2024 (5) TMI 445 - HC - Income Tax

Addition u/s. 68 - unsecured loans / cash credit - net profit addition - ITAT deleted addition as no loans has been taken by the assessee during the year under consideration but it was the opening balance as on 01.04.2013 which was carried forward and thus, the genuineness of cash credits were established by the assessee and assessee has duly furnished all the details to establish the correctness of the books of accounts and while rejecting the books of accounts has not recorded any proper satisfaction/reasons and therefore, the rejection of books of accounts was not justifiable. HELD THAT - CIT(A) and ITAT concurrently based on available records arrived at a finding of fact that the assessee had duly furnished details to establish the correctness of books of accounts and also furnished ITR, Audit Report, balance sheet etc. Having essentially therefore arrived at such findings based on facts, no substantial question of law, much less any substantial question of law is argued. The appeal is dismissed

Summary

Issues:
The issues involved in this case include the deletion of additions made under Section 68 of the Income Tax Act and the net profit addition for the Assessment Year 2014-15.

Deletion of Addition under Section 68:
The appellant, engaged in the business of trading, had filed its income tax return declaring a total income. The Assessing Officer made additions under Section 68 for unsecured loans/cash credit and turnover disallowance. The CIT(Appeals) partly allowed the appeal, noting that the appellant had submitted details to establish the identity, creditworthiness, and genuineness of transactions. The appellant provided documents for both cash creditors, including confirmation, bank statements, and audit reports. The AO's addition was based on the appellant's alleged failure to produce depositors' evidence. However, the appellant had submitted necessary details to prove the transactions' genuineness. The Tribunal upheld the CIT(A)'s decision, stating that the appellant had established the genuineness of cash credits and the correctness of books of accounts. The Tribunal found no need to interfere with the CIT(A)'s findings and dismissed the Revenue's appeal regarding this issue.

Net Profit Addition Deletion:
Regarding the net profit addition, the Assessing Officer disallowed expenses under Section 14A r.w.r 8D and made a substantial addition to the turnover. The CIT(Appeals) found that the appellant had furnished details to establish the correctness of books of accounts, including ITR, Audit Report, balance sheet, and profit & loss account. The AO's rejection of books of accounts lacked proper justification, and the CIT(A) rightly accepted the turnover increase despite a decrease in G.P and N.P. ratios. The Tribunal concurred with the CIT(A)'s findings, dismissing the Revenue's appeal on this ground as well. Both the CIT(A) and the Tribunal concluded that the appellant had provided sufficient evidence to support the accuracy of its financial records, leading to the dismissal of the appeal.

In summary, the Gujarat High Court upheld the decisions of the CIT(A) and the ITAT, finding that the appellant had adequately substantiated the genuineness of cash credits and the correctness of its financial records. The court dismissed the appeal, as no substantial questions of law were raised based on the established facts and evidence presented during the proceedings.