2024 (5) TMI 1177 - AT - Income Tax

Taxability of creditors as unexplained/cessation of liability - AO found that certain creditors were actually loans/advances and not creditors - HELD THAT - The liabilities of G.G.Telecrest Pvt. Ltd. and Uttam Strips Pvt. Ltd. have to be disclosed in the balance sheet of the appellant/assessee as loan/advances. It cannot be ruled out that there may not be some error in the grouping of these liabilities under the head creditors instead of loans and advances as these liabilities are not appearing under the head loans and advances in the balance sheet of the appellant/ assessee. In view of the above, we are of the considered opinion that the liabilities of the above mentioned two parties; G.G.Telecrest Pvt. Ltd. and Uttam Strips Pvt. Ltd., aggregating Rs. 95,00,000/- require further investigations/verifications. Therefore, in the interest of justice appellant/assessee deserves reasonable one more opportunity to make good the defects/shortcomings - we deem it appropriate set aside the issue of taxability of liabilities of G.G.Telecrest Pvt. Ltd. and Uttam Strips Pvt. Ltd.and remit the matter back to the file of the AO for de-nova consideration.' In respect of creditors other than those mentioned above in para 10, the appellant/assessee did not file any details or confirmation either before the AO or CIT(A). we therefore, have no option except to upheld the addition for this. Disallowance of commission expenses u/s 40(a)(ia) - Taxability of cash deposits in the bank account of the appellant/assessee - The appellant/assessee has failed to bring any material on the record to contradict the findings of the Ld. CIT(A) on these two issues. We, therefore, do not find fit to interfere in the findings of the CIT(A) in this regard. Appeal of assessee is partly allowed.

Summary

Issues Involved: The judgment involves the taxability of creditors, disallowance of commission expenses, and taxability of cash deposits.

Taxability of Creditors:
The appellant/assessee challenged the taxability of creditors amounting to Rs. 1,12,75,060/- as unexplained/cessation of liability. The AO found that certain creditors were actually loans/advances and not creditors, requiring further investigation. The liabilities of G.G.Telecrest Pvt. Ltd. and Uttam Strips Pvt. Ltd. aggregating to Rs. 95,00,000/- were remitted back to the AO for de-nova consideration. However, for other creditors, the addition of Rs. 17,75,060/- was upheld due to lack of details or confirmation.

Disallowance of Commission Expenses:
The AO disallowed commission expenses of Rs. 16,52,720/- under section 40(a)(ia) of the Act as TDS was not deducted. The appellant/assessee claimed these expenses were rebates/discounts, but failed to provide supporting evidence. The Tribunal did not interfere with the CIT(A)'s findings on this issue.

Taxability of Cash Deposits:
The AO taxed cash deposits totaling Rs. 16,28,500/- in the bank account of the appellant/assessee. The appellant/assessee argued that the profit from another entity had been accounted for, but the AO found discrepancies. The Tribunal did not intervene in the CIT(A)'s decision regarding the taxability of these cash deposits.

Condonation of Delay:
There was a delay of 84 days in filing the appeal, attributed to the appellant/assessee's illness. The Tribunal, following legal precedents, condoned the delay and admitted the appeal for adjudication on merits.

Conclusion:
The Tribunal remitted the issue of taxability of certain creditors back to the AO for further investigation, upheld the addition of other creditors, and did not interfere with the disallowance of commission expenses and taxability of cash deposits. The appeal of the assessee was partly allowed.

Order: The order was pronounced in open court on 15th May, 2024.