2000 (7) TMI 205 - AT - Income Tax

Summary

Issues:
Addition of cash credits in the assessment for the assessment year 1997-98.

Analysis:
The appeal was against the CIT(A)'s decision upholding the addition of Rs. 3,87,985 on account of cash credits. The assessee firm was involved in the business of machinery spare parts and trading in stone quarry. The AO found discrepancies in the accounts of certain parties where cash receipts against sale bills were shown by the assessee. Despite being asked to provide confirmation from the parties, the assessee failed to do so. Statements under s. 131 revealed that the cash recorded in the assessee's books was not given by the customers. The AO made additions based on specific instances of discrepancies in the accounts of various parties.

The assessee contended in appeal that the entries were realizations of sale consideration and not cash credits. The assessee argued that the discrepancies were due to wrong entries and should not be treated as cash credits. The assessee also raised concerns about the lack of opportunity for cross-examination of the parties deposing against them. However, the CIT(A) confirmed the addition as the assessee failed to provide necessary details and confirmations.

In the subsequent appeal, the assessee's counsel argued that the credits were not cash credits but realizations from sales. They also highlighted errors in the AO's calculations for the additions. The Departmental Representative supported the original decision, emphasizing the assessee's failure to provide evidence despite opportunities.

The Tribunal found that the AO was justified in treating the unproved credits as unexplained income when the assessee failed to provide evidence. The Tribunal rejected the arguments regarding the nature of credits and upheld the addition of cash credits as deemed income. However, the Tribunal acknowledged errors in the calculation of additions and remanded the case to the AO for proper assessment based on peak credits and available cash details.

The Tribunal partly allowed the appeal, setting aside the previous orders and instructing the AO to reevaluate the additions based on peak credits and available funds. The other grounds raised in the appeal were rejected as they were not pressed by the assessee's counsel.