2009 (9) TMI 683 - AT - Income Tax

Assessee's Appeals Partly Allowed: Unexplained Credits Deleted, Other Grounds Dismissed

Mathrubhumi Printing & Publishing Co. Ltd. Versus Deputy Commissioner of Income-tax, Circle-1(1), Calicut

Mathrubhumi Printing & Publishing Co. Ltd. Versus Deputy Commissioner of Income-tax, Circle-1(1), Calicut - [2010] 38 SOT 300 (COCHIN) Issues:Validity of initiation of proceedings under section 147, justification in making additions against unexplained credits, disallowing claim for deduction of losses by way of bad debts.Validity of Initiation of Proceedings under Section 147:The assessee raised numerous grounds challenging the initiation of proceedings under section 147, among others. However, during the hearing, the assessee focused only on the partial additions sustained by the CIT (Appeals) related to unexplained credits of depositors and dealers/agents. The counsel for the assessee argued that the Assessing Officer had made additions without fully appreciating the circumstances, especially regarding deposits accepted from the public in compliance with the Companies Act, 1956. The counsel contended that the CIT (Appeals) should have accepted the evidence provided by the assessee and deleted the entire additions. The Revenue, represented by the Additional Commissioner of Income-tax, argued that the CIT (Appeals) had appropriately granted relief based on the additional evidence presented by the assessee. The Tribunal noted the arguments from both sides and proceeded to analyze the evidence and legal aspects involved.Additions against Unexplained Credits of Depositors:The Tribunal examined the additions sustained by the CIT (Appeals) concerning unexplained credits of depositors for the assessment years 1999-2000 and 2001-02. The assessee, a public limited company, had accepted deposits from the public in accordance with the Companies Act, 1956. The Tribunal observed that the assessee had demonstrated the source of the deposits collected from the public and provided documentary evidence supporting the majority of these deposits. The Tribunal emphasized that once the source of the deposits was established, they could not be treated as unexplained credits. It further highlighted that under the law, unreturned deposits must be transferred to the public account of the Government of India. Therefore, the Tribunal concluded that the additions made by the lower authorities were not justified, and subsequently, deleted the additions for both assessment years.Additions against Unexplained Credits of Dealers/Agents:Regarding the additions sustained by the CIT (Appeals) related to unexplained credits of dealers/agents, the Tribunal noted that the assessee maintained accounts with numerous newspaper agents, which were running accounts. The Tribunal acknowledged the challenges in producing confirmation letters and details for all these accounts within a short period. However, the Tribunal found that the majority of the accounts had been explained and supported with documentary evidence. Applying the rule of probability, the Tribunal concluded that there was no basis to treat a part of these accounts as unexplained. Without any incriminating evidence, the Tribunal held that the CIT (Appeals) erred in sustaining the additions and proceeded to delete them for both assessment years.Conclusion:In conclusion, the Tribunal partly allowed the appeals filed by the assessee, deleting the additions made against unexplained credits of depositors and dealers/agents for the respective assessment years. Other grounds raised by the assessee were dismissed as not pressed, resulting in a partial success for the assessee in the appeals.