2017 (5) TMI 535 - AT - Income Tax

Revenue's Appeal Dismissed, Assessee's Objection Allowed

DCIT -1 (1), Raipur Versus Shri Abhay Jain, Prop. M/s. Abhay Logistics

DCIT -1 (1), Raipur Versus Shri Abhay Jain, Prop. M/s. Abhay Logistics - TMI Issues:1. Addition of unexplained cash credit under section 68 of the Act.2. Deletion of interest on unsecured loan.3. Addition of low withdrawals for household expenses.4. Estimation of net profit rate for income calculation.Analysis:Issue 1: Addition of unexplained cash credit under section 68 of the ActThe Assessing Officer added Rs. 53,27,925 to the income of the assessee as unexplained cash credit under section 68 of the Act. On appeal, the CIT(A) observed that certain loans were carried forward from previous years and accepted as genuine by the Assessing Officer in a previous assessment under section 143(3) of the Act. The CIT(A) found that the assessee provided evidence, including income tax returns and confirmations from loan creditors, to support the genuineness of the loans. Relying on various legal precedents, the CIT(A) deleted the addition. The Tribunal upheld the CIT(A)'s decision, emphasizing the burden of proof on the assessee under section 68 and the lack of evidence provided by the revenue to show the loans were not genuine.Issue 2: Deletion of interest on unsecured loanThe Assessing Officer disallowed interest on an unsecured loan, which was consequential to the addition made under section 68. As the Tribunal confirmed the genuineness of the loan creditors, the disallowance of interest was also deleted by the CIT(A) and upheld by the Tribunal.Issue 3: Addition of low withdrawals for household expensesThe Assessing Officer estimated household expenses of the assessee to be higher than declared, adding Rs. 60,000 to the income. The CIT(A) deleted this addition after finding that the wife of the assessee, who was also an income tax assessee, had shown withdrawals for household expenses in her return of income. The Tribunal confirmed this decision, noting the lack of specific errors in the CIT(A)'s findings.Issue 4: Estimation of net profit rate for income calculationThe Assessing Officer estimated the income of the assessee based on a decrease in net profit ratio without rejecting the books of account. The CIT(A) upheld this estimation, but the Tribunal disagreed, stating that without rejecting the books of account, such an estimate was not justified. Citing legal precedents, the Tribunal set aside the addition of Rs. 1,33,269 to the income of the assessee.In conclusion, the Tribunal dismissed the revenue's appeal and allowed the assessee's cross objection, confirming the decisions of the CIT(A) on all issues raised in the case.