2018 (11) TMI 392 - AT - Income Tax

Addition in respect of the service charges received by the assessee from M/s ESAJV D-Art Indo India Pvt. Ltd. - CIT(A) has given relief of 50% of the total addition - Held that - This addition is unsustainable on the ground that the assessee having included the service charges in its income, the same amount cannot be added again. It was agreed by both the learned DR and AR that the facts of the present case are identical to the facts in the case of Piron Education Pvt. Ltd. This entire amount of ₹ 33,09,000/- forms part of the receipt declared by the assessee as its income in the Profit & Loss account of the year under consideration. Accordingly following the reasoning given in our order dated 31.10.2018 in the case of ACIT vs. Piron Education Pvt. Ltd. 2018 (11) TMI 339 - ITAT DELHI , we direct the Assessing Officer to delete the entire addition on this account. Addition of unexplained cash deposits - Held that - The addition is unsustainable as the cash deposited is as per the books of accounts being regularly maintained by the assessee. Since the facts are identical following our order and the reasoning in the above said order we uphold the order of the Ld. CIT(A) in deleting this addition and accordingly, this ground is dismissed. Addition on account of unexplained share premium - Held that - From the balance sheet of the assessee company it is evident that there is no increase in the share capital as well as share premium during the year. Since no amount has been received during the year, the provision of section 68 are not applicable. In view of the above facts and circumstances, we uphold the order of the Ld. CIT(A) on the issue in dispute of deleting this addition. Addition on account of bogus expenses - Held that - The assessee is carrying on regular business and all the expenses have been actually incurred. Further the assessing officer has made the disallowance arbitrarily ignoring the fact that assessee has actually carried out the business. As regard the survey report on going through the assessment order we note that though the assessing officer is making a reference to the survey report but is ignoring the fact that the allegations made are generic and in the light of evidences submitted by the assessee before him how he has ignored the same. It is important to point out that the assessing officer has not rejected the books of accounts nor has held that the assessee is not carrying any business. The expenses incurred are accounted for in the books of account and there is no material brought on the record that these expenses have not been actually incurred. Since the facts are identical following our order and the reasoning in the above said order we uphold the order of the Ld. CIT(A) in deleting this addition

Summary

Issues involved:
1. Relief of 50% of total addition on account of bogus expenses and receipts from M/s ESAJV
2. Deletion of addition made on account of unexplained cash deposits
3. Deletion of addition made on account of unexplained share premium
4. Deletion of addition made on account of bogus expenses

Analysis:

1. The first issue pertains to the relief granted by the Ld. CIT(A) in allowing 50% of the total addition of ?33,09,000 made by the AO on account of bogus expenses and receipts from M/s ESAJV. The Tribunal upheld the relief based on a similar case precedent and directed the Assessing Officer to delete the entire addition as the amount was already included in the assessee's income.

2. The second issue concerns the deletion of the addition of ?24,37,500 made by the AO on account of unexplained cash deposits. The Tribunal found this addition unsustainable as the cash deposits were in line with the books of accounts maintained by the assessee, following a similar decision in a previous case. Consequently, the Tribunal upheld the deletion of this addition.

3. The third issue revolves around the deletion of the addition of ?19,75,000 made by the AO on account of unexplained share premium. The AO considered the share premium as unaccounted income due to lack of details provided by the assessee. However, the Tribunal upheld the deletion of this addition by noting that the share premium was an opening balance from previous years and no increase occurred during the relevant year, rendering Section 68 inapplicable.

4. The fourth issue addresses the deletion of the addition of ?36,30,143 made by the AO on account of bogus expenses. The Tribunal found that the AO's observations were factually incorrect and arbitrary, as the assessee had provided all necessary details and evidence to support the expenses incurred in the regular course of business. The Tribunal upheld the deletion of this addition based on the assessee's compliance and the lack of incriminating material found during the assessment.

In conclusion, the Tribunal dismissed the Revenue's appeal and allowed the assessee's cross objection, emphasizing the importance of factual accuracy and compliance with legal provisions in determining additions and deletions in the assessment process.