2016 (8) TMI 373 - HC - Income Tax

Addition on account of capital investment - Held that - Whether these amounts formed part of ₹ 2.45 crores or not is a question of fact. The assessee has not adduced any evidence to establish the same. The manner in which the Assessing Officer has came to the figure of ₹ 2.45 crores cannot be held to be perverse or irrational. His refusal to deduct the amounts as claimed by the assessee from this amount cannot be said to be perverse or irrational either. The Tribunal indeed speculated by reducing the undisclosed investment at ₹ 1.50 crores and the addition of ₹ 55.01 lacs to about ₹ 34.65 lacs. However, the Tribunal speculated in favour of the assessee. The assessee can hardly be aggrieved by the speculation in his favour. No substantial question of law.- Decided against assessee Disallowance of interest under section 36(1)(iii) - amount advanced to the employees of the Appellant by terming the said advancement of money as not for business purposes? - Held that - The assessee advanced amounts without interest to his sister concern and to the employees. It was found that there were no business transactions with the sister concern. Commercial expediency was not established. As far as the employees are concerned, a sum of ₹ 10 lacs is alleged to have been advanced to him. Only a credit entry in his account was found. The amount was advanced for the purpose of constructing a house. There was no evidence that the money was infact given for construction of a house. Relief as regards supply of goods to one of the sister concern was partly granted. Relief as regards other transactions warrants no interference. It was found as a matter of fact that there was no commercial expediency. - Decided against assessee

Summary

Issues:
Appeal against ITAT order dismissing appellant's appeal against CIT(A) order which upheld AO's decision for assessment year 2007-08.

Analysis:
1. Unaccounted Sales and Investments:
- During a survey, unaccounted sales and purchases were discovered, leading to additional income offered for taxation.
- AO calculated unaccounted profits based on unrecorded cash sales and investments required for achieving the turnover.
- Assessee's contention of deductions from the calculated investment amount was not substantiated with evidence.
- Tribunal speculated in favor of the assessee by reducing undisclosed investment, but the appellant's grievance was unfounded.

2. Substantial Questions of Law:
- Appellant raised substantial questions regarding the estimation of capital investment, excess cash, excess stock, and disallowance of interest.
- Tribunal's decisions on these questions were upheld as they did not raise substantial legal issues.

3. Disallowance of Interest:
- Interest disallowance under section 36(1)(iii) on advances to sister concern and employees was upheld due to lack of commercial expediency.
- No evidence was provided to establish the purpose of advances, leading to dismissal of the appeal on these grounds.

4. Final Decision:
- The appeal was ultimately dismissed as the raised questions did not present substantial legal issues.
- The Tribunal's decisions regarding unaccounted sales, investments, and interest disallowances were upheld based on factual and legal grounds.
- Lack of evidence and commercial purpose led to the dismissal of the appeal on various grounds.

In conclusion, the High Court dismissed the appeal against the ITAT order, upholding the decisions regarding unaccounted sales, investments, and interest disallowances due to lack of substantial legal issues and evidence supporting the appellant's contentions.