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2018 (10) TMI 66 - AT - Income TaxAddition u/s 68 - Held that:- Though section 68 of the Act was rightly invoked considering the failure of the assessee to give the identity of its customers, who gave advance in cash, and purchased in cash, such addition has to be restricted to the extent it is not reflected in sales. Taxing the credits in bullion margin money account and sales, would be equivalent to taxing the same amount two times. Hence, section 68 of the Act, in our opinion can be invoked only for those amounts which are not reflected in sales. Thus, while holding that the learned Commissioner of Income-tax (Appeals) was justified in confirming the addition for credits in the bullion margin money account, we direct the learned Assessing Officer to rework such addition by exclud ing margin money credits, to the extent accounted in sales, in the same financial years. In the result, ground of the assessee is partly allowed. Addition for suppression of sales and rejection of loss - cash sale of bullion at a rate below the association rates for the impugned assessment years - Held that:- We upheld the order of the learned Commissioner of Income-tax (Appeals) deleting the addition for suppression in cash sales. Since the credits in bullion margin money account were transferred as sales, the learned Commissioner of Income-tax (Appeals) directed the Assessing Officer to reduce the peak credit considered for addition under section 68 of the Act from sales accounted by the assessee. As mentioned by us it is an undisputed position that credits in bullion margin money account were generally transferred to sales account. Addition of credit in bullion margin money account has been sustained by us, only to the extent not transferred/ accounted in the sales. Otherwise, it will result in double addition of the same amount. In such circumstances, we are of the opinion that the learned Commissioner of Income-tax (Appeals) was justified in giving direction to set off of credit in bullion margin money account with sales accounted by the assessee, so that double addition was avoided. Addition made for diversion of interest bearing funds - Held that:- CIT-A has given a clear finding that the assessee had more than sufficient own funds for giving the interest-free advances. When the assessee was having sufficient own funds, we cannot say that any interest bearing funds were diverted for giving interest-free advances. That apart, the learned Departmental representative was unable to show what were the interest bearing funds that were held by the assessee which were diverted. We do not find any reason to interfere with the finding of the learned Commissioner of Income-tax (Appeals) in this regard. Disallowance made for personal use of car despite the assessee admitting such use - Held that:- Commissioner of Income-tax (Appeals) had deleted this disallowance with a finding that the business of the assessee was vast. The learned Assessing Officer on the other hand had made the disallowance for personal use of cars based on the admission of the assessee. We are of the opinion that the learned Assessing Officer was justified in making such disallowance since it was made on an admission of the assessee. Order of the learned Commissioner of Income-tax (Appeals) on this issue is set aside and the disallowance made by the learned Assessing Officer is reinstated - decided in favour of revenue Additions made for credit/debit notes and differences in reconciliation with M/s. Metals and Minerals Trading Corporation - Held that:- he assessee could not have been saddled with the onus of reconciling the differences in accounts. No way, it can be said that credit notes were the assessee's income or debit notes, were the assessee's expenses. The outcome of the arbitration proceedings, in our opinion will have a great bearing on the quantum of reconciliation difference for which the assessee, if at all is liable. In such circumstances, we are of the opinion an addition for difference in accounting credit and debit notes could not have been made for the impugned assessment years. Even if there is some income arising to the assessee, it will crystallised only in the year in which the arbitration proceedings reach a finality. The Revenue may, if it choose, take cognizance of the arbitral award, in the year in which the arbitration is complete and proceed according to law. We therefore set aside the additions made for credit/debit notes and differences in reconciliation with M/s. Metals and Minerals Trading Corporation for the impugned assessment year - decided in favour of assessee. Addition for difference in M/s. State Trading Corporation (M/s. STC) account - Held that:- Nothing to show what was the nature of the income sought to be added as from State Trading Corporation. Discussion in the assessment order for the assessment year 2011-12 is only on difference with regard to M/s. Metals and Minerals Trading Corporation credit/debit notes and reconciliation. The order of the learned Commissioner of Income-tax (Appeals), also does not deal with any issue regarding addition made by the learned Assessing Officer for income from M/s. State Trading Corporation. Only conclusion we can reach is that the addition made by the learned Assessing Officer was purely on a surmises. The said addition stands deleted. Addition for exchange rate fluctuation debited in its account based on alleged instructions from M/s. Metals and Minerals Trading Corporation - Held that:- If M/s. Metals and Minerals Trading Corporation had charged on the assessee, exchange fluctuation loss of ₹ 7,53,46,987, it would definitely appear in the account of the assessee with M/s. Metals and Minerals Trading Corporation. We have already held that the learned Assessing Officer can take a wholesome view considering the reconciliation differences, if any, between the assessee and the M/s. Metals and Minerals Trading Corporation, once the Arbitral Tribunal reaches its conclusion, in the year which such proceedings are complete. The assessee in our opinion could not have claimed such amount in the impugned assessment year when all along its argument was that credit/debit notes issued by M/s. Metals and Minerals Trading Corporation were fraudulent. The lower authorities were in our opinion, justified in disallowing the claim. Ground of the assessee is dismissed. Addition for want of confirmation from a creditor, named Duraikannau - Held that:- We find that the assessee was given a number of opportunity during the course of assessment proceedings and also in the remand proceedings for substantiating the credit. It seems, the assessee could not produce any evidence before the learned Assessing Officer. In such situation, we are of the opinion that the learned Commissioner of Income-tax (Appeals) was justified in confirming the addition. Addition for difference in closing stock - Held that:- The assessee could not file any confirmation letters either before the Assessing Officer or before the learned Commissioner of Income-tax (Appeals). Even during the remand proceedings the assessee failed to substantiate the credit. The contention of the learned authorised representative before us is that balances in such creditors account was trans ferred to sales and hence addition ought not have been done. We are unable to appreciate this argument. The assessee having introduced credits in the name of these three persons in its accounts, was obliged to provide confirmation and substantiate orders. At no point of time, the assessee claimed it as part of advance received for any cash sales and similar to bullion margin money. Thus, the onus resting on the assessee, was not discharged. Addition for unaccounted investments in a property at Tiruporur - Held that:- It is clearly noted by the learned Assessing Officer that balance-sheet of the assessee's proprietorship business tallied with its bank account with ICICI Bank. Obviously, the assessee had shown payments made for three out of four plots, as utilised for some purpose other than acquisition of the plots. Ex consequenti payments made for three plots stood unexplained. We are therefore, of the opinion that lower authorities were justified in considering the cost equivalent of three plots as unexplained investment of the assessee. Addition made for credit balance in sundry debtors account - Held that:- The transactions ought not have been disbelieved just for the delay in supplying the goods. The assessee having shown that sales were effected to clear the credit in the debtors account, in our opinion, an addition ought not have been made. Such addition stands deleted. Addition for a credit balance in the account of one Mrs. Pista Bai - Held that:- ommissioner of Income-tax (Appeals) has noted that the amounts received from Mrs. Pista Bai were repayment of earlier advance of ₹ 30 lakhs given by Mr. Naresh Prasad Agarwal, when the business was run as a proprietorship concern. The latter transactions were reflected in the accounts of the proprietorship concern. Hence, it was only a repayment of a debt by a debtor. Once the business was taken over by the assessee company, any repayment of debt by a debtor will not create a fresh credit but will only square off the debt. We do not find any reason to interfere with the order of the Commissioner of Income-tax (Appeals).
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