2017 (2) TMI 680 - AT - Income Tax

Addition on account of unsecured loan - Held that - CIT(A) has rightly applied the test of identity, creditworthiness and genuineness to examine the unsecured loan transactions of the appellant and after examining the material on record, has given a clear finding that except for Anuradha Pareek, the said test is duly satisfied. Regarding the findings about Anuradha Pareek from whom the assessee has shown unsecured loan transaction of ₹ 9,00,000, the ld CIT(A) has given a finding after examining her return of income that her creditworthiness is not proved. Where any one of three limbs of the basis test as referred above are not satisfied, it cannot be said that the assessee has discharged the primary onus placed upon him. The assessee has placed the necessary documentation before the ld CIT(A) and after going through the same, where the ld CIT(A) has arrived at a conclusion, it cannot be said that adequate opportunity was not given to the assessee. Apparently, on review of the same set of documentation furnished by the assessee, the ld CIT(A) has come to a conclusion that the other loan transactions are duly explained and he has provided the necessary relief to the assessee. Nothing further has been brought to our notice to controvert the said findings of the ld CIT(A) to establish the creditworthiness of Anuradha Pareek. To that extent, the assessee has not discharged the primary onus. - Decided partly n favour of assessee. Addition of difference in the contract receipts as declared in the ITR and as reflected in the form 26AS - Held that - The AO has simply compared the contract receipts with Form 26AS. The ld CIT(A) has however gone through the details furnished by the assessee in detail in terms of reflection of sales on account of supply of material in addition to the contract receipts in its books of accounts, the fact that the TDS has also been made on the supplies in addition to contract receipts and the reconciliation thereof. The appellant has also submitted copies of bills and payment instructions issued by the principal which shows that tax has been deducted at source on sales/supply material as well. The appellant has submitted a reconciliation statement which shows that all the receipts in the 26-AS statement has been credited in the books of accounts. Hence no addition is called for - Decided in favour of assessee.

Summary

Issues Involved:
1. Addition on account of unsecured loans.
2. Deletion of addition due to difference in 26AS statement and books of account.
3. Rejection of books of accounts under section 145(3).
4. Disallowance of labor charges.

Detailed Analysis:

1. Addition on Account of Unsecured Loans:
Issue:
Whether the CIT(A) erred in restricting the addition of ?9,00,000 out of ?18,70,000 on account of unsecured loans and whether the assessee discharged the onus of proving the identity, genuineness, and creditworthiness of the creditors.

Judgment:
The CIT(A) provided relief of ?9,70,000 to the assessee, confirming the addition of ?9,00,000 from Anuradha Pareek due to insufficient creditworthiness. The assessee argued that all transactions were through banking channels and provided confirmations, PAN details, and income tax returns of the lenders. The CIT(A) found that the assessee failed to prove the creditworthiness of Anuradha Pareek, whose income was significantly lower than the loan amount. The Tribunal upheld the CIT(A)’s decision, stating that the assessee did not discharge the primary onus of proving the creditworthiness of Anuradha Pareek, thereby dismissing the Revenue’s appeal and the assessee’s cross-objection.

2. Deletion of Addition Due to Difference in 26AS Statement and Books of Account:
Issue:
Whether the CIT(A) erred in deleting the addition of ?60,02,367 made by the AO on account of a discrepancy between the 26AS statement and the books of account.

Judgment:
The AO added ?60,02,367 due to a perceived discrepancy between the contract receipts in the 26AS statement and the books of account. The assessee clarified that the total receipts, including sales and contract receipts, exceeded the amount in the 26AS statement. The CIT(A) accepted the assessee’s reconciliation, showing that TDS was deducted on both supplies and contract receipts. The Tribunal confirmed the CIT(A)’s findings, noting that the AO failed to consider the complete details, and upheld the deletion of the addition.

3. Rejection of Books of Accounts under Section 145(3):
Issue:
Whether the CIT(A) erred in upholding the AO’s rejection of the books of accounts under section 145(3) due to the non-maintenance of a stock register and non-production of sale/purchase bills.

Judgment:
The assessee’s cross-objection on the rejection of books of accounts and 10% disallowance of various expenses was dismissed as not pressed during the hearing. Therefore, the Tribunal did not address this issue further.

4. Disallowance of Labor Charges:
Issue:
Whether the CIT(A) erred in sustaining the addition of ?3,12,632, being 10% of the total labor charges claimed.

Judgment:
The assessee argued that the CIT(A) did not appreciate the evidence submitted in support of the labor charges. However, since the cross-objection was not pressed during the hearing, the Tribunal dismissed it without further consideration.

Conclusion:
The Tribunal upheld the CIT(A)’s decision on the unsecured loans and the deletion of the addition due to the discrepancy in the 26AS statement. The cross-objections regarding the rejection of books of accounts and disallowance of labor charges were dismissed as not pressed. The appeals filed by both the Revenue and the assessee were dismissed.