2022 (11) TMI 611 - AT - Income Tax

Unexplained credit u/s 68 - proof of money has come from a particular source - HELD THAT - As appears that the accounts of the appellant company were audited under the provision of Section 44AB of the Act wherein no such defect in fact the above fund were source from OD account of the assessee company which is running by Mr. Atul K. Shah and his proprietary concern. The bank statement further shows various payments and receipts. Moreso, the appellant company audited under S. 44AB of the Act in which no defect has been pointed out, since, once the appellant has proved the money has come from a particular source, the impugned addition cannot be made under Section 68 of the Act on account of unexplained credit, hence, the same is deleted. Undisclosed short term capital gain (STCG) - assessee sold out an immovable property being a shop premises - HELD THAT - The assessee submitted that it has disclosed the entire sale consideration in the return of income and neither he has received the difference amount as pointed out by the Ld. AO. However, without referring the matter to the District Valuation Officer, the AO added the same to the total income of the assessee, which was, in turn, confirmed by the First Appellate Authority. There is catena of judgments that in the present facts and circumstances of the case it is the duty cast upon the AO to refer the matter for determining the fair market value. In the absence of such statutory compliance made by the Ld. AO, we do not find the addition is justified and the same is, thus, deleted. Disallowance of ROC tax - HELD THAT - The said addition has been made pursuant to the ratio laid down in the matter of Punjab Industrial Development Corporation Ltd. 1996 (12) TMI 6 - SUPREME COURT and also the judgment passed in the matter of Brookebond India Ltd. 1997 (2) TMI 11 - SUPREME COURT which has not been controverted by the assessee in the written notes of submission in the absence of which, we confirm the said addition. Addition on account of membership fees - HELD THAT - It is the case of the assessee that such membership paid every periodical years has been allowed as business expenses. In that view of the matter, we do not find any justification in making such addition for the year under consideration, the same is, thus, deleted. Addition on car depreciation - HELD THAT - In absence of any submission made by the assessee in this regard, we do not find any reason to interfere with the order passed by the authorities below, the same is, therefore, confirmed. This ground of appeal is, thus, found to be devoid of any merit and thus dismissed.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Addition of Rs. 7,25,000/- as unexplained credit under Section 68.
3. Addition of Rs. 1,58,300/- as undisclosed short-term capital gain.
4. Disallowance of ROC tax of Rs. 10,235/-.
5. Disallowance of membership fees of Rs. 1,50,000/-.
6. Disallowance of car depreciation of Rs. 1,23,522/-.

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The appeal was filed with a delay of 384 days. The assessee provided reasons for the delay, including the serious illness of the Director's mother-in-law and the COVID-19 pandemic. Supporting documents were filed. The Tribunal found the reasons genuine and condoned the delay.

2. Addition of Rs. 7,25,000/- as Unexplained Credit under Section 68:
The assessee received Rs. 31,25,000/- during the year, of which Rs. 7,25,000/- was contributed by the Director, Shri Atul K. Shah. The assessee provided bank statements and other documents to prove the transaction's genuineness. The Tribunal found the transactions were carried out through proper bank channels and the accounts were audited under Section 44AB without any defects. Thus, the addition under Section 68 was deleted.

3. Addition of Rs. 1,58,300/- as Undisclosed Short-Term Capital Gain:
The assessee sold a shop for Rs. 6 Lakhs, but the registered sale deed showed a jantri value of Rs. 7,34,700/-. The AO added the difference as undisclosed STCG without referring the matter to the District Valuation Officer. The Tribunal found this non-compliance unjustified and deleted the addition.

4. Disallowance of ROC Tax of Rs. 10,235/-:
The disallowance was based on the judgments in Punjab Industrial Development Corporation Ltd. vs. CIT and Brookebond India Ltd. vs. CIT. The assessee did not controvert these judgments in their submission. The Tribunal confirmed the disallowance.

5. Disallowance of Membership Fees of Rs. 1,50,000/-:
The assessee claimed the membership fees paid to All India Gems & Jewellery Federation as business expenses. The Tribunal found the periodic payment of membership fees as allowable business expenses and deleted the disallowance.

6. Disallowance of Car Depreciation of Rs. 1,23,522/-:
The car was purchased in the name of Hemantkumar Amrutlal Patel and later transferred to the Director, Shri Atul K. Shah. The AO disallowed the depreciation, stating the car was not owned by the company during the relevant financial year. The Tribunal, in absence of any further submission from the assessee, confirmed the disallowance.

Conclusion:
The Tribunal partly allowed the assessee's appeal, deleting the additions under Section 68 and for the membership fees, while confirming the disallowances for ROC tax and car depreciation. The appeal was allowed in part.