2014 (2) TMI 598 - AT - Income Tax

Appeal Dismissed for Unexplained Receipt & Payment: ITAT Emphasizes Evidence & Compliance

M/s. Bedi Auto Engineer Versus Income Tax Officer

The Appellate Tribunal ITAT Amritsar dismissed the appeal for the assessment year 2006-07, upholding additions of Rs.5 lacs as an unexplained receipt and ... Addition as unexplained receipt – Held that:- The assessee's case is built on presumption i.e. that the first payment was usually in cash that receipt had been accepted by Smt. Reema Aggarwal to be issued against cheque but not against the cash etc. -The CIT(A) was not satisfied that these presumptions can assist the appellant in the discharge of the onus cash upon it - a credit of this amount has been introduced in the books of the assessee and the onus lies squarely upon the assessee to prove the genuineness of the transaction recorded in its books - The assessee was running a business for a long time. Even though it had suffered losses, it had a running operation, stock in trade of the value of more than Rs.79 lacs and several other fixed asset - thus, the assessee firm and its partner did have access to money - In the face of clear denial by Smt. Reena Aggarwal and absence of any positive evidence with the assessee, the CIT(A) rightly upheld the addition made by the AO as unexplained money received by the assessee – Decided against Assessee. Application of section 36(2)(i) of the Act - Addition made on account of payment – Held that:- The Ld. CIT(A) has passed a well-reasoned order that the claim made by the assessee is not allowable as deduction u/s 36(1)(vii) of the Act since the condition prescribed u/s 36(2)(i) of the Act relating to bad debts is not satisfied in respect of the excess payment - The debt due to be paid by the assessee to M/s. Mahindra & Mahindra Ltd; was lesser than the amount actually paid by the assessee - The excess amount was never taken into account in computing income of the assessee in the present assessment year or in the earlier year prior to present assessment year - there is nothing to show that any sales were made by the assessee to M/s. Mahindra & Mahindra Ltd. Claim for deduction u/s 37(1) of the Act – Held that: Deduction u/s 37(1) of the Act is allowed in respect of expenditure incurred wholly and exclusively for the purpose of assessee's business - The assessee has not able to throw any light on the purpose for which the excess payment was made - It has not informed as to how the payment resulted in an expenditure incurred wholly and exclusively for the purpose of assessee's business or even as to how it was expenditure – thus, the CIT(A) has rightly rejected the claim of the assessee – Decided against Assessee. Issues:1. Unexplained receipt of Rs.5 lacs.2. Addition of Rs.216331/- on account of payment made to M/s. Mohindra and Mohindra.Unexplained Receipt of Rs.5 lacs:The appeal pertains to the assessment year 2006-07, where the assessee claimed to have received an advance of Rs.30 lacs from a party for the sale of a building. The AO investigated and found discrepancies regarding the receipt of Rs.5 lacs in cash. The assessee provided a photocopy of a receipt, but it was not signed by the buyer. The AO added Rs.5 lacs to the assessee's income as unexplained receipt. The CIT(A) upheld this addition, stating that the burden was on the assessee to prove the genuineness of the transaction. The CIT(A) highlighted that the entries in the books and self-serving documents were insufficient to corroborate the claim, especially with the denial by the payer. The CIT(A) emphasized the need for concrete evidence to support the receipt of the amount, dismissing the appeal on this ground.Addition of Rs.216331/- on Account of Payment to M/s. Mohindra and Mohindra:Regarding the claim of Rs.216331/- as a bad debt, the assessee stated that an excess payment made to M/s. Mahindra & Mahindra Ltd. had become irrecoverable and was claimed as a bad debt. The AO disallowed this claim, questioning the reason for the excess payment and its business purpose. The CIT(A) confirmed the AO's decision, stating that the conditions for bad debt deduction were not met. The excess amount was never accounted for in the assessee's income, and there was no evidence of sales to M/s. Mahindra & Mahindra Ltd. The CIT(A) emphasized that mere payment does not qualify as a deduction under the relevant sections of the Act. The CIT(A) cited previous decisions to support the disallowance and rejected the claim under both sections 36(1)(vii) and 37(1) of the Act. Consequently, the appeal on this ground was dismissed, upholding the CIT(A)'s order.In conclusion, the Appellate Tribunal ITAT Amritsar dismissed the appeal filed by the assessee for the assessment year 2006-07, upholding the additions of Rs.5 lacs as an unexplained receipt and Rs.216331/- on account of a payment made to M/s. Mohindra and Mohindra. The judgment emphasized the importance of concrete evidence and compliance with the provisions of the Income Tax Act to support claims and deductions, ultimately affirming the decisions of the lower authorities.