2015 (12) TMI 762 - AT - Income Tax

Addition on difference in the amount of credit notes - Held that - A reconciliation statement was furnished by the assessee before the ld. CIT(A) explaining the said difference. When the said reconciliation was forwarded by the ld. CIT(A) to the AO, the latter did not make any adverse comments thereon and although this position was specifically pointed out by the assessee, the ld. CIT(A) still confirmed the addition made by the AO on this issue observing that there was no documentary evidence filed by the assessee in order to enable verification of the reconciliation statement as pointed out by the AO. At the time of hearing before us, the ld. Counsel for the assessee has taken us through the copy of remand report submitted by the AO to the ld. CIT(A) to show that there was no such adverse comment offered by the AO in his remand report regarding lack of any documentary evidence and the reconciliation statement furnished by the assessee was actually accepted by him. It is also seen from the reconciliation statement furnished by the assessee that the major difference, as explained by the assessee, was on account of difference in the years, in which some credit notes were accounted for by both the sides. Thus the addition made by the AO on this issue was not sustainable and the ld. CIT(A) is not justified to confirm the same without appreciating the reconciliation statement filed by the assessee explaining the difference in the amount of credit notes - Decided in favour of assessee. Disallowance on account of interest on unsecured loan under section 40(a)(ia) - non-deduction of tax at source - said disallowance was made by the AO due to failure of the assessee to file during the course of assessment proceedings form no.15G claimed to be issued by Shri S. Debnath, the recipient of the interest - Held that - Before the ld. CIT(A), the assessee however filed a photo copy of relevant form no.15G with a stamp thereon acknowledging receipt thereof by the concerned authority. The ld. CIT(A) however did not admit this relevant evidence on the ground that a photo copy of form no.15G was filed by the assessee and not the original. Unable to subscribe to the view taken by the ld. CIT(A) on this issue. At the time of hearing, the ld. Counsel for the assessee has filed a photo copy of the said form no.15G duly certified as a true copy and keeping in view the relevance of this documentary evidence, thus consider it fair and proper to restore this issue to the file of the AO for deciding the same afresh after verifying the authenticity and reliability of the form no.15G - Decided in favour of assessee for statistical purposes. Addition made on account of low withdrawals - Held that - It is observed that reasonableness of the withdrawals of ₹ 29,500/- shown during the year under consideration was duly explained by the assessee before the AO as well as before the ld. CIT(A). In the said explanation, all the relevant aspects including the single status of the assessee living in the joint family leading a simple life were specifically pointed out by the assessee. It appears that the AO as well as ld. CIT(A), however, has overlooked all these relevant aspects and estimated the withdrawals of the assessee for personal and household expenses at ₹ 60,000/- without giving any sound or convincing basis whatsoever. I, therefore, find no justification in the addition made by the AO on this issue and confirmed by the ld. CIT(A) and deleting the same - Decided in favour of assessee

Summary

Issues:
1. Difference in the amount of credit notes accounted for by the assessee.
2. Disallowance of interest on unsecured loan for non-deduction of tax at source.
3. Addition made on account of low withdrawals.

Analysis:

Issue 1: Difference in Credit Notes
The AO added Rs. 2,07,306 to the assessee's income due to a difference in credit notes. The assessee provided a reconciliation statement, but the AO deemed it unverifiable without supporting evidence. The CIT(A) confirmed the addition despite no adverse comments from the AO. However, the Tribunal found the reconciliation acceptable, noting discrepancies in the years of accounting for credit notes. Consequently, the Tribunal deleted the addition.

Issue 2: Disallowance of Interest on Unsecured Loan
The AO disallowed Rs. 1,08,000 as interest on an unsecured loan for non-deduction of tax, as the form no.15G was not submitted during assessment. The assessee later provided a certified photo copy of the form, but the CIT(A) rejected it for not being the original. The Tribunal disagreed, considering the relevance of the document and remanded the issue to the AO for verification.

Issue 3: Addition on Account of Low Withdrawals
The AO estimated personal expenses at Rs. 60,000 due to low withdrawals of Rs. 30,500 by the assessee, adding Rs. 29,500 to income. The assessee explained the reasonableness of withdrawals based on their single status and simple lifestyle, which the AO and CIT(A) overlooked. The Tribunal found no justification for the addition and deleted it, allowing the appeal.

In conclusion, the Tribunal allowed the appeal, deleting the additions made by the AO and confirmed by the CIT(A) on all three issues.