liability as the incomes assessed under section 68 of the Act are also liable to be taxed at the same rate for the year under consideration. Typographical error in the order of the Ld.CIT(A) - As this was only a mistake apparent on the record and the assessee should have approached the Ld.CIT(A) for rectification of the said mistake. However, in the interest of justice, we direct the Assessing Officer to consider the amount deleted as Rs.1,79,530/- which is apparent from the finding of the Ld.CIT(A). This ground of the appeal of the assessee is accordingly allowed

Summary

Issues Involved:
1. Addition of allegedly bogus loan as unexplained cash credits.
2. Treatment of declared income as unexplained cash credits.
3. Violation of natural justice principles.
4. Disallowance of business expenses.
5. Typographical error in the deletion amount.
6. Additional ground regarding taxing loan received by sister concern.

Summary:

1. Addition of Allegedly Bogus Loan as Unexplained Cash Credits:
The assessee challenged the addition of Rs. 85,00,000 as unexplained cash credits under section 68 of the IT Act. The Assessing Officer (AO) deemed the loan from M/s Josh Trading Pvt Ltd as non-genuine due to the creditor's untraceability and links to accommodation entries. The CIT(A) upheld this, emphasizing that mere documentation does not prove transaction genuineness. The Tribunal affirmed the lower authorities' decision, noting the assessee's failure to establish the creditor's identity and creditworthiness.

2. Treatment of Declared Income as Unexplained Cash Credits:
The AO treated Rs. 9,90,000 (fees), Rs. 2,62,000 (miscellaneous income), and Rs. 95,000 (sale of products) as unexplained cash credits. The Tribunal found that the commission income of Rs. 9,90,000 was already offered for tax, and thus, retaining both the income and the addition under section 68 would result in double taxation. For the miscellaneous income and sale of products, the Tribunal upheld the addition due to the lack of documentary evidence but noted that these should not result in additional tax liability since they were already declared.

3. Violation of Natural Justice Principles:
The assessee argued that the AO violated natural justice by not allowing cross-examination of witnesses and evidence. The Tribunal did not find merit in this argument as it was not properly adjudicated by the CIT(A).

4. Disallowance of Business Expenses:
The Tribunal noted that the CIT(A) disallowed business expenses incurred to earn the commission income. The Tribunal found this unjustified as the expenses were necessary for earning the income and directed the AO to allow these expenses.

5. Typographical Error in the Deletion Amount:
The assessee pointed out a typographical error in the CIT(A)'s order, where the deletion amount was mentioned as Rs. 79,530 instead of Rs. 1,79,530. The Tribunal directed the AO to correct this error, acknowledging it as a mistake apparent on the record.

6. Additional Ground Regarding Taxing Loan Received by Sister Concern:
The assessee raised an additional ground that Rs. 45 lakhs of the Rs. 85 lakhs loan was received by its sister concern, M/s Garware Synthetics Pvt Ltd. The Tribunal rejected this claim, stating that the credit appeared in the assessee's books, making it responsible for explaining the transaction under section 68.

Conclusion:
The appeal was partly allowed, with specific directions to correct the typographical error and allow business expenses, while other grounds were dismissed based on the evidence and legal principles.