2013 (5) TMI 356 - AT - Income Tax

Unexplained credits set off of the addition - Withdrawal of set off of peak of cash credits against unaccounted advances to farmers by AO on direction given by CIT(A). - Held that - Similar dispute regarding set off of peak of cash credits against unaccounted advances to farmers also arose in case of the assessee s wife 2013 (5) TMI 355 - ITAT HYDERABAD for the impugned assessment year. In assessee s wife case also, the AO by virtue of an order passed u/s 154 of the Act withdrew the set off of peak of cash credits allowed in the consequential order passed by him in pursuance to the order of the CIT (A). In this case also, the facts are materially similar to the facts involved in earlier case of Smt. C. Prabhavathi. In fact, the CIT (A) has followed the order passed by the first appellate authority in case of assessee s wife. - Decided against the revenue.

Summary

Issues:
- Distinguishing between 'advances to farmers outside books of accounts' and 'unexplained credits (cash credits) in books of accounts'
- Setting off 'unexplained credits (peak credits) in the books of accounts' against 'advances to farmers outside books of accounts'

Analysis:

Issue 1:
The appeal filed by the Revenue challenged the order of CIT (A) regarding the distinction between 'advances to farmers outside books of accounts' and 'unexplained credits (cash credits) in books of accounts.' The department contended that the assessee must explain the sources for money in both cases. The CIT (A) had enhanced the income by a specific amount and directed the Assessing Officer to verify and set off peak credits against the advances given to farmers. Subsequently, the Assessing Officer rectified the order by withdrawing the set off of peak credits. The CIT (A) held that the assessee was entitled to set off the peak of cash credits against the unaccounted advances to farmers, based on a similar decision in another case.

Issue 2:
The second ground of appeal focused on setting off 'unexplained credits (peak credits) in the books of accounts' against 'advances to farmers outside books of accounts.' The department challenged the order of the CIT (A) regarding this set off. The Tribunal noted a similar case involving the assessee's wife, where the CIT (A) had allowed the set off of peak cash credits against unaccounted advances to farmers. The Tribunal upheld the order of the CIT (A) in the wife's case, emphasizing the clarity of the directions given by the CIT (A) and dismissing the revenue's appeal.

In conclusion, the Tribunal dismissed the department's appeal, upholding the order of the CIT (A) based on the precedent set in a similar case involving the assessee's wife. The decision was made after considering the factual similarities and the clarity of the directions given by the CIT (A) in allowing the set off of peak cash credits against unaccounted advances to farmers.