2019 (11) TMI 198 - AT - Income Tax

Addition of cash Deposit in bank accounts - HELD THAT - Revenue before us during the course of arguments and also in the written submissions have not disputed the correctness of the cashbook. Further, it was also not the case of the Assessing Officer that the cash book maintained by the assessee was incorrect. In view of the above, once the assessee was able to explain the source of deposits in the bank based on the cash book, which were admittedly not disputed and rejected by the AO, therefore, no addition on the basis of the bank deposit can be made out and accordingly, the ground raised by the Revenue is liable to be dismissed. Addition in respect of cash deposits in the account of various creditors - According to AO, the confirmations were filed, but no copy of IT returns and computation and bank statement not filed. Assessee has not proved the deposit, as he added the same in the income - HELD THAT - As is clear from the tabulatio Assessing Officer had made the addition even in respect of Axis Bank and Barclay Finance. This shows the total non-application of mind by the Assessing officer. In respect of these two creditors, we have no doubts that these are duly explained creditors being the financial Institution/bank, hence, the addition are deleted. With respect to Renu Verma, we had already mentioned that the deposit in the bank account of Renu Verma was duly explained by her in the return of income filed by her. Further, she had also explained that the said amount was duly given by her to her husband. In our view, the assessee had discharged his onus and therefore, the addition made by the AO qua Renu Verma was uncalled for. AO was asked by the assessee during the assessment proceedings to summon all these creditors including Renu Verma, but theAO failed to exercise his powers under the Act. Hence, for this reason also, this addition is deleted. Creditor Arun Chaddha, the confirmation of account was placed by the assessee in the paper book at page 129 and 130. The amount of ₹ 5 lacs was paid by Shri Arun Chaddha through cheque drawn on Shreyas Gramin Bank, SB 791. The above said fact was not disputed by the Assessing Officer in the remand report. In view of the above, the addition made by the assessing officer on account of creditor Arun Chadda is deleted. In respect of Nisha Agarwal - As per confirmation before AO, a closing balance of ₹ 468375/- was mentioned whereas as per confirmation before CIT(A), it was mentioned as ₹ 4,50,000/-. Difference between the two is a very small amount and moreover, the creditor in the books of account of the assessee are required to be seen and in the present case, the amount shown in the assessee s account was less as compared to the confirmation before the AO. In view of the above, we do not find any reason to uphold the action of AO In respect of Shree Timber, the assessee has placed at page 146 to 188 the confirmation from shree Timber through its proprietor sh. Akhil Bansal for an amount of ₹ 2,00,000/-. Even the return of income was placed on record for the relevant assessment year. Since the identity, capacity and creditworthiness of the creditor are beyond the shade of doubt, therefore, the deletion made by the CIT(A) is required to be upheld. In respect to Bharat Bansal the confirmation of account clearly shows the receipt of ₹ 1,50,000/- through the banking channel and therefore, the amount remained to be unpaid by the assessee was only ₹ 1,50,000/-. The said amount was not reflected in the books of account of the assessee. In view of the above, the assessee failed to give any explanation for the credit of ₹ 1,50,000/-. In view of the above, the appeal of the Revenue is dismissed as the assessee s explanation in respect of ₹ 1,50,000/- is accepted on the basis of the books of account of the Bharat Bansal. However, the C.O. of the assessee in respect of remaining ₹ 1,50,000/- which was sustained by the ld. CIT(A), we are of the opinion that the assessee s explanation is without any merit and accordingly, the same is dismissed. Disallowance u/s 40(a)(ia) - interest paid to Barklay Finance Co. without deduction of IDS - HELD THAT - The payment was made to Barklay Finance Co. which is a bankand is assessed to Income-tax. In our considered opinion, the assessee was not required to deduct the TDS while making the payment of interest and principal to Barklay Finance CO. The bank is liable to be taxed on the interest income and it is not the case of the AO that the bank has not declared the interest income in its return of income and has not paid the taxes. In our view this issue is of applicability to proviso to section 40(a)(ia) is covered in favour of the assessee by the decision of Hon ble High Court in the matter of Ansal Land Mark, 2015 (9) TMI 79 - DELHI HIGH COURT wherein Delhi High Court has followed the decision of Agra Tribunal in the matter of Rajeev Agarwal 2014 (6) TMI 79 - ITAT AGRA

Summary

Issues Involved:
1. Deletion of addition of ?62,13,500 out of ?63,63,500 made by AO on account of cash deposits in bank accounts.
2. Addition of ?56,00,000 in respect of cash deposits in the account of various creditors.
3. Disallowance of ?5,98,306 under Section 36(1)(iii) of the Act, reduced to ?46,794 by CIT(A).
4. Addition of ?85,000 on account of unexplained investment in the purchase of a car.
5. Affirming addition of ?1,50,000 in respect of cash deposit in the SB account of Mrs. Renu Verma.
6. Affirming addition of ?1,50,000 in the account of loan received by account payee cheque, wrongly entered in the account of Mr. Bharat Bansal.
7. Affirming addition of ?46,794 under Section 36(1)(iii) in respect of interest paid to Syndicate Bank.
8. Affirming addition of ?92,626 in respect of interest paid to Barklay Finance without deduction of TDS under Section 40(a)(ia).

Detailed Analysis:

1. Deletion of Addition of ?62,13,500 Out of ?63,63,500 Made by AO on Account of Cash Deposits in Bank Accounts:
The AO added ?63,63,500 to the income of the assessee, arguing that the deposits could not be made out of the income of the year. The CIT(A) deleted ?62,13,500 of this addition, concluding that the deposits were duly recorded in the cash book and explained by the assessee. The Tribunal upheld this decision, noting that the correctness of the cash book was not disputed by the Revenue.

2. Addition of ?56,00,000 in Respect of Cash Deposits in the Account of Various Creditors:
The AO added ?56,00,000, stating that the confirmations were filed but copies of IT returns and bank statements were not provided. The CIT(A) deleted ?51,88,237 of this addition, confirming only ?1,50,000 as unexplained. The Tribunal upheld the deletion, noting that the creditors were duly explained and the AO failed to summon them despite the assessee's request.

3. Disallowance of ?5,98,306 Under Section 36(1)(iii) of the Act, Reduced to ?46,794 by CIT(A):
The AO disallowed ?5,98,306, arguing that the donation to Shri Sai Ram Charitable Trust was not for business purposes and was out of borrowed funds. The CIT(A) reduced this disallowance to ?46,794, linking it directly to the interest charged by Syndicate Bank. The Tribunal did not decide on the merits, citing a Board Circular to withdraw appeals with tax effects of less than ?50 lakhs.

4. Addition of ?85,000 on Account of Unexplained Investment in the Purchase of a Car:
The Tribunal dismissed this ground in light of the Board Circular mentioned above, without deciding on the merits.

5. Affirming Addition of ?1,50,000 in Respect of Cash Deposit in the SB Account of Mrs. Renu Verma:
The CIT(A) affirmed the addition of ?1,50,000, but the Tribunal allowed the assessee's explanation, noting that the deposit was duly explained in Mrs. Verma's return of income.

6. Affirming Addition of ?1,50,000 in the Account of Loan Received by Account Payee Cheque, Wrongly Entered in the Account of Mr. Bharat Bansal:
The CIT(A) confirmed the addition of ?1,50,000 as unexplained. The Tribunal dismissed the assessee's cross-objection, agreeing with the CIT(A) that the assessee failed to provide a satisfactory explanation for this credit.

7. Affirming Addition of ?46,794 Under Section 36(1)(iii) in Respect of Interest Paid to Syndicate Bank:
This issue was not decided on the merits by the Tribunal, in accordance with the Board Circular to withdraw appeals with tax effects of less than ?50 lakhs.

8. Affirming Addition of ?92,626 in Respect of Interest Paid to Barklay Finance Without Deduction of TDS Under Section 40(a)(ia):
The Tribunal allowed the assessee's cross-objection, noting that the payment was made to a bank assessed to income-tax, and thus, TDS was not required. The Tribunal followed the decision of the Delhi High Court in the matter of Ansal Land Mark.

Conclusion:
The Tribunal dismissed the Revenue's appeal and partly allowed the assessee's cross-objection, providing detailed justifications for each issue based on the merits of the case and applicable legal principles.