2005 (12) TMI 208 - AT - Income Tax

Issues Involved:
1. Addition of Rs. 20,02,136 as unaccounted income.
2. Addition of Rs. 82,28,347 based on peak credits.
3. Addition of Rs. 16 lakhs as unexplained credits.
4. Interest charged under section 234B.

Detailed Analysis:

1. Addition of Rs. 20,02,136 as Unaccounted Income:
The assessee was engaged in the business of manufacturing steel casting and steel ingots. The Assessing Officer (AO) noted discrepancies in sales made to M/s. M.K. Sales, a partnership firm comprising the Director of the assessee-company and his wife. The AO observed that M/s. M.K. Sales had not conducted any business and was used as a conduit for selling pig iron in the open market at a premium. The AO added Rs. 20,02,136 as unaccounted income, which was the credit balance in M/s. M.K. Sales' account. The CIT(A) upheld this addition, noting that the credit balance represented unaccounted income. The Tribunal, however, reduced the addition to Rs. 5,62,748, considering that Rs. 14,39,388 of the Rs. 20,02,136 had already been taxed in the previous year.

2. Addition of Rs. 82,28,347 Based on Peak Credits:
The AO, following the CIT(A)'s direction, made an addition of Rs. 82,28,347 based on peak credits. The CIT(A) reduced this addition to Rs. 20,02,136, which was the credit balance at the end of the year. The Tribunal found no merit in making the addition based on peak credits, as the sales were accepted, and only the profit could be taxed. The Tribunal upheld the CIT(A)'s decision, noting that the peak credit for the relevant year was lower than the previous year, and thus, no addition on this basis was warranted.

3. Addition of Rs. 16 Lakhs as Unexplained Credits:
The AO noted credits of Rs. 5 lakhs in the name of Sh. Ajit Pal Singh, Rs. 2 lakhs in the account of M/s. Amar Finance Industrial, Rs. 10 lakhs in the name of M/s. R.K. Joshi & Co., and Rs. 1 lakh in the name of Sh. Manjit Singh. The AO made an addition of Rs. 18 lakhs as unexplained credits. The CIT(A) reduced this to Rs. 16 lakhs, excluding the amount in M/s. Amar Finance Company's account, which was a brought forward balance. The Tribunal upheld the addition of Rs. 11 lakhs for Sh. Manjit Singh and M/s. R.K. Joshi & Co., as the assessee failed to prove the identity, creditworthiness, and genuineness of these credits. However, the Tribunal deleted the addition of Rs. 5 lakhs for Sh. Ajit Pal Singh, as the AO failed to issue a summons despite the assessee's request.

4. Interest Charged Under Section 234B:
The Tribunal noted that the issue of interest under section 234B was consequential and directed the AO to allow consequential relief at the time of giving effect to the order.

Conclusion:
The Tribunal partly allowed the assessee's appeals, reducing the addition of Rs. 20,02,136 to Rs. 5,62,748 and deleting the addition of Rs. 5 lakhs for Sh. Ajit Pal Singh. The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to reduce the addition based on peak credits. The issue of interest under section 234B was left to be resolved consequentially.

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