2023 (3) TMI 397 - AT - Income Tax

Assessee's Appeal Partly Allowed; Various Expenses Upheld, Suppressed Sales Remanded

M/s. Checkmate Services Pvt. Ltd. Versus Addl. Commiss ioner of Income Tax Range-1, Baroda And (Vice-Versa)

M/s. Checkmate Services Pvt. Ltd. Versus Addl. Commiss ioner of Income Tax Range-1, Baroda And (Vice-Versa) - TMI Issues Involved:1. Addition of Rs. 2.5 crores for Renovation and Repair expenditure.2. Addition of Rs. 1.5 crores for Miscellaneous Receivables.3. Addition of Rs. 4,58,60,861/- for Suppressed Sales.4. Addition of Rs. 34,98,571/- for Suppressed Sales.5. Addition of Rs. 5,11,28,393/- for delayed payment of PF and ESI.6. Deletion of addition for Bad Debts.7. Deletion of addition for Unverifiable amount of Deductions from Customers.Detailed Analysis:1. Addition of Rs. 2.5 crores for Renovation and Repair expenditure:The assessee argued that the Rs. 2.5 crores for Renovation and Repair expenses were included in the Rs. 13 crores of undisclosed income. The Assessing Officer (AO) rejected this claim, stating that the statement of the Managing Director during the survey clearly bifurcated the heads of unaccounted income. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, emphasizing that the assessee did not claim the expenses were made out of inflated wages during the survey. The Tribunal found that the assessee did not provide sufficient evidence to support the claim and upheld the disallowance but remanded the issue back to the AO to verify and allow appropriate depreciation on the capitalized expenses.2. Addition of Rs. 1.5 crores for Miscellaneous Receivables:The assessee claimed that the Rs. 1.5 crores for Miscellaneous Receivables were also part of the Rs. 13 crores of undisclosed income. The AO and CIT(A) rejected this claim for similar reasons as the Renovation and Repair expenses. The Tribunal upheld the disallowance, stating that no evidence was provided to show the correlation between inflated wages and the unexplained expenditure.3. Addition of Rs. 4,58,60,861/- for Suppressed Sales:This ground was not pressed by the assessee as the AO had already deleted the addition while giving effect to the order dated 15.02.2019.4. Addition of Rs. 34,98,571/- for Suppressed Sales:The AO added Rs. 34,98,571/- as suppressed sales based on discrepancies in receipts. The CIT(A) did not adjudicate this ground. The Tribunal remanded the issue back to the AO to work out the average profit rate and assess the suppressed sales in accordance with the law.5. Addition of Rs. 5,11,28,393/- for delayed payment of PF and ESI:This issue was not pressed by the assessee as it was covered against them by the Hon'ble Supreme Court in their own case.6. Deletion of addition for Bad Debts:The AO disallowed Rs. 5,92,43,933/- claimed as bad debts, stating that the assessee did not provide sufficient details. The CIT(A) deleted the addition, finding that the assessee had provided full details and that the bad debts were allowable under section 36(1)(vii) read with section 36(2). The Tribunal upheld the CIT(A)'s decision, stating that the assessee had fulfilled the conditions laid down by the relevant sections and that the AO's disallowance was unwarranted.7. Deletion of addition for Unverifiable amount of Deductions from Customers:The AO disallowed Rs. 29,25,332/- out of Rs. 97,57,105/- claimed as deductions from customers, citing unverifiable expenditure. The CIT(A) deleted the addition, finding that the deductions were in the nature of bad debts and allowable under the law. The Tribunal upheld the CIT(A)'s decision, stating that the assessee had provided sufficient details to support the claim.Conclusion:The Tribunal partly allowed the assessee's appeal for statistical purposes and dismissed the Revenue's appeal. The key takeaways include the importance of providing sufficient evidence to support claims and the applicability of the principle of consistency in allowing claims for bad debts.