2022 (1) TMI 1086 - AT - Income Tax

Addition of gross profit - AO for adopting the gross profit figure as income and not allowing the claim of expenses made in the profit and loss account - HELD THAT - We find that the assessee is carrying on business consistently. Since the tax audit report has been filed, the facts remain undisputed that the books of account are regularly maintained. In the profit and loss account, various expenses incidental to running the business have been claimed. These expenses are duly supported by the Audit Report. Looking to the consistent running of business of the assessee this action of the Ld. AO of disallowing all the expenses claimed in the profit and loss account was not justified. Ld. CIT(A) has rightly deleted the addition which calls no interference. Thus ground no.1 raised by the revenue stands dismissed. Addition u/s 68 for unsecured loan - HELD THAT - We find that the assessee took, unsecured loan from existing loan creditors in other words those parties which have already given unsecured loan to the assessee in preceding years further gave loan to the assessee during the year. Nothing has been brought on record that whether identity, genuineness and creditworthiness of these cash creditors were ever disputed by revenue authorities in the preceding years as no such material was put forth by the Ld. DR. Remaining amount we find that out of this sum amount of ₹ 40,50,000/- was received and was repaid during the year itself and for the remaining amount of unsecured loan of ₹ 40,50,000/- was repaid in subsequent A.Y. 2006-07. Assessee had filed complete details of confirmation of account, copies of Income Tax Return of the cash creditors along with bank statements to explain the identity, genuineness and creditworthiness of all the alleged unsecured loans. Revenue authorities failed to find any discrepancy in these documents and even before us also Ld. DR could not file any evidence to challenge the evidences filed by the assessee. Under these given facts and circumstances of the case we find merit in the finding of Ld. CIT(A) and the same stands confirmed. Accordingly, ground no.2 3 raised by the revenue stands dismissed. Disallowance of purchase iron scrap - HELD THAT - We find that the AO made the disallowance for want of verification of purchase. The assessee placed these details before the ld. CIT(A) who after going through the same and also in view of the details appearing in the audited financial statement deleted the disallowance of purchase of Iron Scrap - Before us Ld. DR failed to controvert the finding of Ld. CIT(A) which therefore, in our view needs no interference. Accordingly ground no.4 raised by the revenue stands dismissed. TDS u/s 194C - Addition u/s 40a(ia) of the Act for non-deduction of tax at source and the Motor Bhada Expenses - HELD THAT - AO was supplied with the relevant details of the Motor Bhada Expenses claimed in the profit and loss account. Before the Ld. CIT(A) it was stated that none of the payment exceeded the limit provided u/s 194C i.e. ₹ 20,000/- per transaction and ₹ 50,000/- in aggregate for transaction with one party during the year. Further there is no adverse remark in the tax audit report and also Ld. CIT(A) has examined the documents to arrive at the finding that TDS was not deductible on the alleged expenses and this finding of Ld. CIT(A) remains uncontroverted by ld. CIT-DR, we therefore, find no inconsistency in the finding of Ld. CIT(A). Accordingly ground no.5 raised by the revenue stands dismissed. Addition u/s 68 of the Act for the sale consideration received from sale of capital asset - HELD THAT - AO made the addition for the total sale consideration received from sale of land and also made addition for cost of acquisition of equity share - when the matter was carried before the Ld. CIT(A) the assessee had filed the details of cost of assets and calculation of capital gain and the same were found to be correct. We find that the ld. AO failed to allow the deduction for cost of acquisition of equity shares against the sale of securities and similarly failed to give deduction for cost of acquisition of land purchased during the F.Y. 1994-95 1991-92 as claimed in the computation of income. Since necessary enquiries were carried out by the ld. CIT(A) by calling remand report and examining documentary evidences before deleting the impugned addition, we find that Ld. CIT(A) has rightly examined the facts of this issue and the finding of Ld. CIT(A) remains uncontroverted before us by the Revenue authorities.

Summary

Issues Involved:
1. Deletion of addition made by the Assessing Officer under the head business income.
2. Deletion of addition in respect of unsecured loans.
3. Non-consideration of the remand report by the CIT(A).
4. Deletion of addition made in respect of purchase of scrap.
5. Deletion of addition made under Section 40(a)(ia) of the Income Tax Act.
6. Deletion of addition made in respect of capital gains.

Detailed Analysis:

1. Deletion of Addition Made by the Assessing Officer Under the Head Business Income
The Assessing Officer disallowed expenses claimed in the profit and loss account, treating the gross profit as net income due to the non-production of books of accounts, bills, and vouchers. The CIT(A) deleted this addition, stating that the audit report supported the expenses claimed and that the best judgment assessment cannot disregard material on record. The tribunal upheld the CIT(A)'s decision, noting that the assessee consistently maintained books of accounts and the expenses were duly supported by the audit report.

2. Deletion of Addition in Respect of Unsecured Loans
The Assessing Officer added unsecured loans of ?81 lakhs and ?1,18,66,871 under Section 68 due to insufficient evidence of the creditors' identity, capacity, and genuineness. The CIT(A) deleted these additions, noting that the assessee had provided confirmation letters, copies of income tax returns, and bank statements of the creditors. The tribunal found no discrepancy in these documents and upheld the CIT(A)'s decision, noting the revenue's failure to dispute the creditors' identity, genuineness, and creditworthiness in preceding years.

3. Non-Consideration of the Remand Report by the CIT(A)
The revenue argued that the CIT(A) did not consider the remand report, which detailed the Assessing Officer's findings on each loan creditor. However, the tribunal found that the CIT(A) had examined the remand report and the documents provided by the assessee, which discharged the assessee's onus to prove the genuineness of the transactions. The tribunal upheld the CIT(A)'s deletion of the additions.

4. Deletion of Addition Made in Respect of Purchase of Scrap
The Assessing Officer disallowed the purchase of scrap for want of verification. The CIT(A) deleted this addition, finding it to be ad hoc and not correlated to specific expenditure. The tribunal upheld the CIT(A)'s decision, noting that the assessee had provided the necessary details and the disallowance was not justified.

5. Deletion of Addition Made Under Section 40(a)(ia) of the Income Tax Act
The Assessing Officer disallowed Motor Bhada Expenses for non-deduction of tax at source. The CIT(A) deleted this disallowance, noting that none of the payments exceeded the threshold limits under Section 194C and there were no adverse remarks in the tax audit report. The tribunal upheld the CIT(A)'s decision, finding no inconsistency in the findings.

6. Deletion of Addition Made in Respect of Capital Gains
The Assessing Officer added the sale consideration received from the sale of a capital asset without allowing deductions for the cost of acquisition. The CIT(A) deleted this addition after examining the details and finding the computations correct. The tribunal upheld the CIT(A)'s decision, noting that the necessary inquiries were carried out and the findings remained uncontroverted by the revenue authorities.

Conclusion
The tribunal dismissed the revenue's appeal, upholding the CIT(A)'s deletions of the additions made by the Assessing Officer under various heads, including business income, unsecured loans, purchase of scrap, disallowance under Section 40(a)(ia), and capital gains. The tribunal found that the assessee had provided sufficient evidence and the CIT(A)'s findings were well-supported and uncontroverted.