2018 (4) TMI 1060 - AT - Income Tax

Tribunal limits undisclosed income additions, rules on credits and reduces unexplained amounts

The Tribunal partially allowed the assessee's appeals, directing the Assessing Officer to restrict the addition of undisclosed income to Rs. 55,000, ... Addition being a loan claimed to have been received from one Mrs. Kamala N. Katri - undisclosed income - Held that:- It is an admitted position that Trial Balance as on 31.03.1982 of Mrs. Kamal N. Katri, available with the Department, clearly reflected assessee as a debtor for ₹ 35,000/-. Hence it is of the opinion that the addition that could have been made was no more than ₹ 55,000/-. Assessee had also filed a confirmation which was not found to be bogus. In such circumstances, direct AO to restrict the addition to ₹ 55,000/-. Ground of the assessee is partly allowed. Additions being credits in bank account - Held that:- It is of the opinion that presumption u/s.132(4A) of the Act could have been taken only against person who was searched. The bank account Nos. 578 and 490 with Canara Bank, Broadway Branch, Chennai were not impounded from the premises of the assessee. Assessee had along denied opening or operating these accounts. The additions if at all it could be made, was only in the hands of Shri. N.K. Mohnot and not the assessee. Additions for credits in these bank accounts could not have been made in the hands of the assessee. Such additions stands deleted. Ground of the assessee is allowed. Addition of repayment received from debtors - Held that:- It is not disputed by the Revenue that M/s. Balaji Plastic and Metal Enterprises had paid ₹ 10,000/- and Shri. R.N. Subramanian had paid ₹ 50,000/- to the assessee during the relevant previous year. These debtors were recorded in the books of the account of the assessee. Assessee had mentioned in a letter to the ld. Assessing Officer that the date of receipt was mistakenly recorded due to errors committed by its accountant. There is no case for the Revenue that the receipts if recorded on the correct dates would have resulted in any deficit cash in the preceding months. The addition ought not have been made just for an error committed in the date of recording the actual receipts from the debtors. The factum of receipts were not doubted, and the year of receipt was also the same. - Decided in favour of assessee. Addition being a credit standing in the name of one M/s. Hindusthan Electronics - Held that:- Books of accounts of a proprietory concern is different from the books of accounts maintained by the proprietor. Just because, the latter did not have the name of the concern would not mean that the concern as such did not exist. No cogent reason was given by the lower authorities for disbelieving the credit and confirmation. Addition stands deleted. Addition under the head “undisclosed income’’- Held that:- Trial Balance of the assessee as on 31.03.1982, filed alongwith its return for assessment year 1982-83 do show M/s. Prakash Textile as a debtor for ₹ 50,200/- and Rajlakshmi Paper Company as a debtor for ₹ 10,000/-. This has not been disputed by the Revenue. When a debtor repays the loan, it is not akin to a fresh credit. A person who is receiving, refund of debt cannot be fastened with an onus to prove the source of the debtor. Assessee had shown ₹ 60,200/- as opening debtors in the name of M/s. Prakash Textile and Rajlakshmi Paper Company. Repayment to this extent could not have been disbelieved. Therefore restrict the addition to a sum of ₹ 20,000/-. Addition to the extent of ₹ 60,200/- stands deleted. Addition for unexplained credits - Held that:- AO could not have considered the credits to be not genuine. However, in the case of Uma Enterprises and D.R. Enterprises confirmations filed by the assessee did not give any details regarding their assessment circle. Nor was their PAN were available. The confirmation letters in respect of Uma Enterprises and D.R. Enterprises were rightly rejected by the lower authorities. Therefore delete addition pertaining to Pradeep M. Shah, Kamal H. Shah and M. Gulab, while sustaining the balance addition. Grounds 2 & 3 of the assessee are partly allowed. Issues Involved:1. Addition of Rs. 90,000 as undisclosed income.2. Additions of Rs. 3,70,456 and Rs. 1,17,660 for credits in bank accounts.3. Addition of Rs. 60,000 as repayment from debtors.4. Addition of Rs. 80,000 as credit from M/s. Hindusthan Electronics.5. Addition of Rs. 80,200 as undisclosed income from debtors.6. Addition of Rs. 5,99,000 as unexplained credits.Detailed Analysis:1. Addition of Rs. 90,000 as Undisclosed Income:The assessee challenged the addition of Rs. 90,000, claimed as a loan from Mrs. Kamala N. Katri. The Tribunal noted that the confirmation letter from Mrs. Katri was disbelieved because she had shifted to Kolkata and was not found at the provided address. The Tribunal observed that the Trial Balance of Mrs. Katri showed the assessee as a debtor for Rs. 35,000. Therefore, the addition should be restricted to the difference of Rs. 55,000, not Rs. 90,000. The Tribunal directed the Assessing Officer to restrict the addition to Rs. 55,000, partly allowing the assessee's ground.2. Additions of Rs. 3,70,456 and Rs. 1,17,660 for Credits in Bank Accounts:The assessee contested the additions for credits in bank accounts No. 578 and 490 with Canara Bank, Broadway Branch, Chennai. The Tribunal noted that these accounts were found during a search of Shri N.K. Mohnot, the son of the Kartha of the assessee (HUF). The Tribunal referred to a similar case where it was held that presumptions under Section 132(4A) and Section 292C could not be used for making additions in the hands of the assessee based on materials found during the search of another person. Therefore, the Tribunal deleted the additions, allowing the assessee's ground.3. Addition of Rs. 60,000 as Repayment from Debtors:The assessee argued that the addition comprised Rs. 10,000 from M/s. Balaji Plastic and Metal Enterprises and Rs. 50,000 from Shri R.N. Subramanian. The Tribunal found that the amounts were undisputedly received by the assessee and the addition was made solely due to a mistake in recording the date of receipt. The Tribunal held that the addition was not warranted and deleted it, allowing the assessee's ground.4. Addition of Rs. 80,000 as Credit from M/s. Hindusthan Electronics:The assessee contested the addition of Rs. 80,000 shown as a loan from M/s. Hindusthan Electronics. The Tribunal noted that the confirmation letter from M/s. Hindusthan Electronics was provided, which included the PA number of Smt. Hema Mohnot, the proprietrix. The Tribunal found no cogent reason for disbelieving the credit and confirmation, and thus deleted the addition, allowing the assessee's ground.5. Addition of Rs. 80,200 as Undisclosed Income from Debtors:The assessee argued that the addition was for repayments from M/s. Prakash Textile and M/s. Rajlakshmi Paper Company. The Tribunal noted that the Trial Balance showed these parties as debtors for Rs. 50,200 and Rs. 10,000 respectively. The Tribunal held that the repayment of debtors could not be disbelieved and restricted the addition to Rs. 20,000, deleting Rs. 60,200. The ground was partly allowed.6. Addition of Rs. 5,99,000 as Unexplained Credits:The assessee disputed the addition comprising Rs. 5,60,000 as principal and Rs. 39,000 as interest from various parties. The Tribunal found that the confirmations from Pradeep M. Shah, Kamal H. Shah, and M. Gulab included necessary details and were assessed to tax. The Tribunal held that the assessee had discharged its onus to prove these credits. However, confirmations from Uma Enterprises and D.R. Enterprises lacked details, and their credits were rightly rejected. The Tribunal deleted the addition of Rs. 2,79,000 and sustained Rs. 3,20,000, partly allowing the assessee's grounds.Conclusion:The appeals of the assessee for all the three years were partly allowed, with specific additions being deleted or reduced based on the evidence and legal principles discussed.