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2017 (1) TMI 1001 - AT - Income TaxAddition on account of difference in opening balance of sundry creditor namely MTA - Held that - We find that the balance of sundry creditor was brought forward in the year under consideration from the previous financial year. As such, we find that the corresponding purchase in relation to impugned sundry creditor was booked by the assessee in the immediate preceding year which has been allowed in the earlier year. Therefore, in our considered view, the issue of sundry creditor does not pertain to the year under consideration before us. As the issue is not arising for the sundry creditor in the year under consideration, therefore, no disallowance can be made. On merit as well we find that the MBC has confirmed the value of the tickets sold to the assessee which is exactly matching as shown in the books of account of the assessee. To the contrary, Ld. DR has not brought any defect in the confirmation received from MBC. Simply assessee has booked the sundry creditor liability with MTA out of ignorance cannot form the basis for the addition of such sundry creditor. Similarly what policy is being adopted by MBC for recognizing the sales Revenue has no bearing to the facts of the case. On perusal of the ledger of MTA, we find that the accounts were settled in the year under consideration. - Decided in favour of assessee Addition on account of non disclosure of income from interest - AO made the addition on account of difference in the net profit shown by assessee in its profit and loss account and profit shown in the computation of income - Held that - On perusal of audited profit and loss a/c of assessee along with computation of income, we find that assessee in its profit and loss a/c has not shown any remuneration to the partners but same was shown in the profit and loss account appropriation. However the amount shown in the computation of income was after deduction of partner s remuneration. Therefore, mismatch in figure was observed. Therefore after considering the submission of the assessee, we find no difference between amount of profit shown in the profit and loss account and in the computation of income. As such, we find no infirmity in the order of Ld. CIT(A). - Decided in favour of assessee Addition on account of diversification of interest bearing fund to interest free loan - Held that - There is no dispute with regard to amount of debtor shown in the balance-sheet vis- -vis interest free loan provided by assessee. In the absence of any specific finding with regard to diversion of fund we are not agreed with the arguments placed by Ld. DR. Similarly, we also find that it is the discretion of the assessee to charge or not to charge interest from the debtors. The AO cannot enter into the shoes of assessee for deciding to charge interest on the amount of debtor shown as on 31.03.2008 in its balance sheet. In the light of above reasoning, we hold that the order of the Ld. CIT(A) is correct and in accordance with law and no interference is called for - Decided in favour of assessee Addition on account of difference in gross profit - Held that - From the perusal of remand report, it is ample clear, that there is no cogent reason for rejecting the books of account and estimating the gross profit @ 0.41%. This fact has been duly accepted by AO in its remand report. In this view of the matter, we find no reason to interfere with the findings arrived by the Ld. CIT(A). Under the circumstances, this issue of Revenue s appeal is dismissed. Disallowance on account of credit entries found in the books of account of assessee - Held that - We find that the addition was made by AO on account of non-submission of supporting documents by assessee in respect of credit entries found in the books of account of assessee. Now, before us Ld. AR for the assessee first time submitted that the ledger copy of MVE which constitute the additional documents but the same has not been verified by Authorities Below. Needless to mention that the additional document was not submitted before Authorities Below but it does not mean that he should be deprived of justice. Thus restore the matter to the file of AO for fresh adjudication. This ground of assessee s appeal is allowed for statistical purpose in terms of above.
Issues Involved:
1. Deletion of addition on account of difference in opening balance of sundry creditors. 2. Deletion of addition on account of non-disclosure of income from interest. 3. Deletion of addition on account of diversification of interest-bearing funds to interest-free loans. 4. Deletion of addition on account of difference in gross profit. 5. Sustaining disallowance on account of credit entries found in the books of account. Issue-wise Detailed Analysis: 1. Deletion of Addition on Account of Difference in Opening Balance of Sundry Creditors: The Revenue appealed against the deletion of an addition of ?6,75,99,557/- made by the AO due to a discrepancy in the opening balance of sundry creditors. The assessee, a stockist of lottery tickets, had shown a creditor balance of ?6,99,16,984/- as of 31.03.2007, which was disputed by the AO based on an IT Inspector's report. The AO treated the difference as bogus cash credit. However, the assessee clarified that the liability was mistakenly shown under M/s Tiger Associates (MTA) instead of M/s Best & Company (MBC), which was confirmed during remand proceedings. The CIT(A) found no error in the assessee's accounting and deleted the addition. The Tribunal upheld the CIT(A)'s decision, noting that the sundry creditor balance was carried forward from the previous year and confirmed by MBC, thus dismissing the Revenue's ground. 2. Deletion of Addition on Account of Non-Disclosure of Income from Interest: The AO added ?21,23,616/- to the assessee's income due to a discrepancy between the net profit shown in the audited profit and loss account and the computation of income. The assessee explained that the difference was due to the partner's remuneration, which was shown in the profit and loss appropriation account but not in the profit and loss account. The CIT(A) accepted this explanation and deleted the addition. The Tribunal found no infirmity in the CIT(A)'s order and dismissed the Revenue's ground. 3. Deletion of Addition on Account of Diversification of Interest-Bearing Funds to Interest-Free Loans: The AO disallowed ?14,18,161/- of interest claimed by the assessee, alleging that interest-bearing funds were diverted to interest-free loans. The assessee argued that the sundry debtors were only 3.34% of net sales and that charging interest was a business policy. The CIT(A) found no evidence of interest-free loans to relatives and noted that the AO's reasons for the addition were unclear. The Tribunal agreed, stating that the AO cannot dictate the business policy of charging interest and upheld the CIT(A)'s deletion of the addition, dismissing the Revenue's ground. 4. Deletion of Addition on Account of Difference in Gross Profit: The AO added ?4,84,456/- due to a lower gross profit percentage compared to the previous year. The CIT(A) noted that the AO's calculation was based on incorrect sales figures and lacked a clear basis for the gross profit percentage used. The Tribunal found that the AO had no cogent reason for rejecting the books of account and estimating the gross profit, thus upholding the CIT(A)'s deletion of the addition and dismissing the Revenue's ground. 5. Sustaining Disallowance on Account of Credit Entries Found in the Books of Account: The AO disallowed ?19,22,662/- due to unexplained credit entries in the name of M/s Veera Enterprise (MVE). The CIT(A) upheld the disallowance, stating that the rectification order was validly passed by the jurisdictional authority. The assessee provided additional documents (ledger copy of MVE) before the Tribunal, which had not been verified by the lower authorities. The Tribunal restored the matter to the AO for fresh adjudication, allowing the assessee's appeal for statistical purposes. Conclusion: The Tribunal dismissed the Revenue's appeal on all grounds and allowed the assessee's appeal for statistical purposes, directing a fresh adjudication on the issue of unexplained credit entries. The order was pronounced in open court on 11/01/2017.
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