2012 (11) TMI 710 - AT - Income Tax

Addition on account of interest payments to non genuine cash creditors - Held that - Most of the repayments were made either during the periods when the assessment proceedings were going on or thereafter. In such circumstances, it was expected of the assessee to at least have the correct address at the time of repaying the amounts, especially when assessee had not filed any confirmation in respect of these deposits. Thus, majority of the addition is liable to be confirmed except where summons were served or where summons were not received as unserved - out of these two additions the assessee was given a relief of Rs.2.91 lakh in respect of unexplained credits and Rs.85,751/- in respect of interest thereon and balance addition was confirmed Addition u/s. 69B of the Income-tax Act - assessee is engaged in the cheque discounting business Held that - Transaction had been recorded on the next working day when the payment was made on earlier working day after the business hours - assessee had submitted the explanation which is rightly accepted by Ld. CIT(A) since the assessee had given the cash after the business hours or on Saturday and accordingly the transactions have been entered on the next working day. The explanation has been substantiated from various documents submitted by the assessee - addition deleted Addition made by estimating the commission income u/s. 145 of the Income-tax Act - assessee had shown the cash payment to various parties against cheque discounting - Assessing Officer was of the view that it is not possible for him to deduce accurate income and therefore on show-cause given to the assessee he rejected the books of account u/s 145(3) of the Act Held that - In addition to the specific addition made and to meet the ends of justice the AO made presumption that the assessee had understated commission income of such transaction and accordingly estimated the income of Rs.5 lakh over and above the commission declared by the assessee CIT in his order by accepting the explanation of the assessee deleted the addition

Issues involved:
1. Disallowance of cash credits under section 68 of the Income-tax Act
2. Disallowance of interest payments to non-genuine cash creditors
3. Addition under section 69B of the Income-tax Act
4. Estimation of commission income under section 145 of the Income-tax Act
5. Compliance with principles of natural justice in the assessment process

Analysis:

1. Disallowance of Cash Credits under Section 68:
The Revenue challenged the relief granted by the Ld. CIT(A) regarding the addition of cash credits under section 68 of the Income-tax Act. The Ld. CIT(A) upheld the addition for unexplained credits where summons were not served or not received back, granting partial relief to the assessee. The ITAT concurred with the Ld. CIT(A)'s reasoned decision, noting that the assessee failed to make further efforts to contact the creditors. Therefore, the ITAT dismissed the grounds of appeal related to this issue.

2. Disallowance of Interest Payments to Non-Genuine Cash Creditors:
Similar to the previous issue, the ITAT upheld the Ld. CIT(A)'s decision to grant partial relief to the assessee concerning interest payments on non-genuine cash credits. The ITAT found no infirmity in the Ld. CIT(A)'s order and dismissed the relevant grounds of appeal.

3. Addition under Section 69B:
The Revenue contested the Ld. CIT(A)'s deletion of the addition made under section 69B of the Income-tax Act related to cheque discounting transactions. However, the ITAT agreed with the Ld. CIT(A) that the assessee's explanation was acceptable, supported by evidence, and deleted the addition. Therefore, the ITAT dismissed the Revenue's appeal on this issue.

4. Estimation of Commission Income under Section 145:
The Revenue raised concerns about the estimation of commission income by the Assessing Officer under section 145 of the Income-tax Act. The Ld. CIT(A) accepted the assessee's explanation and deleted the addition. The ITAT found no reason to interfere with the Ld. CIT(A)'s decision, leading to the dismissal of the Revenue's appeal on this ground.

5. Compliance with Principles of Natural Justice:
The assessee raised concerns about the violation of principles of natural justice in the assessment process. However, the ITAT did not find it necessary to adjudicate on these general grounds, as they did not impact the substantive issues under consideration.

In conclusion, both the assessee's and Revenue's appeals were dismissed by the ITAT, upholding the decisions made by the Ld. CIT(A) on various issues related to cash credits, interest payments, addition under section 69B, and estimation of commission income under the Income-tax Act.

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