2024 (11) TMI 1422 - AT - Income Tax

Addition u/s 69C - note book was seized containing the ledger account titled Adsure as pertained to the payment made both in cash and cheque/RTGS to Shri Ravindra K Adsure the legal advisor of the assessee-company - HELD THAT - We find that out of four transactions reflected on the same page in the ledger account we find transactions recorded on 16.09.2016 and 29.08.2016 of Rs. 3, 00000/- each totaling to Rs. 6, 00, 000/- were repetitive entries bearing the same bank details and cheque details and the transactions of Rs.3, 00000/ was already recorded in the regular books of the assessee. No infirmity in the decision of ld. CIT(A) in deleting the addition. Addition u/s 68 - assessee failed to establish the creditworthiness of the lendor - CIT(A) deleted the impugned addition holding that assessee has submitted confirmation of ledger account ITR ROC particulars and also stated that said entity was having substantial long term borrowings as well as advances given and only on the basis of such financial statement it would be inappropriate to hold that loan amount was not genuine - HELD THAT - AO has not brought any material on record to disprove the genuineness of the loan amount. Further on the basis of submission of the ld. Counsel we consider that the impugned addition was made in nonabated assessment year on the basis of financial statement of the assessee without demonstrating any incriminating document found and seized during the course of search. Therefore such addition is not sustainable following the decision of Abhisar Buildwell Private Limited 2023 (4) TMI 1056 - SUPREME COURT . No infirmity in the decision of ld. CIT(A) in deleting the addition. Disallowance of interest on loan amount is not sustainable and we have sustained the action of ld. CIT(A) in deleting the impugned quantum addition of loan. Addition u/s 37(1) - HELD THAT - AO had made disallowance of purchase expenses on estimation basis and the AO had not brought any relevant material on record to prove that in fact the expenditure claimed were nongenuine. On the submission of the assessee we find that the impugned assessment was non-abated assessment and no incriminating material was found and seized on the impugned issue of disallowance of expenditure. Therefore the same is not sustainable as held in the case of Abhisar Buildwell Private Limited 2023 (4) TMI 1056 - SUPREME COURT Addition u/s 69C - assessee had also paid commission on the disallowed 2% of purchases - CIT(A) has deleted the estimated addition of commission amount holding that purchases on the basis of which disallowance made were considered as genuine purchases - HELD THAT - Since we have already sustained the action of the ld. CIT(A) in deleting the addition of such purchases as discussed supra in this order and further found that addition was not based on any incriminating document found and seized pertaining to the year under consideration as the same was non-abated assessment year. Addition made u/s 69C by treating the addition as duplicate addition - HELD THAT - AO has made the double addition on the basis of similar entries appearing in the journal of entries and also appearing in the ledger account of the S.B. International. Considering the above facts and findings we do not find any reason to interfere in the finding of ld. CIT(A) in deleting addition. Double addition - As repetitive addition of the same transaction which were reported once in ledger account and also in the journal entries not allowed. Unexplained expenditure u/s 69C - payment to various foreign entities in USD - CIT(A) deleted the addition in absence of any evidence - HELD THAT - We do not find any evidence which demonstrate that impugned transactions between the foreign parties were carried out on behalf of the assessee. AO had also not brought any material on record to substantiate that such payment by the foreign party to the other foreign party was made on or behalf of the assesse. Therefore we do not find any reason to interfere in the decision of Ld.CIT(A). Addition of cash generated in taking accommodation entries by inflating expenses is utilized in making payment towards unexplained expenditure - HELD THAT - On perusal of material placed on record we find that there is clear entries of receipt appeared on the left side and entries of payment reflected on the right side of the journal in Annexure A-39. Therefore we consider that ld. CIT(A) has rightly allowed the set off after co-relating the transactions as discussed. Treating expenses as non-genuine and disallowed the same u/s 37(1) - HELD THAT - We find that the assessing officer had not brought any material on record to substantiate that in fact the aforesaid expenditure was non-genuine expenditure. Further the AO has not carried out any enquiry with any of the party to controvert the submission of the assessee and to disprove the genuineness of the transactions. Addition on the basis of statement of Shri Jiten Pujari - assessee pointed out that all the third parties have retracted their statement after the search therefore the same have no evidential value unless based on seized document co-related with the assessee - HELD THAT - We have discussed the nature of additions and the relevant seized documents showing systematic maintaining of ledger account along with journal entries recorded with narrations as per annexure A-39 A41 and A-42 of the seized documents before arriving at the conclusion on the different issues therefore we do not find any merit in this ground of appeal of assessee since we have considered the sustainability of addition based on the seized document co-related with the assessee. Accordingly this ground of appeal of assessee is dismissed. Assessment u/s 143(3) r.w.s. 153C completed without any incriminating document being found during the course of search - A ddition of loan taken from M/s. Malvika Herbo Pharma Pvt. Ltd. was made u/s 68 on the basis of information available in the assessment record and information filed by the assessee - HELD THAT - we find merit in the submission of the Ld. Counsel that the said transaction was carried out through banking channel as evident from the details mentioned at page 7A of annexure A-41 with relevant details of amount cheque no. and submission made on the point that that same was duly recorded in the books of the assessee. Therefore the action of the assessing officer in treating the same as cash credit is not justified we direct the assessing officer to delete the addition u/s 68. Unexplained payment to the aforesaid parties in USD - HELD THAT - We find that the AO had not made any enquiry to ascertain the truth of the fact to prove that foreign parties had made payment to the other parties in USD on behalf of the assessee therefore we consider that ld. CIT(A) is not justified in sustaining the addition in contrary to his findings on the foreign payment issue in other cases as discussed supra in this order without establishing the fact that payment has been made actually on behalf of the assessee by one foreign party to other foreign party. Accordingly this ground of appeal of the assessee is allowed.

Summary

Issues Presented and Considered

The Tribunal addressed several core issues, primarily concerning the deletion of various additions made by the Assessing Officer (AO) under sections 69C, 68, and 37(1) of the Income Tax Act, 1961. These issues involved:

• Whether the additions made under section 69C for unexplained expenditure were justified.
• Whether the additions made under section 68 for unexplained cash credits were appropriate.
• Whether the disallowance of interest and other expenses under section 37(1) was warranted.
• Whether the invocation of section 115BBE was appropriate.
• Whether the additions were based on duplicate entries or unsupported by incriminating evidence.
• Whether the benefit of telescoping should be granted for unexplained expenditures.

Issue-wise Detailed Analysis

1. Additions under Section 69C

• Legal Framework: Section 69C pertains to unexplained expenditure, where the taxpayer fails to explain the source of expenditure, and it is deemed as income.
• Analysis and Findings: The Tribunal found that many additions were based on duplicate entries in seized documents, which were not corroborated with sufficient evidence. The CIT(A) had deleted these additions, recognizing them as repetitive or unsupported by concrete evidence.
• Conclusion: The Tribunal upheld the CIT(A)'s decision to delete these additions, emphasizing the lack of incriminating evidence and the repetitive nature of entries.

2. Additions under Section 68

• Legal Framework: Section 68 deals with unexplained cash credits, requiring the taxpayer to prove the identity, creditworthiness, and genuineness of the transaction.
• Analysis and Findings: The Tribunal noted that the assessee had provided adequate documentation to establish the genuineness and creditworthiness of the transactions. The AO failed to bring any contrary evidence.
• Conclusion: The Tribunal upheld the deletion of additions under section 68, citing the absence of incriminating evidence and the adequacy of the documentation provided by the assessee.

3. Disallowance under Section 37(1)

• Legal Framework: Section 37(1) allows deductions for business expenses unless they are personal or capital in nature.
• Analysis and Findings: The AO disallowed certain expenses, alleging them to be non-genuine. However, the Tribunal found that the AO did not conduct any independent inquiry to substantiate these claims.
• Conclusion: The Tribunal upheld the CIT(A)'s decision to delete these disallowances, noting the lack of evidence to prove the expenses were non-genuine.

4. Invocation of Section 115BBE

• Legal Framework: Section 115BBE imposes a higher tax rate on income deemed under certain sections, including 68 and 69C.
• Analysis and Findings: The Tribunal did not find substantial discussion on this issue, leading to the dismissal of related grounds.
• Conclusion: The Tribunal dismissed these grounds due to lack of discussion and evidence.

5. Duplicate Additions and Incriminating Evidence

• Analysis and Findings: The Tribunal extensively reviewed the seized documents and found that many entries were repetitive or not linked to the assessee. The AO's reliance on these entries for making additions was deemed unjustified.
• Conclusion: The Tribunal upheld the deletion of duplicate additions, emphasizing the need for concrete evidence linking the transactions to the assessee.

6. Telescoping Benefit

• Analysis and Findings: The Tribunal considered the assessee's claim for telescoping benefits, where unexplained expenditures could be set off against inflated expenses.
• Conclusion: The Tribunal directed the CIT(A) to examine the claim for telescoping benefits, allowing for adjustments based on available evidence.

Significant Holdings

• The Tribunal consistently emphasized the need for concrete evidence and proper correlation between seized documents and the assessee's accounts.
• It upheld the CIT(A)'s approach in deleting additions based on repetitive entries and lack of incriminating evidence.
• The Tribunal reiterated the importance of independent inquiries by the AO to substantiate claims of non-genuine transactions.
• It allowed for the possibility of telescoping benefits, directing the CIT(A) to reassess the claims based on the evidence.

In conclusion, the Tribunal dismissed the revenue's appeals and partly allowed the assessee's appeals, focusing on the lack of substantial evidence and the repetitive nature of entries in the seized documents. The decision underscores the necessity for thorough evidence and proper linkage between alleged transactions and the taxpayer's accounts.