2017 (4) TMI 357 - AT - Income Tax

Addition on unexplained money - excess payment of license fee - Held that - The assessee was following mercantile system of accounting. Thus, as per the consistently followed method of accounting by the assessee, which is mercantile system, only expenditure which has accrued and became due during the year is allowable deduction to the assesse as per section 145 of the Act. Ld A.R. of the assessee has not brought any positive material on record to controvert the findings of lower authorities that ₹ 2,34,256/- being license fee to State Excise was the expenditure for subsequent financial year 2011-12 and not for the year under consideration. Hence, the disallowance made by the Assessing Officer of ₹ 2,34,256/- was fully justified and, therefore, uphold the order of the CIT(A) - Decided against assessee Addition on undisclosed receivables - Held that - As the assessee could not offer any explanation or furnish any evidence to the contrary therefore, the CIT(A) confirmed the order of the Assessing Officer held that contract receipts of ₹ 2,07,105/- remained to be credited to the bank account of the assessee as at the end of the year, which has not been shown as an asset in the balance sheet. Therefore, he made addition of ₹ 2,07,150/- to the income of the assessee. - Decided against assessee

Summary

Issues:
1. Addition of ?2,56,805 as undisclosed income.
2. Addition of ?2,34,256 as unexplained money.
3. Alleged undisclosed liability of ?733.
4. Addition of ?2,07,150 as undisclosed receivables.

Issue 1: Addition of ?2,56,805 as undisclosed income
The Assessing Officer found discrepancies in the bank accounts of the assessee, leading to the addition of ?2,56,805 to the income. The CIT(A) upheld this addition as no evidence was presented to challenge it. The appellant failed to provide any material to counter the findings, resulting in the confirmation of the addition by the ITAT.

Issue 2: Addition of ?2,34,256 as unexplained money
The Assessing Officer identified an excess payment of license fees, adding ?2,34,256 to the income. The appellant argued that this amount should not be treated as unexplained money due to consistent accounting practices. However, the CIT(A) and ITAT confirmed the addition, emphasizing the lack of evidence to justify the discrepancy and the prepaid nature of the expenditure.

Issue 3: Alleged undisclosed liability of ?733
The appellant did not pursue this ground during the hearing, leading to its dismissal for lack of prosecution. No further analysis or discussion was provided regarding this issue in the judgment.

Issue 4: Addition of ?2,07,150 as undisclosed receivables
The Assessing Officer noted uncredited contract receipts of ?2,07,105 in the bank account, which were not reflected in the balance sheet. Consequently, ?2,07,150 was added to the income. The CIT(A) and ITAT upheld this addition as the appellant failed to offer any explanation or evidence to refute the findings, resulting in the dismissal of the appeal.

In conclusion, the ITAT dismissed the appeal filed by the assessee, upholding the additions made by the Assessing Officer regarding undisclosed income, unexplained money, and undisclosed receivables. The judgment highlights the importance of providing substantial evidence and explanations to challenge such additions during the assessment process.