2013 (4) TMI 174 - AT - Income Tax

Addition made on account of two Sundry Creditors under the head Income from Other Sources - Held that - The advances received by the assessee from the two parties were duly adjusted in the subsequent year against the sales made by the assessee to both the parties. Since the advances received were duly adjusted and set off against the sales, which were made to these parties and there remained no advances in the subsequent year the addition made by the AO cannot be sustained - thus delete the addition made - in favour of assessee. Addition of Rs.5,00,000/- made on account of introduction to Capital under the head Income from Other Sources - Held that - Going through the bank accounts as well as the confirmations filed by the assessee from Tea Brokers (Guwahati) Pvt. Ltd. it is seen that ultimately the amount came to the bank account of the assessee s proprietorship concern, i.e. Giriraj Steel Traders of Rs.2 lakhs on 7.3.2001 and Rs.3 lakhs on 21.3.2001 by way of transfer from G. D. Enterprises. This is apart from the fact that the assessee has received a sum of Rs.5,35,858/- from M/s. Tea Brokers (Guwahati) Pvt. Ltd. as refund of the loan earlier advanced by the assessee along with interest thereon. M/s. Tea Brokers (Guwahati) Pvt. Ltd. is an income-tax assessee, the identity of which is not doubted. The amount has been received through cheque and has duly come in the bank account of the assessee. Thus the assessee has discharged his onus, thus the addition deleted by setting aside the order of the CIT(A)- in favour of assessee. Addition of Rs.65,000/- made on account of introduction to Capital under the head Income from Other Sources - assessee reiterated the submissions that out of cash in hand accumulated from its withdrawals from the bank account of the assessee - Held that - On going through the bank account and cash book and keeping in view of the documents of the assessee, the explanation of the assessee that out of cash in hand accumulated from its withdrawals from the bank account of the assessee accepted. No infirmity in the order of the CIT(A) in confirming the addition - against assessee. Addition of Rs.90,020/- made on account of the introduction to the capital in the proprietorship concern - Held that - Going through the copy of the bank account it is noted that the assessee had transferred on 13.9.1999 a sum of Rs.70,000/- in the current account of the proprietorship concern and similarly, the assessee had transferred on 15.12.1999 a sum of Rs.20,000/- in his proprietorship concern vide cheques. The sum of Rs.20/- is a petty amount and is also appearing as transfer on 22.3.2001. Thus the observations made by the authorities below are not correct and the sum of Rs.90,020/- is duly appearing in the Punjab National Bank account number on three dates amounting to Rs.70,000/-, Rs.20,000/- and Rs.20/-. As the assessee has duly explained the source of the capital introduced in the firm orders to delete the addition - in favour of assessee.

Summary

Issues:
1. Sustenance of addition of Rs.1,64,500 on account of two Sundry Creditors under Income from Other Sources.
2. Addition of Rs.5,00,000 on account of introduction to Capital under Income from Other Sources.
3. Addition of Rs.65,000 on account of introduction to Capital in the proprietorship concern.
4. Addition of Rs.90,020 on account of introduction to the capital in the proprietorship concern.

Issue 1: Sustenance of addition of Rs.1,64,500 on account of two Sundry Creditors under Income from Other Sources:
The AO added Rs.1,64,500 based on advances shown in the balance-sheet from two parties. The CIT(A) upheld this addition. However, the ITAT found that the advances were duly adjusted against sales made to these parties, supported by bills and confirmations. As there were no outstanding advances, the addition was deemed unjustified. The ITAT set aside the CIT(A)'s order and deleted the Rs.1,64,500 addition.

Issue 2: Addition of Rs.5,00,000 on account of introduction to Capital under Income from Other Sources:
The AO added Rs.5,00,000 as unexplained investment under section 69. The CIT(A) upheld this addition due to the lack of proof regarding the source of the amount. However, the ITAT reviewed the confirmations and bank statements provided by the assessee, showing the fund transfer and loan repayment, concluding that the assessee had discharged the onus. The ITAT deleted the addition, setting aside the CIT(A)'s order.

Issue 3: Addition of Rs.65,000 on account of introduction to Capital in the proprietorship concern:
The AO added Rs.65,000 introduced in the proprietorship concern, which the CIT(A) confirmed. The assessee claimed the amount accumulated from bank withdrawals, supported by a cash book. However, upon examination of bank accounts and documents, the ITAT found the explanation unsatisfactory. Consequently, the ITAT upheld the CIT(A)'s decision to sustain the Rs.65,000 addition.

Issue 4: Addition of Rs.90,020 on account of introduction to the capital in the proprietorship concern:
The AO added Rs.90,020 for unexplained capital introduction, upheld by the CIT(A). The ITAT observed bank transactions showing transfers to the proprietorship concern, explaining the source of the capital. As the amount was accounted for in the bank records, the ITAT disagreed with the lower authorities' conclusions. Therefore, the ITAT set aside the CIT(A)'s order and deleted the Rs.90,020 addition.

In conclusion, the ITAT partly allowed the appeal, deleting the additions of Rs.1,64,500 and Rs.90,020, while upholding the additions of Rs.65,000 and Rs.5,00,000.