2014 (6) TMI 72 - AT - Income Tax

Claim of amount due to business associates Held that - There was no reason to interfere with the order of the CIT(A) - Assessee has computed his gross assets and claimed deduction of various amounts borrowed from others so as to arrive at the unaccounted amount and the details of which were placed before the AO - Working of amounts due to business associates was also based on the seized note book marked as AC-79 the assessee s claim is based on the books seized in the course of search and also since the incomes are arrived at on the basis of the gross assets minus liabilities found during the course of search, thus, there is no reason to interfere with the amounts arrived at by Assessee, which is based on the seized material itself Decided against Revenue. Pronotes found but amounts not advanced Held that - CIT(A) rightly held that the assessee was found to be recording unaccounted all his transactions in his book/registers the assessee is maintaining pronotes in Sl. No. and Investigation Unit found that most of the pronotes duly accounted for in the note books seized - no amounts were advanced against 11 pronotes, but, they are taken in the total gross assets, the claim of Assessee for exclusion is proper Decided against Revenue. Disallowance of time barred pronotes Held that - There was no reason to interfere with the order of the learned CIT(A) as the non-recovery of the amounts against the time barred pronotes is a valid claim as bad debt when the entire amount advanced is considered in gross assets in the computation of income made by Assessee on the basis of note books and there is no such allegation that Assessee has collected the amounts outside the books of account, since all the transactions are found entered in the books of account - Non-recovery of the amounts on these pronotes has resulted in loss to Assessee thus, the claim made by Assessee as deduction is to be upheld Decided against Revenue. Disallowance on time barred cheques Held that - There was no reason to defer from the finding of the CIT(A) - The issue is similar to the earlier two claims of pronotes found but not advanced and time barred pronotes - In the case of time barred cheques also the claim is allowable as the amounts involved in the cheques have been taken into consideration and arrived at the gross assets - Non-recovery of the amounts will certainly make a reduction in the assets availability and there is no allegation that the amounts borrowed to these cheques have been encashed, since the books of account also corroborate the working of the assessee hence, the claim of Assessee is to be allowed Decided against Revenue. Disallowance of deficit cash balance Held that - There was no reason to interfere with the order of the CIT(A) - Not only the present CIT(A) even his predecessor CIT(A) has deleted the amount (while confirming other amounts) by stating reason in his order dated 15-07-2005 - The reasoning given by the CIT(A) is valid since the unaccounted income was arrived at on the basis of gross assets minus liabilities method, the deficit cash would certainly result in a reduction to the gross assets as the same would have been accounted for in any of the other assets found in the course of search - There is no allegation that the amounts could have been spent outside the books as the assessment was based on seized material and the assets found during the course of search thus, there was no reason to consider the issue raised by Revenue Decided against Revenue.

Issues Involved:
1. Claim of amounts due to business associates.
2. Pronotes found but amounts not advanced.
3. Disallowance of time-barred pronotes.
4. Disallowance of time-barred cheques.
5. Disallowance of deficit cash balance.

Detailed Analysis:

1. Claim of Amounts Due to Business Associates:
The assessee included various assets totaling Rs. 2,47,21,185/- and claimed a deduction of Rs. 1,31,21,950/- for amounts due to business associates. The AO did not agree, citing discrepancies and lack of confirmations. The CIT(A) remanded the matter, conducted enquiries, and found the AO's disallowance based on suspicion and surmises. The CIT(A) deleted the addition, stating that discrepancies in signatures and non-service of letters were not sufficient grounds for disallowance. The ITAT upheld the CIT(A)'s decision, confirming that the claim was based on seized material and proper enquiry.

2. Pronotes Found but Amounts Not Advanced:
The assessee claimed Rs. 11,93,000/- worth of pronotes were executed but no amounts were advanced. The AO dismissed the claim, but the CIT(A) found that the AO did not properly consider the confirmation letters. The CIT(A) deleted the addition, stating that the assessee recorded all transactions in his books. The ITAT confirmed the CIT(A)'s decision, noting that the claim was valid as no amounts were advanced against these pronotes.

3. Disallowance of Time-Barred Pronotes:
The assessee claimed Rs. 6,70,000/- for pronotes that had become time-barred. The AO dismissed the claim, but the CIT(A) found that the amounts were included in the gross receipts and the non-traceability of lendees supported the assessee's claim. The CIT(A) allowed the deduction, and the ITAT upheld this decision, confirming that non-recovery of amounts on time-barred pronotes was a valid claim as bad debt.

4. Disallowance of Time-Barred Cheques:
The assessee claimed Rs. 13,21,500/- for cheques that had become time-barred. The AO dismissed the claim, but the CIT(A) found that the amounts were included in the gross receipts and the cheques were not encashed due to the liquidation of issuing firms. The CIT(A) allowed the deduction, and the ITAT upheld this decision, confirming that the claim was valid as the amounts involved in the cheques were taken into consideration in the gross assets.

5. Disallowance of Deficit Cash Balance:
The assessee claimed a deficit cash balance of Rs. 5,69,600/- as the physical cash found was less than the book balance. The AO rejected the claim, but the CIT(A) found that the deficit cash could have gone into the assets found during the search. The CIT(A) allowed the deduction, and the ITAT upheld this decision, confirming that the deficit cash would result in a reduction to the gross assets as it would have been accounted for in other assets found during the search.

Conclusion:
The ITAT upheld the CIT(A)'s decisions on all grounds, confirming that the claims made by the assessee were valid and based on proper examination of the seized material. The appeal of the Revenue was dismissed.

← Previous Next →