Appellate Tribunal partially allows assessee's appeal on income addition for AY 2013-14 and 2014-15

The Appellate Tribunal partially allowed the appeals of the assessee in relation to the addition of income from inflation of expenses for A.Y.2013-14 and the addition towards on-money for A.Y.2014-15. The Tribunal directed the assessing officer to make adjustments by adding 12% of inflation of expenses and 12% of on-money receipts as undisclosed income, in line with the Settlement Commission's directions in group company cases, thereby partially accepting the assessee's appeal.

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Issues:
1. Addition of income from inflation of expenses for A.Y.2013-14.
2. Addition towards on-money for A.Y.2014-15.

Issue 1: Addition of income from inflation of expenses for A.Y.2013-14:
The Appellate Tribunal considered whether the ld. CIT(A) correctly confirmed the addition of Rs. 5,34,819/- as income from inflation of expenses for A.Y.2013-14. The Tribunal noted that the assessee did not appear, and after reviewing the material, found that parallel books of accounts showed expenses inflated through cheque payments and receiving cash back. The ld. AO sought to add Rs. 21,39,275/- as inflation of expenses, while the assessee proposed adding 8% on a without prejudice basis. The Tribunal observed that the Hon'ble Income Tax Settlement Commission accepted 12% of the expenditure as income in the group cases. The ld. CIT(A) made an adhoc disallowance at 25% of inflated expenses, which the Tribunal deemed incorrect. They directed the ld. AO to add @12% of inflation of expenses in line with the Settlement Commission's direction in group company cases, partially allowing the assessee's appeal.

Issue 2: Addition towards on-money for A.Y.2014-15:
Regarding the addition of Rs. 55 lakhs towards on-money for A.Y.2014-15, the Tribunal reviewed the ld. AO's decision to tax the net on-money received of Rs. 2,20,00,000/- under Section 68 as unexplained cash credit. The Tribunal noted that the ld. CIT(A) recognized that only the profit element of on-money could be taxed, not the entire receipts. The ld. CIT(A) estimated the profit element at 25%, limiting the addition to Rs. 55 lakhs instead of the full amount. The Tribunal found that the assessee's group offered 12% of on-money receipts as income before the Settlement Commission, which was accepted. They directed the ld. AO to add only 12% of on-money receipts as undisclosed income for the year, partially allowing the assessee's appeal.

In conclusion, the Appellate Tribunal partially allowed the appeals of the assessee concerning the addition of income from inflation of expenses for A.Y.2013-14 and the addition towards on-money for A.Y.2014-15, directing the ld. AO to make adjustments based on the Settlement Commission's directions in the group company cases.

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