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TMI Blog2025 (1) TMI 642X X X X Extracts X X X X X X X X Extracts X X X X ..... Ground No.2 of the Revenue and therefore, it stands dismissed. Addition of sundry creditors and unsecured loans u/s. 68 - Addition as the business income which was estimated at 8% of the gross receipts - HELD THAT:-CIT(A) after going through relevant the ROI as well as the Tax Audit Report expressed his satisfaction about the nature and source of the loan taken from his mother and was pleased to hold that the same can t be treated as unexplained cash credit u/s. 68 of the Act which action of the CIT(A) can t be held to be perverse, in the light of the supporting relevant materials which were produced by the assessee before the AO as well before the CIT(A) who called for it exercising his co-terminus power. Therefore, there is no infirmity in the action of Ld.CIT(A) holding that unsecured loan of Rs. 60 lakhs couldn t be added u/s. 68 of the Act. Addition u/s. 68 of the Act as unexplained sundry creditors - Assessee produced the ledger extracts (of sundry creditors) and from perusal of which, CIT(A) found that most of the sundry creditors were paid the amounts due in the subsequent years by the assessee. In such a scenario CIT(A) rightly found that there was no justification to mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , to page no. 6, wherein the Ld.CIT(A) has asked, inter-alia for producing details/supporting documentary evidences in respect of sundry creditors, ledger extract, nature of transaction of Rs. 4,87,51,001/-, [which amount was added by the AO] as well as documentary evidences in respect of unsecured loan of Rs. 60,00,000/- taken from M/s.AKR Agencies along with proof of identity of creditors, nature of transaction, creditworthiness of creditors, ledger extract, confirmation from party etc. [which amount was also added by the AO u/s. 68 of the Act]. According to the Ld.AR, pursuant to the aforesaid direction of the first appellate authority, the assessee had filed relevant documents and therefore, there is no violation of Rule 46A, and in addition, submitted that sub-rule (4) of Rule 46A permits additional evidence to be adduced, if directed by the first appellate authority and in such an event, Rule 46A(1) to (3) of the Rules are not applicable. 5. We have heard both the parties and perused the material available on record. The short question raised by the Revenue is whether in this case, the Ld CIT(A) violated Rule 46A by accepting evidences not produced before AO; and if the answe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the authority is necessary for the effective decision of the case. Further, it is clear that before the ITAT, no ground was raised regarding reception of additional evidence by the First Appellate Authority in contravention of Rule 46A of Rules and in any view of the matter, we hold that the first appellate authority was justified in relying upon the material produced and there is no violation of Rule 46A of the Rules and accordingly, answer the said question of law against the revenue and in favour of the assessee. 6. In light of the ratio laid down by the Hon ble Karnataka High Court in the case of CIT Vs. Sanu Family Trust (supra), we do not find any infirmity in the action of the Ld.CIT(A) calling for relevant documents in respect of both the aforesaid issues and admitting the same and adjudicating the grounds of Appeal, and hold that in this case, there is no violation of Rule 46A of the Rules; and therefore, we don t find any merit in Ground No.2 of the Revenue and therefore, it stands dismissed. 7. The other ground of the Revenue is mainly assailing action of the Ld.CIT(A) deleting separate additions made by the AO in respect of sundry creditors and unsecured loans u/s. 68 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Finance Act, 2017 w.e.f.01.04.2017 (instead of @8% adopted by the AO). 11. The Ld.CIT(A) in his order is noted to have justified the action of the AO rejecting the books of accounts of the assessee though not contested by assessee; and adjudicated the plea of the assessee to restrict the rate adopted by the AO as per section 44AD while estimating the income, in the light of the amendment brought in by the Finance Act, 2017 in sec.44AD of the Act wherein, from AY 2017-18, the presumptive rate to be applied is @6% (instead of @8%) if the total turnover or gross receipts are received by account payee cheque or account payee bank draft or use of electronic clearance system through a bank account . In this regard, the Ld.CIT(A) found that assessee has received contract receipt from Government agencies through cheque after deduction of TDS reflected in 26AS and thus satisfies the condition stipulated in sec 44AD to adopt rate @ 6% instead of 8%. And since, the AO has adopted the gross-receipts at Rs. 20,47,87,318/- as appearing in Form 26AS, the Ld.CIT(A) rightly concluded that the AO might have erred in determining the gross-receipts based only on data from Form 26AS; and taking note of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h, the Ld.CIT(A) found that most of the sundry creditors were paid the amounts due in the subsequent years by the assessee. In such a scenario, the Ld.CIT(A) rightly found that there was no justification to make addition of sundry creditors u/s. 68 of the Act, which action we concur; and also repel the contention of the Revenue that the impugned addition was sustainable u/s. 41(1) of the Act; and thus, we find no infirmity in the action of Ld CIT(A) holding that the assessee succeeded on merits on these two issues/additions erroneously made by the AO. 14. Further, we note that the Ld.CIT(A) found force in the alternate submission of the assessee that AO having rejected the books of accounts and having resorted to estimation of the income of the assessee, no addition as made in respect of sundry creditors ought to have been made in the facts of the case. According to us, the Ld CIT(A) rightly noted that since the sundry creditors formed part of the business transaction of the assessee (trading of the assessee), therefore, no separate addition either u/s. 68 of the Act or u/s. 41(1) of the Act was legally tenable and therefore rightly deleted by the Ld.CIT(A) as held by the Hon ble A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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