2013 (8) TMI 756 - AT - Income Tax

Unexplained credit u/s 68 of the Income Tax Act credit worthiness of lender - genuineness of transaction - onus to prove - Held that - In the present case, the assessee did not able to establish the cash credits mentioned above as genuine credits. The assessee s stand from the beginning and also before us is that the cash credits are genuine. The assessee never took specific stand that these unexplained cash credits are referable to the income from disclosed sources - In order to delete this addition, the assessee is bound to explain the source of credit, genuineness of the transaction and the capacity of the lender to advance the same. As the assessee failed to explained these criteria confirmation of order of Commissioner(A) has been done Reliance is placed upon the CIT v. Maduri Rajaiahgari Kistaiah 1975 (12) TMI 8 - ANDHRA PRADESH High Court -and in the case of CIT v. Devi Prasad Viswanath Prasad 1968 (8) TMI 5 - SUPREME Court wherein held that on rejection of books of account, business income estimated, addition towards unexplained cash credit separately valued Decided against the Assessee. Whether Intangible addition in the past would take care of the unexplained credit in the present Held that - When the alternate plea that tangible additions in the past could take care of cash credits of current year is not taken at the earlier stage and no materials are placed on record to substantiate the same, rejection of such plea would be justified Reliance is placed upon the judgment of R. Dalmia (Decd.) Versus Commissioner of Income Tax. 2001 (8) TMI 26 - DELHI High Court Decided against the Assessee.

Summary

Issues Involved:
1. Addition of Rs. 15,00,000/- as unexplained cash credit.
2. Addition of Rs. 41,46,233/- under section 40(i)(ia) for non-deduction of tax at source.
3. Addition of Rs. 10,53,315/- due to low net profit without rejecting the books of account.

Detailed Analysis:

1. Addition of Rs. 15,00,000/- as Unexplained Cash Credit:
The assessee contested the addition of Rs. 15,00,000/- as a loan from Smt. Radhika Gupta, asserting that she has been regularly assessed to tax and has a regular source of income. The amount was advanced by cheque. However, the Assessing Officer (AO) made an exparte order under section 144 of the Income Tax Act, as the assessee failed to provide necessary evidence to prove the identity, creditworthiness of the party, and genuineness of the transaction. The Tribunal, recognizing the additional evidence submitted by the assessee, deemed it fit to remit the issue back to the AO for fresh consideration. The Tribunal emphasized that even if the income is estimated, the AO may invoke the provisions of section 68/69 of the Act, as held in a previous Tribunal decision.

2. Addition of Rs. 41,46,233/- under Section 40(i)(ia) for Non-Deduction of Tax at Source:
The assessee argued that the provisions of section 192C were not applicable as it was the first year of business. The Tribunal noted that the original assessment was completed under section 144 due to the non-production of necessary evidence by the assessee. Given the new evidence presented, the Tribunal decided to remit the issue back to the AO for fresh consideration, allowing the assessee to produce the required documents.

3. Addition of Rs. 10,53,315/- Due to Low Net Profit Without Rejecting the Books of Account:
The assessee objected to the estimation of income by the AO, who rejected the books of account. The assessee contended that the low net profit rate of 0.1% was due to significant advertisement expenditure in the first year of business. The Tribunal, considering the new evidence and the fact that the books of account were not initially produced, directed the AO to reassess the books. The AO was allowed to make a best judgment if discrepancies were found in the books of account.

Conclusion:
The Tribunal remitted all issues back to the AO for fresh consideration, allowing the assessee to produce additional evidence and directing the AO to reassess the books of account. The appeal was allowed for statistical purposes, and the AO was given liberty to make a best judgment in accordance with the law if discrepancies were found. The order was pronounced in the open court on 10/07/2013.