2015 (1) TMI 774 - AT - Income Tax

Tribunal Upholds Revenue's Appeals Dismissal for A.Y. 2006-07 & 2007-08 (A)

ACIT., Circle – 2, Surat Versus Shri Chhaganbhai R. Rakholia

ACIT., Circle – 2, Surat Versus Shri Chhaganbhai R. Rakholia - TMI Issues Involved:1. Addition on account of suppression of sales for A.Y. 2006-07 and A.Y. 2007-08.2. Addition on account of understated agricultural expenses for A.Y. 2006-07.3. Addition on account of unexplained investment under Section 69B for A.Y. 2006-07.4. Addition on account of unexplained cash credit under Section 68 for A.Y. 2007-08.Issue-wise Detailed Analysis:1. Addition on Account of Suppression of Sales:For A.Y. 2006-07, the Assessing Officer (AO) observed discrepancies in the production figures of the assessee, which led to a conclusion that the book results were not reliable. The AO noted significant variations in the production per unit of electricity across different months, which were not justified by the assessee. Consequently, the AO rejected the book results under Section 145(3) of the Act and estimated the suppression of sales at Rs. 1,08,99,405/- based on the highest production month, July. The CIT(A) found the AO's approach arbitrary and logically inaccurate, noting that production could vary month-to-month. The CIT(A) deleted the addition, and this decision was upheld by the Tribunal, finding no interference needed with the reasoned factual finding of the CIT(A).For A.Y. 2007-08, a similar issue arose where the AO added Rs. 2,88,43,616/- on account of estimated suppressed sales. The CIT(A) deleted the addition, and the Tribunal, following the reasoning applied for A.Y. 2006-07, upheld the CIT(A)'s decision.2. Addition on Account of Understated Agricultural Expenses:The AO made an addition of Rs. 78,000/- for A.Y. 2006-07, estimating agricultural expenses at 40% of the total agricultural receipt, whereas the assessee had shown expenses of only 19.54%. The CIT(A) found that the total expenditure represented 37.29% of the gross agricultural receipt, which was close to the 40% benchmark. The CIT(A) limited the addition to Rs. 13,714/-, corresponding to the understated expenditure. The Tribunal upheld the CIT(A)'s reasoned factual finding, noting that it was consistent with the decision in the case of Shri Dhirubhai L Narola.3. Addition on Account of Unexplained Investment Under Section 69B:The AO noted a difference between the sale price of bungalows purchased by the assessee and the valuation by the Stamp Valuation Authority (SVA), amounting to Rs. 2,87,570/-. The AO treated this difference as unexplained investment. The CIT(A) deleted the addition, following the decision in Bharat N Patel vs. ACIT, where it was held that Section 50C of the Act, which deems the valuation by the SVA as the consideration received by the seller, does not apply to the purchaser. The Tribunal upheld the CIT(A)'s decision, noting that the provision was not applicable at the relevant time.4. Addition on Account of Unexplained Cash Credit Under Section 68:For A.Y. 2007-08, the AO added Rs. 4,85,000/- as unexplained cash credits from nine creditors, focusing on cash deposits in their bank accounts. The CIT(A) deleted the addition, noting that the AO had selectively picked cash deposits while ignoring other transactions and cheques deposits. The Tribunal upheld the CIT(A)'s decision, finding that the AO did not conduct any inquiry and that the loans had been repaid by cheques during the year, making the additions unjustified.Conclusion:The Tribunal dismissed both appeals filed by the Revenue for A.Y. 2006-07 and A.Y. 2007-08, upholding the CIT(A)'s decisions on all issues. The judgments were pronounced in the open Court on December 31, 2014.