1995 (2) TMI 121 - AT - Income Tax

Summary

Issues:
1. Addition of Rs. 97,000 as unexplained cash credits.
2. Disallowance of sales-tax to the extent of Rs. 28,750 under section 43B.

Detailed Analysis:
Issue 1: The assessee appealed against the addition of Rs. 97,000 as unexplained cash credits made by the Assessing Officer (AO) and confirmed by the CIT(A). The loans were received in cash from family relatives of the directors. The assessee explained that the creditors had sold agricultural lands to make the deposits. However, the AO found no evidence to support this explanation and treated the amount as unproved cash credits. The CIT(A) did not accept the appeal based on the confirmations and documents provided by the assessee.

Issue 2: The assessee also challenged the disallowance of sales-tax amounting to Rs. 28,750 under section 43B. The AO added this amount as it was not paid during the relevant previous year. The CIT(A) upheld the addition, stating that since the sales-tax was realized but not paid, the addition was justified. The assessee contended that section 43B was not applicable during the relevant assessment year and relied on a Supreme Court judgment to support their argument.

Judgment: The ITAT Delhi-D, after considering the submissions and evidence presented, held that the assessee had successfully established the nature and source of the cash credits from the creditors. Therefore, the addition of Rs. 97,000 was deemed unjustified and deleted. Regarding the disallowance of sales-tax under section 43B, the ITAT allowed the additional ground of appeal taken by the assessee. It held that the assessee had followed the appropriate accounting method by offering the sales-tax collected as income and taking the unpaid amount to the balance sheet, making the disallowance unwarranted. Consequently, the appeal of the assessee was allowed in full.