2024 (9) TMI 960 - AT - Income Tax

Addition u/s 68 - unexplained/bogus credits - HELD THAT - As the assessee had duly proved on the file that the aforesaid amount represents the payment made by the assessee to the contractor M/s Growfast Realtors (P) Ltd. Therefore, both the lower authorities misconstrued the aforesaid amount as unexplained credits. The impugned addition is, therefore, not sustainable and the same is accordingly ordered to be deleted. Addition as unexplained credits - counsel has submitted that in respect of the above amount/transaction, both the lower authorities have wrongly and mistakenly taken the said amount as unexplained credits, whereas, the said amount was a payment made to M/s Sarda Vanijya (P) Ltd. during the course of business - HELD THAT - Referring certificate of an accountant under first proviso to sub-section (1) of section 201 of the Act certifying the aforesaid payment to M/s Sarda Vanijya (P) Ltd. by the assessee and TDS was duly deducted thereupon and further that the payee had duly taken into consideration the aforesaid payments in its return of income. The ld. counsel has also invited our attention to submit that the aforesaid transaction was duly explained to the AO. The aforesaid documents on record duly proved that the aforesaid amount was business payment by the assessee to M/s Sarda Vanijya (P) Ltd. and there is no question of addition on the same as unexplained credits into the income of the assessee. Therefore, the aforesaid addition made/confirmed by the lower authorities are ordered to be deleted. Bogus trading liability - HELD THAT - As trading liabilities of the small amounts cannot be merely added only because the assessee could not furnish the relevant documents in respect of the aforesaid two parties. The preponderance of probabilities in this respect lie in favour of the assessee. Considering that the assessee has been able to produce evidences in respect of the remaining parties and also considering that the assessee has collected records from the various parties, we do not find justification on the part of the lower authorities in making the addition in respect of the aforesaid two parties. The same is accordingly ordered to be deleted. Trading liability - HELD THAT - Considering the overall facts and circumstances of the case and considering that the assessee has been able to explain most of the transactions and also considering that the record of the assessee got damaged and that the assessee has collected the record/document including the bank account etc. from the respective parties and produced before the AO therefore, taking a balanced view, the addition in respect of the aforesaid two parties i.e. Kripa Infrastructure and Swastik Engineering is restricted to 50% of the addition made by the AO. Appeal of the assessee is treated as partly allowed.

Summary

Issues:
- Appeal against order of National Faceless Appeal Centre under Income Tax Act
- Addition of unexplained credits under section 68
- Treatment of trading liabilities as bogus
- Confirmation of additions in respect of certain parties
- Partial allowance of appeal

Analysis:
The judgment involves an appeal by the assessee against the order of the National Faceless Appeal Centre under the Income Tax Act. The case had previously been remanded to the Assessing Officer for de novo assessment, resulting in additions to the assessee's income. The CIT(A) confirmed these additions, leading to the current appeal.

The first issue raised by the assessee was the exparte order passed by the CIT(A) without considering the merits of the case. The subsequent grounds of appeal challenged the additions made by the Assessing Officer under section 68 in relation to transactions with various parties. The assessee argued that the amounts in question were payments made through banking channels, supported by documentary evidence. The Tribunal found in favor of the assessee, concluding that the additions were not justified and ordered them to be deleted.

Another issue involved the treatment of trading liabilities as bogus by the CIT(A) in the case of two parties. The Assessing Officer had made additions due to lack of supporting documents, despite the assessee's explanation of damaged records and production of evidence from other parties. The Tribunal ruled in favor of the assessee, stating that the additions were not warranted and ordered them to be deleted.

The final issue concerned the confirmation of additions in respect of certain parties for alleged bogus trading liabilities. The Tribunal reviewed the evidence presented, including confirmations and ledger entries, and found discrepancies in one case, leading to a partial confirmation of the addition. However, in the case of other parties, the Tribunal restricted the additions to 50% due to the overall circumstances and the assessee's efforts to explain the transactions.

In conclusion, the Tribunal partly allowed the appeal, deleting certain additions while partially confirming others. The decision was based on the assessee's ability to provide evidence and explanations for the transactions in question, highlighting the importance of supporting documentation in tax assessments.