2015 (12) TMI 558 - AT - Income Tax

Undisclosed cash credit - Held that - What we find is that a credit of ₹ 3 lakhs appears both in the statement of affairs as on 31.03.2005 as well as as on 31.03.2006 in the name of Shri. Govinda Reddy. These statement of affairs were filed along with the returns of income for A. Ys.2005-06 and 2006-07. Amount remaining the same, if at all it had to be added as unproved credit, it ought to have been done in the year in which assessee had received the credit. As assessee had given full particulars of the creditor and also gave explanation as to how the credit has come into the books of the assessee. In the circumstances, we are of the opinion that the addition for the amount of ₹ 3 lakhs made during the impugned assessment year was uncalled for. Such addition stands deleted. - Decided in favour of assesee. Addition on account of house lease amount - Held that - It is clear that one of the cheques for ₹ 1,50,000/- was dated.25.04.2005. If that be so, house lease amount that ought have been there in the statement of affairs as on 31.03.2005 was ₹ 6 lakhs and not ₹ 7,50,000/-. AO had clearly given a finding that assessee was unable to show entries in its books of account for receipt of such amounts. Closing cash and bank balance as on 31.03.2005 came only to ₹ 44,499/- and hence evidently did not include the post dated cheque of ₹ 1,50,000/-. Thus the version of the assessee that whole of the amount represented receipt from Shri. Mohammed Sarshad as lease advance cannot be believed. However at the same time, we find that the sum of ₹ 7,50,000/- which appears in statement of affairs as on 31.03.2006 is the very same amount that appeared in the statement of affairs as on 31.03.2005 also and the addition had its genesis from this entry. In our opinion, a sum of ₹ 6 lakhs out of ₹ 7,50,000/- stands explained by the assessee as part of the opening balance. However, the balance sum of ₹ 1,50,000/- which assessee received during the relevant previous year being not reflected in its books of account could not be considered as the source for explaining ₹ 7,50,000/- shown as dues in its statement of affairs as on 31.03.2006. In the circumstances we are of the opinion that assessee should be given a relief of ₹ 6 lakhs for the sums received by him during the preceding previous year. Accordingly we restrict the addition to a sum of ₹ 1,50,000/-. Addition to the extent of ₹ 6 lakhs is deleted. - Decided partly in favour of assessee.

Summary

Issues:
1. Disallowance of credit of Rs. 3,00,000 in the name of a creditor.
2. Disallowance of a liability of Rs. 7,50,000 shown in the statement of affairs.

Analysis:

Issue 1: Disallowance of Credit of Rs. 3,00,000
The assessee contested the disallowance of a credit of Rs. 3,00,000 to a creditor named Shri. Govinda Reddy, which was disallowed by the Assessing Officer (AO) and confirmed by the CIT (A). The AO doubted the genuineness of the liability as the assessee failed to provide sufficient evidence. The assessee argued that the amount was a carry forward from the previous year and was duly reflected in the statement of affairs. The Tribunal found that the credit was indeed a carry forward and there was no evidence of any amount received during the year. As the assessee provided full particulars of the creditor and explanation of the credit, the addition was deemed unnecessary. The Tribunal allowed the appeal on this ground.

Issue 2: Disallowance of Liability of Rs. 7,50,000
The second issue revolved around the disallowance of a liability of Rs. 7,50,000 shown in the statement of affairs as a house lease amount. The AO disallowed this amount as unexplained, and the CIT (A) upheld the decision. The assessee contended that this amount was also a carry forward from the previous year and produced a lease agreement as evidence. The Tribunal noted discrepancies in the dates of the cheques mentioned in the lease agreement, indicating that part of the amount was received in the subsequent year. While acknowledging that Rs. 6,00,000 out of the total amount was explained as part of the opening balance, the Tribunal held that the remaining Rs. 1,50,000 received during the relevant year was not reflected in the books. Consequently, the Tribunal allowed relief of Rs. 6,00,000 and upheld the addition of Rs. 1,50,000. The appeal was partly allowed on this ground.

In conclusion, the Tribunal partially allowed the assessee's appeal concerning the disallowance of credits and liabilities, providing detailed reasoning for each issue and clarifying the basis for its decision.