2019 (6) TMI 1127 - HC - Income Tax

Disallowance of expenses - assessee has not produce any books of accounts and therefore, any claim made by the assessee remain unexplained - HELD THAT - CIT(A) accepted all the contentions of the assessee and noted that the accounts maintained by the assessee in accordance with the method consistently followed and accepted by the Department for the last seven years and the same could not be rejected without there being any material change in the facts. When no specific defect or discrepancy has been pointed out by the authorities below in the audited books of accounts of the assessee then, no disallowance or 30% of total claim of expenses without any basis cannot be disallowed therefore, entire claim of the assessee may kindly be allowed Addition on account of bogus Sundry Creditors - HELD THAT - AO has not brought on record any adverse finding or allegation to show that the impugned depositors/sundry creditors, in fact, did not represent the sale proceeds and represents the unaccounted income of the assessee shown in the balance sheet in the garb of sundry creditors on account of booking or allotment or sales of units/flats. Therefore, CIT(A) was right in holding that without any concrete material or evidence showing unexplained or unaccounted income of the assessee introduced in the cover of sundry creditors, the addition made by the AO merely on the basis of suspicion, presumption and assumption cannot be held as sustainable - addition/disallowance made on the basis of presumption and assumption is not sustainable and correct in view of the absence of concrete and sustainable allegation and evidence or adverse material against the assessee. Unexplained bank deposit - HELD THAT - The amounts added and assessed as unexplained sundry creditors includes the impugned amount which was deposited to the three bank accounts of the assessee therefore, the same cannot be treated as unexplained bank deposits in absence of any adverse or positive incriminating evidence or material. Thus, we are inclined to hold that the findings recorded by the CIT(A) are quite correct and we are unable to see any valid reason to interfere with the same and hence, we uphold the same. No substantial question of law.

Summary

Issues Involved:
1. Restriction of addition by the Appellate Tribunal.
2. Deletion of addition on account of bogus Sundry Creditors.
3. Deletion of addition on account of unexplained bank deposit.

Analysis:

Issue 1: Restriction of addition by the Appellate Tribunal
The first proposed question revolved around the Tribunal's decision to restrict the addition to a specific amount as opposed to the disallowance made by the Assessing Officer. The Tribunal considered the arguments presented by both sides. The Assessee's Representative (AR) highlighted that expenses were related to a housing project approved by the Govt. of Gujarat and supported the genuineness of expenses with documentary evidence. The AR argued that the disallowance made by the Assessing Officer was unjustified. On the other hand, the Departmental Representative (DR) contended that the claim remained unexplained as the Assessee did not produce relevant books of accounts or supporting individuals. The AR emphasized that the claim was valid and in accordance with established practices. Ultimately, the Tribunal upheld the decision of the CIT(A) and dismissed the Revenue's appeal, stating that the Assessee's claims were supported by evidence and should be allowed.

Issue 2: Deletion of addition on account of bogus Sundry Creditors
The second proposed question centered on the deletion of an addition made on account of alleged bogus Sundry Creditors. The Tribunal carefully examined the arguments presented by both sides. The Departmental Representative (DR) argued that the Assessee failed to provide supporting books of accounts or creditors, leading to the disallowance of the claimed amount. Conversely, the Assessee's Representative (AR) supported the first appellate order, emphasizing that the Assessee had substantiated the genuineness of the creditors. The Tribunal noted that the CIT(A) had thoroughly examined the transactions and verified the relevant documents before granting relief to the Assessee. The Tribunal found no concrete evidence to suggest that the creditors were bogus, ultimately upholding the CIT(A)'s decision and dismissing the Revenue's appeal.

Issue 3: Deletion of addition on account of unexplained bank deposit
The third question revolved around the deletion of an addition made on account of unexplained bank deposits. The Tribunal analyzed the details provided by the Assessee regarding the bank deposits and noted that the source of the cash amount deposited had been explained as advances received from prospective buyers. The Tribunal found that the amounts added as unexplained sundry creditors included the impugned bank deposits, which were adequately explained. The Tribunal upheld the CIT(A)'s findings, stating that there was no incriminating evidence to treat the deposits as unexplained. Consequently, the Tribunal dismissed the Revenue's appeal on this ground as well.

In conclusion, the High Court dismissed the appeal, stating that the proposed questions did not raise substantial questions of law and were more factual in nature. The Court found no errors in the Tribunal's reasoning and upheld the decisions made in favor of the Assessee.