2022 (5) TMI 521 - AT - Income Tax

Disallowance under the head distribution expenses - AO made the addition on the ground that the expenses debited in the corresponding previous assessment year was Nil - HELD THAT - We find that CIT(A) after considering the assessee s submissions, remand report of the AO and assessee s submissions to the remand report has given a finding that the expenditure was grouped by the auditors and in fact the corresponding expenditure in the immediate preceding assessment year was more than the aggregate expenditure incurred by the assessee in the year under consideration. He has further given a finding that in the remand report, the AO had not rebutted any of the submissions made by the assessee. He thereafter concluded that the AO was legally and factually incorrect in making the addition. Before us, no fallacy in the findings of CIT(A) has been pointed out by Revenue. In such a situation, we find no reason to interfere with the order of CIT(A) and thus the Ground of Revenue is dismissed. Addition u/s 68 - CIT-A deleted the addition given a finding that he has examined the bank account of the share subscribers and on its examination he did not find any cash deposits in the account of the subscriber prior to the issue of cheque for share capital to the assessee - HELD THAT - CIT(A) on considering the remand report along with the order sheet entry has given a finding that order sheet entry reveals that assessee had filed letter dated 13.03.2013 after which the case was adjourned on 15.03.2013 for filing certain information and after entry dated 13.03.2013 there is no further entry either on 15.03.2013 or 22.03.2013 indicating of any proceedings being conducted after 13.03.2013. He has further noted that though in assessment order AO has referred to the notice dated 22.03.2013 but the order sheet record does not prove the service of the notice to the assessee. He has thus accepted the contention of the assessee that the report of the DDIT (Investigation), Kolkata was never confronted to the assessee. He has further given a finding that assessee had furnished certain details before the AO vide letter dated 11.03.2013 13.03.2013 but AO has not rebutted the contention of the assessee. He has further given a finding that the evidences furnished by the assessee not been rebutted by the AO even during the course of remand proceedings. Considering the totality of the aforesaid facts, we find the CIT(A) after considering the material on record has deleted the addition. In the absence of any fallacy in the findings of CIT(A), we find no reason to interfere with the order of CIT(A) and thus the grounds of Revenue are dismissed.

Summary

Issues:
1. Deletion of addition made on account of distribution and labour expenses.
2. Deletion of addition made under section 68 of the Income Tax Act.

Deletion of Addition of Distribution and Labour Expenses:
The case involved an appeal by the Revenue against the order of the Commissioner of Income Tax (Appeals) relating to Assessment Year 2010-11. The Revenue challenged the deletion of an addition of Rs.6,67,420/- made by the Assessing Officer on account of disallowance under distribution and labour expenses. The Assessing Officer disallowed these expenses as the corresponding expenditure in the previous year was Nil and the assessee failed to provide satisfactory evidence. The Commissioner of Income Tax (Appeals) directed the deletion of the addition after considering the submissions and the remand report. The Tribunal upheld the decision of the Commissioner, noting that the Assessing Officer did not rebut the submissions made by the assessee. The Tribunal found no reason to interfere with the Commissioner's decision, dismissing the Revenue's appeal.

Deletion of Addition under Section 68 of the Income Tax Act:
The second issue involved the deletion of an addition of Rs. 3 crores made under section 68 of the Income Tax Act. The Assessing Officer had added this amount as unexplained cash credit, citing discrepancies in the share capital and premium received from four concerns. The Commissioner of Income Tax (Appeals) deleted the additions after examining the bank accounts of the share subscribers and finding no cash deposits prior to issuing the cheques for share capital. The Commissioner also noted that the Assessing Officer failed to appreciate the documentary evidence provided by the assessee to prove the genuineness of the transactions. The Tribunal upheld the Commissioner's decision, stating that the Assessing Officer made the additions based on suspicion without concrete evidence. The Tribunal found no fault in the Commissioner's findings and dismissed the Revenue's appeal.

In conclusion, the Tribunal dismissed the Revenue's appeal in both issues, upholding the decisions of the Commissioner of Income Tax (Appeals) in deleting the additions related to distribution and labour expenses and under section 68 of the Income Tax Act.