2021 (4) TMI 801 - AT - Income Tax

Addition of unexplained cash credit u/s 68 - CIT-A treating the accounted and disclosed in the return of income filed u/s 139 of the Act the brokerage incom as unexplained cash credit - HELD THAT - AO treated the commission income as unexplained cash credit by taking view that assessee has not given any explanation and evidence. On the contrary, in assessment order, AO recorded that the filed submission dated 10.02.2015, wherein it was submitted that he is not covered within the provision of section 44AD of the Act, he is maintaining all regular books of accounts and other records for commission income. He is also incurred certain expenses, which can be verified. The ledger account of commission income was also furnished, along with party wise details and the available addresses and the amount of commission. No finding was given on such explanation furnished and evidenced by the assessee. Moreover,AO has not doubted the various expenses claimed against commission income. The assessee has shown commission income in original return of income. We find convincing force in the submissions of learned AR of the assessee that the assessee has already filed Return of Income under section 139 of the Act before the date of initiation of assessment proceeding and much less after completion of investigation carried out by Investigation Wing of Revenue, it could not in any way be termed as unexplained income, the addition of unexplained income is purely guess work of assessing officer. No justification in treating the commission income as unexplained cash credit, accordingly appeal of the assessee is allowed

Issues Involved:
1. Delay in filing the appeal.
2. Treatment of brokerage income as unexplained cash credit under section 68 of the Income Tax Act.
3. Jurisdiction of the Assessing Officer (AO) under section 144 of the Income Tax Act.
4. Nature of brokerage activity in the diamond business and historical assessment records.

Detailed Analysis:

1. Delay in Filing the Appeal:
The assessee filed an appeal with a delay of two days due to a miscalculation of the time period for filing the appeal. The delay was neither intentional nor deliberate. The Departmental Representative did not seriously oppose the request for condonation of the delay. The Tribunal condoned the delay, considering it was due to a miscalculation and not intentional.

2. Treatment of Brokerage Income as Unexplained Cash Credit:
The AO treated the brokerage income of ?3,10,200/- as unexplained cash credit under section 68 of the Income Tax Act, as the assessee failed to provide sufficient evidence to substantiate the commission income. The AO concluded that the income was from unknown sources due to the lack of supporting evidence. On appeal, the CIT(A) upheld the AO's decision, noting the absence of records or stock discovered during the search and the lack of details on the percentage commission or the names and addresses of the parties involved.

The Tribunal, however, found that the AO made the addition purely on assumptions and without any incriminating material seized during the search. The Tribunal noted that the assessee had already filed returns under section 139 of the Act before the assessment proceedings under section 153A and had provided ledger accounts and details of the commission income. The Tribunal emphasized that no adverse evidence was brought on record to support the AO's presumption and that similar additions in previous years had been deleted by the Tribunal.

3. Jurisdiction of the Assessing Officer (AO) under Section 144:
The assessee argued that the AO's action to pass the order under section 144 of the Act was without jurisdiction, as the detailed explanations and compliance with notices under sections 143(2)/142(1) were not properly considered. The Tribunal agreed, stating that the AO's addition was based on guesswork and assumptions without any tangible material seized during the search, thus making the assessment without jurisdiction and void ab initio.

4. Nature of Brokerage Activity in the Diamond Business and Historical Assessment Records:
The assessee contended that both lower authorities failed to appreciate the nature of the brokerage activity in the diamond business and the historical assessment records. The Tribunal observed that the assessee had been consistently showing brokerage income in past years, which had been accepted by the Department. The Tribunal found that the AO did not doubt the expenses claimed for earning the commission income and had not provided any adverse evidence against the assessee's explanation.

Conclusion:
The Tribunal allowed the appeals, finding no justification in treating the commission income as unexplained cash credit. The Tribunal emphasized that the addition was purely based on assumptions and without any incriminating material. The appeals for the assessment years 2011-12, 2012-13, and 2013-14 were also allowed, following the principle of consistency. The order was pronounced on 04 March 2021.

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