2014 (8) TMI 307 - AT - Income Tax

Cash deposits u/s 69C Source of transaction not furnished Held that - The assessee stated that the amounts referred to in AIR were duly recorded in the books of account by means of cash deposits - When the books of account were produced before the AO, it was incumbent upon him to verify the veracity of the assessee s contention as put forth before him - CIT(A) sustained the addition by basing his opinion on similar addition made for the preceding year, without verifying the assessee s contention thus, the matter is to be remitted back to the AO for fresh adjudication Decided in favour of Assessee. Valuation of contract Held that - Assessee stated that it was following project completion method, the entire income emanating from such contract was duly offered for taxation in the immediately succeeding year - CIT(A) observed that only the profit element from the contract should have been charged to tax - proportionate net profit worked out on the basis of the contract receipts during the year vis-a-vis the total value of the contract and restricted the addition - the action of the AO in taxing the gross sum has no legs to stand on, because tax is levied on the income and not on the receipt - the substantial part of the contract was completed by the assessee during the year, in view of which it also received a sum thus, the Percentage completion method is correctly applicable order of the CIT(A) is upheld Decided against Revenue.

Issues:
1. Addition u/s 69C of the Act - Confirmation of addition of Rs. 49,79,000 made by the AO.
2. Interest u/s 234B - Levy of interest in the assessee's appeal.
3. Deletion of addition - Deletion of addition of Rs. 1,67,62,500 made by the AO.

Issue 1: Addition u/s 69C of the Act - Confirmation of addition of Rs. 49,79,000 made by the AO:
The appeal involved a challenge to the addition of Rs. 49,79,000 under section 69C of the Income Tax Act. The AO relied on AIR information about bank deposits made by the assessee but did not verify the entries in the assessee's books of account. The ITAT observed that section 69C applies when an assessee incurs expenditure without explaining the source. The assessee claimed that the deposits were recorded in the books of account, which should negate the addition under section 69C. The ITAT set aside the order and directed the AO to verify if the transactions were reflected in the books of account before making any addition under section 69C.

Issue 2: Interest u/s 234B - Levy of interest in the assessee's appeal:
The only ground in the assessee's appeal regarding the levy of interest under section 234B was considered consequential and disposed of without detailed discussion in the judgment.

Issue 3: Deletion of addition - Deletion of addition of Rs. 1,67,62,500 made by the AO:
The Revenue challenged the deletion of an addition of Rs. 1,67,62,500 made by the AO related to a contract for job work. The AO contended that the entire contract value should be taxed in the relevant year, while the assessee argued that the income was offered in the subsequent year due to project completion method. The ITAT found that the AO had taxed the entire receipt, ignoring the expenses incurred by the assessee. The ITAT upheld the CIT(A)'s decision to tax only the proportionate net profit of Rs. 98,514 for the year, considering the percentage completion method. The ITAT dismissed the Revenue's appeal and the assessee's cross objection on this issue.

In conclusion, the ITAT allowed the assessee's appeal for statistical purposes, dismissed the Revenue's appeal, and also dismissed the assessee's cross objection. The judgment provided detailed analysis and clarification on the issues raised, emphasizing the importance of verifying transactions, applying correct tax methods, and ensuring fair taxation practices in accordance with the Income Tax Act.

← Previous Next →