2023 (7) TMI 11 - AT - Income Tax

Estimation of Net Profit - Rejection of books of accounts - estimated the profit at the rate of 8% on turnover in terms of section 44AD - CIT(A) for deleting the estimated - HELD THAT - CIT(A) for deleting the estimated addition of net profit had duly taken into account the remand report obtained from the learned AO, wherein, no adverse inferences were drawn about the manner in which books of account were maintained by the assessee - the other discrepancies noticed by the learned AO in the books of account submitted before him in the remand proceedings were duly added by CIT(A) in his appellate order. Hence, no infirmity in the order of learned CIT(A) as the deletion of estimated addition on net profit was made based on the remand of the learned AO - once an issue has been accepted by the learned AO in the remand report, the learned AO would be precluded from filing further appeal to the Tribunal as he could not have any grievance in the matter. This issue is settled by the decision of Smt. B. Jayalakshmi 2018 (8) TMI 208 - MADRAS HIGH COURT Addition of unsecured loan u/s 68 - CIT-A deleted the addition - HELD THAT - We find that the assessee had provided confirmation of loan from the creditor, ITR of creditor, evidence for receipt of loan through banking channel and evidence of repayment of loan through banking channels in subsequent years. All these additional evidences were duly admitted by CIT(A) and a remand report was called for from the learned AO. The learned AO sought to examine the veracity of the evidences from DCIT, Central Circle, Dhanbad, Jharkhand. Since, no reply was received from Dhanbad Office, the learned AO did not make any adverse comments on the evidences filed by the assessee. CIT(A) also concluded that since all the documents were duly placed on record by the assessee and no adverse comments has been made by learned AO, there is no scope for making any addition under section 68 of the Act. This goes to prove that the assessee, on its part, has discharged its primary onus caused in terms of section 68 of the Act by proving the three necessary ingredients thereon. No infirmity in the order of learned CIT(A) in granting relief to the assessee in this regard. Accordingly, the grounds raised by the Revenue are dismissed.

Summary

Issues:
1. Addition of Rs. 3,21,42,095/- based on estimated net profit rate rejection.
2. Addition of Rs. 34,00,000/- due to unsecured loan under section 68 of the I.T. Act, 1961.

Issue 1:
The appeal was against the order by the Commissioner of Income Tax (Appeals) regarding the addition of Rs. 3,21,42,095/- based on the rejection of books of accounts. The Assessing Officer estimated the profit at 8% on turnover under section 44AD of the Act due to the non-production of books of accounts by the assessee. The CIT(A) obtained a remand report which highlighted discrepancies but did not raise concerns about the maintenance of books of account. The High Court decision in Smt. B. Jayalakshmi Vs. ACIT was cited to support the acceptance of the issue by the AO in the remand report, precluding further appeal. The deletion of the estimated addition was upheld by the ITAT.

Issue 2:
The second ground of appeal involved the addition of Rs. 34,00,000/- on account of an unsecured loan under section 68 of the Act. The AO treated the loan as unexplained cash credit due to the lack of PAN, address, or confirmation from the lender. The assessee later provided documents including confirmation of the loan, ITR of the creditor, and evidence of loan receipt and repayment through banking channels. The AO sought verification from the Dhanbad office but did not receive a response. The CIT(A) accepted the additional evidence and concluded that the assessee had fulfilled the requirements of section 68 of the Act. As no adverse comments were made by the AO, the ITAT upheld the CIT(A)'s decision to delete the addition.

The ITAT, in its judgment, dismissed the appeal of the Revenue, upholding the decisions of the CIT(A) regarding both the estimated addition based on net profit rate rejection and the addition on account of the unsecured loan. The ITAT found no infirmity in the CIT(A)'s orders as the necessary evidences were provided by the assessee and no adverse comments were made by the AO. The appeal was thus dismissed, and the order was pronounced in Open Court on 23rd June, 2023.