2012 (7) TMI 721 - AT - Income Tax

Additions on account of undisclosed income - CIT(A) deleted the additions - AO objected to the admission of additional evidence - Held that - As soon as AO called upon the appellant to produce confirmations from various creditors he took immediate action and sent out letters addressed to various creditors requesting them to confirm the balance. However, the creditors did not respond before the hearing proceedings were closed. As the appellant had no control over the creditors, the additional evidence filed by the appellant is admitted as the conditions laid down in Rule 46A are satisfied in this case. The appellant has filed the necessary documents and reconciliation in respect of his accounts with creditors where certain discrepancies were pointed out in the assessment order. Whereas in remand report, the AO has not brought any material on record to show that these discrepancies have remained unreconciled even after considering the documents filed in appellate proceedings - the appellant has discharged his burden of proof in respect of his transactions with creditors, thus the addition made by the AO is not justified and is deleted - against revenue.

Summary

Issues:
Appeal against deletion of addition of undisclosed income and acceptance of additional evidences u/s 46A.

Analysis:
1. The appellant, a Revenue, challenged the deletion of an addition of Rs.1,34,86,495 as undisclosed income by the CIT(A) for AY 2006-07.
2. The AO added the amount to the assessee's income due to failure to furnish confirmations from creditors. The CIT(A) deleted the addition, leading to the Revenue's appeal.
3. The Revenue argued that the burden to prove genuineness of transactions and creditworthiness of creditors was on the assessee, which they failed to do.
4. The assessee contended that the amounts were not undisclosed income but related to supply of goods and services, supported by audited accounts and reconciliation.
5. The CIT(A) admitted additional evidence under Rule 46A, considering the AO's failure to provide opportunity during assessment proceedings.
6. The CIT(A) found the appellant had discharged the burden of proof regarding transactions with creditors, leading to deletion of the addition.
7. The Tribunal upheld the CIT(A)'s decision, noting the AO's lack of solid reasons to discard the evidence provided by the assessee.
8. The Tribunal found no perversity in the CIT(A)'s order, dismissing the Revenue's appeal and upholding the deletion of the addition.

This detailed analysis covers the issues raised in the appeal, the arguments presented by both parties, the consideration of evidence, and the final decision by the Tribunal, providing a comprehensive understanding of the legal judgment.