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2014 (9) TMI 269 - AT - Income TaxEstimated disallowance out of electricity expenses - Enhancement of addition by CIT(A) Held that - CIT(A) rightly noted that from the communication dated 18/02/2009 of the Supdt. Engineer, Operation Circle, AP Transco, Mahaboobnagar Division, it reveals that A.P. Transco had resolved to consider the request of Mahaveer Ferro Alloys for waiver of deemed energy charges and revision of bills to the extent of amount that is allowable as per revised guidelines of APERC and had accordingly revised annual load factor charges towards deemed energy for the period from May, 2005 to July, 2005 - after going through the agreement entered by the assessee with M/s Ramkumar Agarwal on 01/04/2008, the assessee has taken all assets and liability as per Annexure-A to the agreement - There is no mentioning of this liability, which Ramkumar Agrwal is required to be incurred towards business taken over by the assessee - Assessee is entitled for assets mentioned in the Annexure-A to the agreement and the assessee is liable for liabilities mentioned therein - the assessee cannot claim any liability other than the mentioned in the Annexure-A to the agreement - there is no question of adjusting the liability with electricity deposit as this deposit is independent asset and nothing to do with this expenditure and this expenditure not incurred for the purpose of asesssee s business - the CIT(A) is justified in rejecting the claim of the assessee and the order of the CIT(A) is confirmed Decided against Assessee. Unexplained credits - Receipts of deposits against sales - Failure to produce documentary evidences Held that - CIT(A) rightly held that the assessee had furnished a certificate furnished by the Team Ferro Alloys Pvt. Ltd. confirming the deposit of the amount made with Mahavir Ferro Alloys which was subsequently taken over by the assessee as per agreement dated 01/04/2008 - the source of the deposit is properly explained and therefore, it cannot be brought to tax as unexplained credit or deposit the order of the CIT(A) is upheld Decided against Revenue. Rental income treated as business income TDS deducted by M/s Team Alloys Total income to be taxed and expenses regarding business should be allowed or not Held that - CIT(A) observed that lease rent to be treated as income from property/rent, as per the provisions of sec.194-I of the I.T. Act, 1961, under which the TDS was made for the payments related to the said lease rent, as referred in the assessment order, the assessee is eligible for standard deductions as per sec.24 of the I.T. Act,1961 - CIT(A) has rightly directed the AO to re-compute the income treating the same as business income by excluding the electricity charges relying upon Universal Plast Ltd. Versus Commissioner of Income-Tax 1999 (3) TMI 15 - SUPREME Court - the order of the CIT(A) is upheld Decided against Revenue. Protective addition treated as unexplained deposits in bank CIT(A) relied upon one document and ignored seized material Liabilities form part of total investment or not Held that - CIT(A) rightly observed that the additions made by the AO on protective basis in the assessment order of the assessee - the cash deposits into the bank of the assessee which were drawn to meet the liability of M/s Mahavir Ispat Pvt Ltd, the addition is to be considered in the hands of Mahavir Ispat Pvt Ltd only also in The Deputy CIT Central Circle-4, Hyderabad Versus Sri Ramprasad Agarwal And Others 2014 (4) TMI 631 - ITAT HYDERABAD it has been held that the estimation of unaccounted turnover on the basis of unaccounted electricity charges which is in proportion to the accounted electricity charges and accounted turnover Decided against Revenue. Unexplained cash credit u/s 68 Held that - CIT(A) held that the facts further reveal that the liability is not an onetime credit, but is the running account for an expense incurred for the business purpose - CIT(A) rightly was of the view that being the power supplier to one of the units of the company, the liability arisen during the year, which has been discharged in the subsequent year, thus, it cannot be treated as credit for the purpose of section 68 or the unexplained cash credit thus, the order of the CIT(A) is upheld Decided against Revenue. Addition of unexplained jewellery Jewellery belonged to family members or not Held that - Minimum amount of jewellery to be considered in each hand of the family members of the assessee as per the CBDT Instruction No. 1916, dated 11/05/1994 assessee rightly contended that the intention underlining the CBDT Instruction issued on 11/056/1994 is also relevant with reference to deeming provisions of section 69A - 500 grams jewellery is permitted to be retained in the case of a married lady, 250 grams for unmarried lady and 100 grams for male member of the family assessee also contended that there is no granting of cross-examination to the deponent in the affidavit though the donor of the gold jewellery to the assessee has confirmed giving the gift relying upon Mehta Parikh and Co. Vs. CIT 1956 (5) TMI 4 - SUPREME Court thus, the matter is to be remitted back to the Ao to reappraise possession of the jewellery and give corresponding relief on the basis of the holding of each person of family and the family members are staying under single roof, if it is supported by documentary evidence Decided in favour of Assessee.
Issues Involved:
1. Enhancement of addition made by the CIT(A) regarding electricity expenditure. 2. Addition of unexplained credits against sales. 3. Treatment of lease rent as business income or income from other sources. 4. Admission of additional evidence without granting opportunity to the Assessing Officer. 5. Unexplained investment in M/s Maa Sachiya Sponge Iron (P) Ltd. 6. Unexplained cash deposits in bank accounts. 7. Valuation and quantification of unexplained jewellery. Issue-wise Detailed Analysis: 1. Enhancement of Addition by CIT(A) Regarding Electricity Expenditure: The assessee claimed electricity expenses of Rs. 34,85,767/-. The Assessing Officer disallowed 25% of the expenditure, questioning its commensurability with the business activity. The CIT(A) enhanced the addition, disallowing the entire amount, citing that the liability for electricity charges did not pertain to the assessee as per the agreement with M/s Mahavir Ferro Alloys. The Tribunal upheld the CIT(A)'s decision, noting that the liability was not the assessee's responsibility and thus, the entire expenditure was disallowable. 2. Addition of Unexplained Credits Against Sales: The Assessing Officer added Rs. 1,31,00,000/- as unexplained credits. The CIT(A) deleted the addition, explaining that the amount was a brought forward figure from the liabilities taken over from Mahavir Ferro Alloys. The Tribunal upheld the CIT(A)'s decision, confirming that the source of the deposit was properly explained. 3. Treatment of Lease Rent as Business Income or Income from Other Sources: The Assessing Officer treated the lease rent of Rs. 96,00,000/- as income from other sources, disallowing related expenses. The CIT(A) treated it as business income, allowing the expenses, and the Tribunal upheld this view. The Tribunal referenced the Supreme Court's decision in Universal Plast Ltd., emphasizing that the lease of business assets temporarily for profit constitutes business income. 4. Admission of Additional Evidence Without Granting Opportunity to the Assessing Officer: The Tribunal dismissed the ground regarding the CIT(A) admitting additional evidence without granting the Assessing Officer an opportunity, referencing a similar decision in the case of M/s Venkata Balaji Steel Rolling Mills Pvt. Ltd. 5. Unexplained Investment in M/s Maa Sachiya Sponge Iron (P) Ltd.: The Assessing Officer added Rs. 6,10,00,000/- as unexplained investment. The CIT(A) reduced this to Rs. 18,25,000/-, considering the actual payments made and the liabilities. The Tribunal remitted the issue back to the Assessing Officer to examine the assessee's claim that Rs. 15,00,000/- was already offered to tax in AY 2009-10. 6. Unexplained Cash Deposits in Bank Accounts: The Assessing Officer made a protective addition of Rs. 58,42,800/- for unexplained cash deposits. The CIT(A) deleted this addition, confirming that the deposits pertained to M/s Mahavir Ispat Pvt. Ltd. The Tribunal upheld this decision, noting that the substantive addition was already made in the case of Mahavir Ispat Pvt. Ltd. 7. Valuation and Quantification of Unexplained Jewellery: The Assessing Officer added Rs. 43,00,000/- for unexplained jewellery. The CIT(A) provided partial relief, reducing the addition by Rs. 10,25,765/- based on the valuation and considering the jewellery belonging to the entire family. The Tribunal remitted the issue back to the Assessing Officer to reappraise the possession of jewellery in light of the CBDT Instruction No. 1916 and the Supreme Court's judgment in Mehta Parikh and Co. vs. CIT. Conclusion: The Tribunal dismissed the appeals of the revenue and partly allowed the appeals of the assessee for statistical purposes, directing the Assessing Officer to re-examine certain issues in accordance with the Tribunal's observations.
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