2021 (10) TMI 1125 - AT - Income Tax

Undisclosed income - amounts have been advanced to Prakash Ladhani outside the books of account - assessee submitted that it has withdrawn money from United Bank of India and the same was deposited with Bank of India - As per AO the amount was given to Shri Prakash Ladhani and it would also fall under the category of deemed dividend within the meaning of section 2(22)(e) CIT-A deleted the addition - HELD THAT - We notice that the transactions relating to imprest account, withdrawal from United Bank of India and deposit into Bank of India have been routed through the books of account. As submitted by assessee, the imprest account was fastened between cash withdrawal from United Bank of India and deposit into Bank of India in order to have control over these transactions. We notice that the imprest account is created as conduit between the bank transactions. We notice that the Ld. CIT(A) has examined the books of account which has also been confronted before the A.O. CIT(A) has also recorded a finding that all the transactions are duly recorded in the books of account. When all the transactions have been routed through the books of accounts, the question of undisclosed income will not arise. Hence we are of the view that the AO has made the impugned addition on surmises and conjectures only and accordingly, in the facts and circumstances of the case, we do not find any infirmity in the decision rendered by Ld. CIT(A) in deleting this addition in both the years.- Decided in favour of assessee.

Summary

Issues:
Challenging deletion of undisclosed income by CIT(A) | Validity of search proceedings under section 132(1) of the Income Tax Act, 1961

Issue 1: Challenging deletion of undisclosed income by CIT(A):
The case involved appeals by the revenue and cross objections by the assessee against orders by the CIT(A) for assessment years 2011-12 & 2012-13. The revenue contested the deletion of undisclosed income of ?1.74 crores and ?2.51 crores assessed by the AO in both years. The primary concern was advances given to a Director debited to the "Imprest Account," with the AO treating these amounts as undisclosed income. The CIT(A) deleted the additions, leading to the appeal. The revenue argued that the assessee failed to provide details, while the assessee maintained that the transactions were duly recorded in the books of account, and the imprest account was for control purposes only, not for personal use by the Director. The CIT(A) upheld the assessee's position, finding that all transactions were properly recorded, and the additions by the AO were based on conjectures.

Issue 2: Validity of search proceedings under section 132(1) of the Income Tax Act, 1961:
The assessee challenged the validity of search proceedings under section 132(1) of the Income Tax Act. The assessee did not press the challenge during the hearing. The tribunal ultimately dismissed both the revenue's appeals and the assessee's cross objections.

In summary, the ITAT Bangalore addressed the challenges regarding the deletion of undisclosed income by the CIT(A) and the validity of search proceedings under section 132(1) of the Income Tax Act, 1961. The tribunal upheld the CIT(A)'s decision to delete the undisclosed income, emphasizing that the transactions were properly recorded in the books of account. Additionally, the challenge to the validity of search proceedings was not pursued during the hearing, leading to the dismissal of both the revenue's appeals and the assessee's cross objections.