2018 (12) TMI 686 - AT - Income Tax

Rejection of books of accounts - estimation of income - Addition made on account of estimation by holding the books of accounts are correct - Held that - CIT(A) observed that sale of commercial portion @ 826.75 per sq.ft., expenditure not claimed under the head substructure & super superstructure in profit & Loss account, AS-7, advance received for residential portion not included in sales consideration, discounts offered to parties for making full payments does not justify to reject the books of accounts and estimation of profits thereon, thereby, the CIT(A) held that books of accounts are completed as correct and deleted the addition. CIT(A) examined the record together with the two remand reports and come to the above conclusion in favour of the assessee. Further, it is observed that the CIT(A) placed reliance on the decision of Hon ble Supreme Court in the case of Realest Buildings & Services Ltd. 2008 (5) TMI 6 - SUPREME COURT - decided against revenue Addition made on account of unexplained cash credit u/s 68 - Held that - As all the three ingredients identity, creditworthiness and genuineness of transaction were proved and the addition made thereon is to be deleted. Addition made on account of bogus sundry creditor - Held that - AO issued notice u/s 133(6) of the Act to M/s. Nivedita Enterprises and the notice was returned unserved with an endorsement Not known . The AO held that an amount of ₹ 9,70,426/- is bogus and added to the total income of the assessee. Before the CIT(A), the assessee submitted copy of trade license, profession tax enrollment certificate and copy of PAN card relating to M/s. Nivedita Enterprises and the CIT(A) inturn sought remand report from AO. The CIT(A) considering the submissions of the assessee, and remand report deleted the addition made by the AO - no infirmity in the order of CIT(A) and it is justified. Thus, Ground raised by the Revenue is dismissed.

Summary

Issues:
1. Delay in filing the appeal by the Revenue and its condonation.
2. Addition made on account of estimation by the AO.
3. Deletion of addition made on account of unexplained cash credit.
4. Deletion of addition made on account of bogus sundry creditor.

Analysis:

Issue 1:
The appeal filed by the Revenue against the order passed by CIT(A)-IV, Kolkata for AY 2006-07 was delayed by 4 days. The delay was condoned by the Appellate Tribunal ITAT Kolkata after considering the reasons provided by the Ld.DR as bonafide. The Tribunal found the delay justified and allowed the appeal to proceed.

Issue 2:
The AO had made an addition to the total income of the assessee on account of estimation due to discrepancies found in the construction activities expenditure. The AO rejected the books of accounts under section 145(3) of the Act and estimated the profit at 5%, adding a specific amount to the total income. However, the CIT(A) deleted this addition after examining the record, remand reports, and relevant explanations provided by the assessee. The CIT(A) relied on the decision of the Hon'ble Supreme Court and concluded that the books of accounts were correct, justifying the deletion of the addition.

Issue 3:
The Revenue challenged the deletion of addition made on account of unexplained cash credit under section 68 of the Act. The AO had raised concerns regarding the identity, creditworthiness, and genuineness of transactions with specific parties. However, the CIT(A) examined the evidences submitted by the assessee, including banking transactions, and found that all three factors were adequately proved. The addition made by the AO was deleted after considering the remand reports and submissions by the assessee.

Issue 4:
The Revenue contested the deletion of addition made on account of a bogus sundry creditor. The AO had considered an amount as bogus based on a notice returned unserved to the creditor. The assessee provided various documents to prove the existence of the creditor, including trade license, PAN card, and relevant financial records. The CIT(A) reviewed these submissions and remand reports, ultimately deleting the addition made by the AO. The Tribunal found no fault in the CIT(A)'s decision and dismissed the Revenue's appeal.

In conclusion, the Appellate Tribunal ITAT Kolkata upheld the decisions of the CIT(A) in deleting the additions made by the AO, citing proper documentation, explanations, and adherence to legal standards as reasons for their rulings. The appeal filed by the Revenue was ultimately dismissed.