2020 (4) TMI 392 - AT - Income Tax

Tribunal Decision: Revenue Appeal Partially Allowed, Section 68 Addition Reinstated, Director's Remuneration Excluded

The Asstt. Commissioner of Income Tax, Central Circle – 18, Jhandewalan, New Delhi Versus Tirupati Constwell Pvt. Ltd. And (Vice-Versa)

The Tribunal allowed the Revenue's appeal in part, restoring certain issues to the AO for further verification. The addition of Rs. 2.90 crore under ... Addition u/s 68 - unexplained cash credit - HELD THAT:- Bank transactions raise suspicion towards the genuineness of the transaction similarly in the case of Victory Portfolio Limited the income shown in its P&L account raises suspicion thereby creating doubt on the genuineness of the transaction. In the case of World Broadband Communications Ltd. there is no evidence except the PAN details. Assessee should furnish satisfactory documentary evidences to establish the genuineness of the transactions along with the creditworthiness of the lender, we, therefore, restore this issue to the files of the AO. The assessee is directed to furnish relevant satisfactory demonstrative evidences to discharge its onus under section 68 of the Act. Addition u/s 14A r.w.r 8D deleted on finding that there is no exempt income. As there is no exempt income no addition is to be made u/s 14A of the Act and the CIT(A) has rightly deleted the same, therefore, no interference is called for. Reconciliation of Receipts as per TDS (26AS) and Books - HELD THAT:- Advances received from various parties and whereas before us the counsel has furnished a reconciliation statement as above. We are of the considered view that reconciliation statement so filed before us needs to be examined/verified by the AO. We accordingly restore this issue to the files of the AO. The assessee is directed to reconcile the entire difference with satisfactory explanation and if the reconciliation is not accepted by the AO then the entire difference of ₹ 1,03,08,430/- shall be treated as the unaccounted receipts of the assessee. Ground treated as allowed for statistical purposes. Condonation of delay - delay of 1223 days - HELD THAT:- Assessee sated that the Director’s of the company directed the CA to file Cross Objection on receiving the memo of the appeal filed by the Revenue. It is the say of the counsel that the CA did not file the CO on time which caused the delay in filing and the delay should be condoned. As perused the order sheet entries in revenue’s appeal, we find that counsel Mahavir Singh, Advocate is appearing in this case from 28.02.2019 till 05.08.2019 and it is only on 04.10.2019 the Cross Objection was filed. On these demonstrative facts, we do not find any merit in the contention of the counsel. The arguing counsel Mahavir Singh, Advocate was very much aware of the appeal of the revenue since 28.02.2019 and yet did not care to file any cross objection which needs to be filed within 30 days from the date of the appeal filed by the Revenue. Issues Involved:1. Addition of Rs. 2.90 crore under Section 68 of the Income Tax Act.2. Addition of Rs. 12 lakhs on account of Director’s remuneration.3. Addition of Rs. 6,46,438 under Section 14A read with Rule 8D.4. Addition of Rs. 1,03,08,430 as unaccounted receipts.Detailed Analysis:1. Addition of Rs. 2.90 crore under Section 68 of the Income Tax Act:The AO noticed unsecured loans taken by the assessee from three parties: Haguru Engineering Pvt. Ltd. (Rs. 2,10,00,000), World Broadband Communication Ltd. (Rs. 20,00,000), and Victory Portfolio Ltd. (Rs. 60,00,000). The assessee provided ledger copies and bank statements, but the AO found that the creditworthiness and genuineness of the transactions were not established, leading to an addition of Rs. 2.90 crore under Section 68. The CIT(A) deleted this addition after considering additional evidences and remand report. However, upon further examination, the Tribunal found that the bank transactions raised suspicions about the genuineness of the transactions, especially with Haguru Engineering Pvt. Ltd. and Victory Portfolio Ltd. The Tribunal restored the issue to the AO for further verification, directing the assessee to furnish satisfactory documentary evidence.2. Addition of Rs. 12 lakhs on account of Director’s remuneration:The AO disallowed Rs. 12 lakhs paid to Director Suraj Mal Dabas due to lack of justification. The CIT(A) deleted the addition based on the AO's remand report, which accepted the work done by Suraj Mal Dabas supported by financial statements and operational documents. The Tribunal upheld the CIT(A)'s decision, finding no reason for interference.3. Addition of Rs. 6,46,438 under Section 14A read with Rule 8D:The AO made an addition under Section 14A read with Rule 8D for investments made to earn exempt income. The CIT(A) deleted this addition, finding that there was no exempt income. The Tribunal agreed with the CIT(A), stating that no addition is to be made under Section 14A if there is no exempt income.4. Addition of Rs. 1,03,08,430 as unaccounted receipts:The AO noticed a discrepancy between contract receipts shown in the assessee's P&L account (Rs. 20,18,12,138) and Form 26AS (Rs. 21,26,63,118), leading to an addition of Rs. 1,08,50,980. The CIT(A) restricted this addition to 5% of the difference, confirming Rs. 5,42,550. The Tribunal found that the assessee provided a reconciliation statement before the Tribunal but not before the AO or CIT(A). The Tribunal restored the issue to the AO for verification of the reconciliation statement, directing the assessee to provide a satisfactory explanation.Cross Objection by the Assessee:The Cross Objection (CO) was barred by 1223 days. The Tribunal found no merit in the counsel’s explanation for the delay, noting that the counsel was aware of the appeal since 28.02.2019 but did not file the CO on time. The Tribunal declined to condone the delay, dismissing the CO.Conclusion:The appeal of the Revenue was allowed in part for statistical purposes, and the Cross Objection of the assessee was not admitted. The Tribunal restored certain issues to the AO for further verification and directed the assessee to provide satisfactory documentary evidence.