2003 (9) TMI 321 - AT - Income Tax

Addition of unexplained cash credits and interest - HELD THAT - The issue also stands covered in favour of the assessee and against the Department. Presuming that cash credits are unexplained, then the CIT(A) was fully justified in allowing set off of intangible addition on account of unexplained cash credits. This set off is nothing but telescopy of additions which is permitted in view of the decision of Hon ble Delhi High Court in the case of Late Shri R. Dalmia Through LR vs. CIT 2001 (8) TMI 26 - DELHI HIGH COURT wherein it was held that if any unexplained cash credit can reasonably be related to the amount covered by the intangible addition made in the past, or in the very year, necessary set off is not impermissible and also from the decision in B Brothers Engg. Works vs. Dy. CIT 2002 (12) TMI 191 - ITAT AHMEDABAD-A the addition on account of credits found recorded in a diary maintained by the assessee-firm was deleted by the Tribunal, Ahmedabad Bench A , allowing the benefit of telescopy against the addition on account of on-money received by the assessee. The above decision was rendered after relying on the decision of Hon ble Supreme Court in the case of Anantharam Veerasinghaiah Co. vs. CIT 1980 (4) TMI 2 - SUPREME COURT . So, in view of the above findings, there is no force in the submissions of the learned Departmental Representative and the Revenue has to fail in this ground also. As a result, we delete the additions and allow the appeal of the assessee and dismiss the appeal of the Revenue.

Summary

Issues involved: Assessment of income, unexplained cash credits, interest disallowance, rejection of books of accounts, addition to returned income.

In this judgment by the Appellate Tribunal ITAT Jodhpur, the appeals related to the assessment year 1992-93 were disposed of together. The assessee, a contractor, had shown receipts on contract at a certain rate which the Assessing Officer (AO) found to be on the lower side. The AO also noted new credits from 20 persons, out of which 17 were deemed not genuine. The AO rejected the books of accounts and made additions based on a higher N.P. rate. The CIT(A) granted some relief, leading to appeals from both the assessee and the Department.

The Tribunal considered the submissions and evidence presented. The assessee's representative argued against the additions made on account of unexplained cash credits and interest, contending that the assessee had already been subjected to higher N.P. rate based on rejected books of accounts. The representative provided detailed evidence, including confirmations and affidavits from cash creditors, to establish the genuineness of the credits.

The Departmental Representative argued that the cash creditors were not creditworthy and lacked evidence of loan transactions. However, the Tribunal found that the assessee had made efforts to prove the genuineness of the cash credits, including producing some creditors before the AO and submitting relevant documents.

The Tribunal examined the evidence presented, including confirmations, affidavits, and letters to the AO, and concluded that the cash credits were genuine. It noted that the AO's findings were not supported by the evidence on record, and the creditworthiness of the creditors was established. The Tribunal also cited relevant case law supporting its decision.

Regarding the Revenue's challenge to the set off of certain additions, the Tribunal upheld the CIT(A)'s decision, allowing the set off against unexplained cash credits. The Tribunal referenced legal precedents supporting this decision and ultimately deleted the additions, allowing the assessee's appeal and dismissing the Revenue's appeal.