2015 (6) TMI 809 - AT - Income Tax

Unexplained cash payments reflected in cash book - Held that - The balance sheet of M/s. Mosaic House furnished along with return of income shows the addition of ₹ 1,50,000/- against the property. Moreover it is not in dispute that assessee is an owner of the property although a personal property. It is also a matter of record that appellant has furnished affidavits of all the eight parties in support of the claim of advance against land. No doubt, appellant has failed to produce the parties before the Assessing Officer during the remand proceedings yet it is a matter of record that one of the persons who was produced admitted to have advanced ₹ 1,50,000/- to the appellant. The affidavits and the statement as recorded have not been placed before us. We therefore accept the contention of the counsel of the appellant that the issue be restored to the file for the Assessing Officer for verification after examination of the persons who have advanced to the appellant. We also notice that appellant has furnished revised cash book during the assessment proceedings explaining the discrepancy in the original cash book furnished during the assessment proceedings. The Assessing Officer has discredited the said cash book without examining the same. We therefore, direct that while conducting fresh examination, the Assessing Officer would look into the explanation tendered and the revised cash book and not merely discredit the same. Accordingly, the issue of addition regarding unexplained deposit in the cash book of the appellant is restored to the file of the Assessing Officer for denova examination and adjudication after granting necessary opportunity to the appellant. - Decided in favour of assessee for statistical purposes. Addition on alleged difference in sundry creditors accounts - Held that - The appellant could not produce these parties inspite of several opportunities. But for furnishing the bills of these parties, no efforts were made to prove his version. In the rejoinder to the remand report, the assessee contended that complete address, telephone/FAX No. and bank a/c no. was furnished to the AO during the remand proceedings but the AO has not taken any steps to enquire at his own level. We further find that Ld. CIT(A) has observed that it could be seen that the AO made addition in respect of the parties who have denied to have any outstanding amount with the appellant. It is not the case of not receiving any response from the creditors or return of the letters as comeback un-served. Under these circumstances, onus is on the appellant to prove that the liability exists by producing them or furnishing reconciliation statement etc. Instead the assessee has merely given the address etc. of the creditors which was already available with AO. Thus CIT(A) was right in upholding the addition - Decided against assessee. Non deduction of TDS under section 194C - Disallowance on export of goods through agents of freight shipping companies - Held that - since the payments have been made as reimbursement of expenses to the agents of the appellant, therefore, appellant was not obliged to deduct TDS under section 194C of the Act and as such, no disallowance is warranted u/s 40(a)(ia) of the Act. - Decided in favour of assessee. Addition on difference in the account of Mls Venus Stone, Spain - Held that - The sales in this case is ₹ 1.08 crores and the ledger account reflects ₹ 1.21 crores. At page 18 of the paper book the assessee furnished a copy of the reconciliation. The opening balance is ₹ 13,21,034/-. All these are export sales and a perusal of this copy of the ledger of M/s Venus Stores, Spain demonstrates that the figures have been reconciles, the discrepancy explained. - Decided in favour of assessee. Addition u/s. 40A(3) - Held that - The assessee s counsel failed to lead only evidence and submissions as to how the particular transactions are covered under Rule 6DD. In our considered opinion, Ld. CIT(A) was right in observing that mere statement that the purchasers have no bank account a/c at that very place has no meaning without explaining the circumstances under which the assessee had to issue bearer cheques and as to how the transactions are covered under Rule 6DD. In view of above, Ld. CIT(A) has force in his finding in holding that in the absence of any evidence led by the assessee, the action of the AO in disallowing the amount u/s. 40A(3) was upheld, which does not need any interference on our part - Decided in favour of assessee. Account of notional interest - Held that - It is well settled law that the Hon ble Gauhati High Court in the case of Highways Constructions Co. Pvt. Ltd. Vs. Commissioner of Income Tax 1992 (11) TMI 86 - GAUHATI High Court held that notional interest cannot be charged. 20% disallowances of expenses under various heads - Held that - CIT(A) has observed that a fact finding has been given by the AO that some of the expenses are unvouched or not properly vouched. The Assessee s counsel has not contravened these observations of the AO. Therefore, in view of the above factual finding of the AO and Ld. CIT(A), Ld. CIT(A) upheld the disallowance of 20% of the expenses, which does not need any interference on our part - Decided against assessee. Addition under house hold expenses - Held that - The house hold withdrawals of ₹ 1.00 lakh are quite low in response to which the assessee stated that theirs is an agriculture based family and he has only two school going dependent children and the withdrawals are quite reasonable and justice. Ld. CIT(A) further observed that having regard to the status and life style enjoyed by the family, the AO estimated the expenses at ₹ 10000/- per month and made an addition of ₹ 20,000/-. In our considered opinion, Ld. CIT(A) was quite reasonable in sustaining the estimating addition of ₹ 10,000/-, which does not need any interference on our part, hence, we uphold the order of the Ld. CIT(A) on this issue - Decided against assessee.

Summary

Issues Involved:
1. Addition of Rs. 12,67,193/- as unexplained cash payments.
2. Addition of Rs. 3,86,041/- as unexplained cash deposits.
3. Addition of Rs. 1,07,939/- as unexplained payments to sundry creditors.
4. Disallowance of Rs. 18,72,599/- on account of shipping freight outward.
5. Adhoc disallowance of 50% of expenses totaling Rs. 1,54,665/-.
6. Addition of Rs. 13,21,034/- as a difference in the account of M/s Venus Stone, Spain.
7. Addition of Rs. 6,00,000/- under Section 40A(3).
8. Addition of Rs. 24,760/- as notional interest.
9. Addition of Rs. 95,830/- as agricultural income.
10. Addition of Rs. 33,900/- as 20% disallowance of expenses under various heads.
11. Addition of Rs. 20,000/- under household expenses.

Detailed Analysis:

1. Addition of Rs. 12,67,193/- as Unexplained Cash Payments
The Assessing Officer (AO) noted a discrepancy in the cash book of M/s Mosaic House, where payments exceeded receipts by Rs. 12,67,193/-. The appellant claimed this was covered by an advance of Rs. 11,50,000/- against land and a transfer of Rs. 1,95,320/- from M/s Diler Stone. The AO and CIT(A) rejected this explanation due to lack of evidence and discrepancies in the provided documents. The Tribunal restored the issue to the AO for denova examination, directing verification of the revised cash book and examination of the persons who allegedly advanced the sums.

2. Addition of Rs. 3,86,041/- as Unexplained Cash Deposits
The AO found unexplained cash deposits in the bank account of M/s Diler Stone, totaling Rs. 3,86,041/-. The appellant explained these deposits were from a transfer of Rs. 4,00,000/- from M/s Mosaic House and an opening balance of Rs. 75,959/-. The Tribunal restored this issue to the AO for fresh examination, directing consideration of the revised cash book and the appellant's explanations.

3. Addition of Rs. 1,07,939/- as Unexplained Payments to Sundry Creditors
The AO added Rs. 1,07,939/- to the appellant's income, citing payments to sundry creditors outside the books. The appellant failed to produce these creditors or provide sufficient evidence. The Tribunal upheld the CIT(A)'s decision to sustain this addition due to the appellant's failure to substantiate the claims.

4. Disallowance of Rs. 18,72,599/- on Account of Shipping Freight Outward
The AO disallowed Rs. 18,72,599/- for non-deduction of TDS on payments to shipping agents. The appellant argued these were reimbursements to agents who paid on behalf of the appellant. The Tribunal, citing relevant case laws, held that reimbursements do not attract TDS and deleted the disallowance.

5. Adhoc Disallowance of 50% of Expenses Totaling Rs. 1,54,665/-
The AO disallowed 50% of certain expenses, questioning their genuineness and reasonableness. The Tribunal upheld the CIT(A)'s decision to sustain this disallowance, noting the appellant's failure to provide adequate evidence to support the expenses.

6. Addition of Rs. 13,21,034/- as a Difference in the Account of M/s Venus Stone, Spain
The CIT(A) noted a discrepancy between the sales and the ledger account of M/s Venus Stone, Spain. The appellant provided a reconciliation statement. The Tribunal accepted the reconciliation and allowed the ground, deleting the addition.

7. Addition of Rs. 6,00,000/- under Section 40A(3)
The AO disallowed Rs. 6,00,000/- for payments made via bearer cheques, which violated Section 40A(3). The appellant failed to demonstrate how these transactions were covered under Rule 6DD. The Tribunal upheld the CIT(A)'s decision to sustain this disallowance.

8. Addition of Rs. 24,760/- as Notional Interest
The Tribunal allowed the appellant's ground, referencing the Gauhati High Court's ruling that notional interest cannot be charged.

9. Addition of Rs. 95,830/- as Agricultural Income
The appellant did not press this ground before the Tribunal, and it was dismissed as not pressed.

10. Addition of Rs. 33,900/- as 20% Disallowance of Expenses under Various Heads
The AO disallowed 20% of certain expenses due to inadequate vouchers. The Tribunal upheld the CIT(A)'s decision, noting the appellant's failure to counter the AO's observations.

11. Addition of Rs. 20,000/- under Household Expenses
The AO estimated household expenses at Rs. 10,000/- per month, adding Rs. 20,000/- to the appellant's income. The Tribunal upheld this estimation, agreeing with the CIT(A)'s reasoning based on the appellant's lifestyle and status.

Conclusion
The Tribunal provided partial relief to the appellant by restoring certain issues to the AO for fresh examination and deleting specific disallowances. However, several additions and disallowances were upheld due to the appellant's failure to provide sufficient evidence.