2019 (1) TMI 344 - AT - Income Tax

Assessment u/s 153A - addition u/s 68 - unsecured loans as well as introduction of capital by the partners - Held that:- The transactions were duly recorded in the books of account and available with the AO. - Neither in the assessment order nor in the order of the ld. CIT (A) there is any mention or finding that the additions have been made by the AO on the basis of any incriminating material found during the course of search and seizure in the case of the assessee. The AO has solely relied upon the report of the Investigation Wing Kolkata and statement of one Shri Anand Sharma recorded by the Investigation Wing during the survey under section 133A of the Act. Therefore, even if the information/report of the Investigation Wing Kolkata is considered as a relevant evidence, the same cannot be regarded as incriminating material unearthed during the course of search and seizure under section 132 of the IT Act in case of the assessee. In the case in hand, the AO himself has not claimed any incriminating material found during the search and seizure in the case of the assessee. Accordingly, the additions made by the AO while passing the assessment orders under section 153A for the assessment years 2010-11 to 13-14 are not sustainable and accordingly the same are liable to be deleted.

Addition u/s 68 - receipt of unsecured loans - accommodation entry - Held that:- There is no dispute that the AO was not having any evidence or even any statement to impugn the transactions as bogus accommodation entries. Further, the assessee has produced all the relevant supporting documentary evidence as we have reproduced in the foregoing paras as referred by the ld. A/R of the assessee and these creditor companies were subject to regular assessments and scrutiny assessments under section 143(3). As at the time of granting of loans to the assessee the companies were having sufficient funds. Further, we have already recorded the details of repayment made by the assessee of these loans and once regular repayment was there even prior to the date of search, then the transactions cannot be doubted as nothing can be achieved by taking the loan and then repaying the same through banking channel even if there is corresponding channelization of cash. As discussed earlier AO has not pointed out any discrepancy in the financial statements or in the bank account statements of the loan creditors to show that there was deposit or introduction of the cash prior to giving the loan to the assessee, accordingly, addition to be deleted.

Addition on account of partners’ capital received from four parties - Held that:- the finding of the ld. CIT (A) are based on the facts as well as the documentary evidence produced by the assessee whereas the AO has not brought on record any contrary evidence except the allegation made in the report of the Investigation Wing Kolkata. Therefore, the documentary evidences brought by the assessee cannot be negated merely on the basis or allegation made in the report which is nothing but narration of the statements recorded of certain persons. The report of the DDIT Investigation cannot substitute the documentary evidence. No error or illegality in the order of the ld. CIT (A) qua this issue.

Typographical error in the finding of the AO/CIT (A) on account of late delivery charges of ₹ 12 lacs - Held that:- It is apparent that there is a mistake in the amount recorded by the ld. CIT (A) while giving the finding in para 7.3.3. Accordingly, we modify the said part of the order of the ld. CIT (A) and disallowance made by the AO of ₹ 4,23,19,238/- is deleted.

Addition after rejection of books of account - Fall in GP - Held that:- t in the facts and circumstances of present case, account books are maintained as they were ordinarily maintained years after years and which were found to yield a fair result. Mere deviation in GP rate cannot be a ground for rejecting books of account, and entering realm of estimate and guesswork. Lower GP rate shown in the books of account during current year and fall in GP rate was justified and also admitted by the Assessing Officer as well as CIT(A) as well as the Tribunal.

Fall in GP rate lost its significance. Having accepted the reason for fall in GP rate, namely, stiff competition in market and also that huge loss caused in particular transaction, neither the rejection of books of account was justified nor resort to substitution of estimated GP by rule of thumb merely for making certain additions. We are, therefore, of the opinion that the findings arrived at by the Tribunal suffers from basic defect of not applying its mind to the existing material which were relevant and went to the root of the matter. When all the data and entries made in the trading account were not found to be incorrect in any manner, there could not have been any other result except what has been shown by the assessee in the books of account. - Appeal decided against revenue