2024 (2) TMI 397 - HC - Income Tax

Addition u/s. 41(1) - Difference between the amount payable as per books of accounts and amount as per the confirmation received from the creditor - ITAT deleted the addition - HELD THAT - As it is clear that the additions u/s 41(1) were made for the differences which arose on account of only book entries. Admittedly, the assessee had actually made the payment in the later year and the party has accounted receipt in the same financial year which resulted into differences in the balance as added by the Assessing Officer. Since the difference has been explained which was only on account of the book entries, in our considered opinion, there is no error in the order of the ITAT. No substantial question of law.

Summary

Issues involved: Appeal u/s 260A of the Income Tax Act, 1961 challenging ITAT order for assessment year 2012-13 regarding addition under Section 41(1) and 37(1).

Summary:

Issue 1 - Addition u/s 41(1) of the Act:
The appellant revenue challenged the ITAT order deleting the addition of Rs. 42,98,84,771/- made by the AO u/s. 41(1) of the Act. The Assessing Officer observed discrepancies in credit shown by the assessee in the name of M/s. Kabra Brothers. The assessee failed to obtain confirmation from M/s. Kabra Brothers, leading to the addition. However, CIT(A) allowed the appeal of the assessee, and ITAT upheld the decision based on satisfactory reconciliation and explanation of the alleged difference in the balance due to book entries. The ITAT noted that the difference arose due to the party discounting the letter of credit and receiving payment in the same financial year, while the actual payment was made by the assessee in the subsequent year. The ITAT concluded that no addition was warranted under Section 41(1) of the Act, and directed the AO to delete the addition.

Decision:
The High Court upheld the ITAT decision, stating that the additions were made based on differences arising from book entries, where the actual payment was made by the assessee in a later year, and the party accounted for the receipt in the same financial year. As the difference was satisfactorily explained, the High Court found no error in the ITAT order and dismissed the tax appeal, stating that there was no substantial question of law requiring consideration.

Conclusion:
The High Court dismissed the tax appeal, affirming the ITAT decision to delete the addition made by the AO u/s. 41(1) of the Income Tax Act, 1961 for the assessment year 2012-13.