2014 (4) TMI 1011 - HC - Income Tax

Justification for rejection of books of accounts u/s 145(2) of the Act - Sales not verifiable from the accounts Addition u/s 68 of the Act Substantial question of law Held that - The CIT(A) has observed that all the quantitative details are available in the books of Account and that the accounts are regularly maintained and on those factual findings deleted the addition made by AO, which was confirmed by the Tribunal as such no substantial question of law arises in respect of deletion of addition made u/s 145(2) - the cash creditors including the ladies creditors appeared before the AO and their income particulars were filed before the AO - The AO disbelieved all those documents and statement of those creditors for one reason or the other - The CIT(A) rightly held that the AO was not justified in making addition as an unexplained credit the Tribunal was right in confirming the order of deleting the addition of Rs. 9,83,935/- made u/s 68 of the Act - So far as deletion of addition of Rs. 9,83,935/- made u/s 68 of the Act is concerned, there was no substantial question of law arises Decided against Revenue.

Summary

Issues:
1. Rejection of accounts under Section 145(2) of the IT Act.
2. Addition under Section 68 for unexplained credit.

Rejection of Accounts under Section 145(2) of the IT Act:
The appellant, a coal dealer, faced issues during the assessment for the year 1996-97 when the Assessing Officer doubted the correctness of the accounts due to defects and raised sales amount by 20%. The addition of Rs. 7,21,717 was made under Section 145(2) of the IT Act. However, the C.I.T. (Appeals) deleted this addition, stating it was based on mere suspicion and that the accounts were maintained regularly without deviation from the accounting system. The ITAT upheld this decision, emphasizing the regular maintenance of accounts and lack of deviation from known accounting practices.

Addition under Section 68 for Unexplained Credit:
The Assessing Officer also added Rs. 9,83,935 as unexplained credit under Section 68 of the IT Act, alleging that the loan creditors were not genuine. The C.I.T. (Appeals) disagreed, noting that creditors responded to notices and provided income tax particulars, which the Assessing Officer disregarded. The ITAT upheld the deletion of this addition, emphasizing that the creditors' identities and creditworthiness were established. The Tribunal dismissed the Revenue's appeal, citing the established facts and lack of substantial legal questions.

In conclusion, the High Court dismissed the Tax Appeal by the Revenue, as no substantial question of law arose from the concurrent findings of the C.I.T. (Appeals) and ITAT regarding the rejection of accounts under Section 145(2) and the addition for unexplained credit under Section 68 of the IT Act. The judgments were based on the regular maintenance of accounts, lack of deviation from accounting norms, and the established identities and creditworthiness of the creditors.