2001 (6) TMI 178 - AT - Income Tax

Summary

Issues Involved:
1. Addition of Rs. 2,00,000 as unaccounted income.
2. Addition of Rs. 50,000 on estimated basis out of unverifiable expenses.
3. Cross-objection by the assessee regarding the proceedings u/s 147 and sustaining the addition of Rs. 20,000 by the CIT(A).

Summary:

Issue 1: Addition of Rs. 2,00,000 as Unaccounted Income

The AO added Rs. 2,00,000 as unaccounted income due to non-production of loan creditors for examination. The CIT(A) deleted this addition, observing that the assessee had provided sufficient details such as names, addresses, confirmations, and bank statements of the creditors. The Tribunal upheld the CIT(A)'s decision, noting that the assessee had taken sufficient steps to discharge the initial burden of proving the genuineness of the loans. The Tribunal emphasized that the AO did not utilize the power u/s 131 to summon the creditors and failed to bring adequate materials to prove the loans were not genuine. The Tribunal cited various judicial precedents, including the Hon'ble Supreme Court in CIT vs. Orissa Corporation (P) Ltd. and the Gauhati High Court in Jalan Timber vs. CIT, to support its decision.

Issue 2: Addition of Rs. 50,000 on Estimated Basis Out of Unverifiable Expenses

The AO made an addition of Rs. 50,000 on the ground that none of the expenses debited to the trading and P&L a/c could be verified due to non-production of books of account. The CIT(A) reduced this addition to Rs. 20,000, observing that the sales were verifiable. The Tribunal upheld the CIT(A)'s decision, noting that despite the increase in sales and net profit rate, the books of account were not produced, justifying the addition of Rs. 20,000 for unverifiable expenses.

Issue 3: Cross-Objection by the Assessee

The assessee's cross-objection regarding the proceedings u/s 147 was not pressed and thus dismissed. The challenge to the CIT(A)'s sustaining of Rs. 20,000 out of the Rs. 50,000 added by the AO was also dismissed. The Tribunal found no infirmity in the CIT(A)'s order, agreeing that the addition was justified due to the non-production of books of account.

Conclusion:

Both the Revenue's appeal and the assessee's cross-objection were dismissed. The Tribunal upheld the CIT(A)'s deletion of the Rs. 2,00,000 addition and the interest thereon, as well as the partial sustenance of the Rs. 50,000 addition, reducing it to Rs. 20,000.