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2013 (2) TMI 123 - AT - Income Tax


Issues Involved:
1. Addition of unexplained credits under Section 68 of the Income Tax Act.
2. Difference in job work charges/conversion charges credited to the Profit & Loss account and the amount furnished in the TDS certificate.
3. Disallowance of contributions towards Provident Fund (PF) and Employee State Insurance (ESI) under Section 43B.
4. Reduction of 90% of job work charges and excise duty from profits of business applying clause (baa) of Explanation to Section 80HHC.
5. Treatment of agricultural income as income from other sources.

Detailed Analysis:

1. Addition of Unexplained Credits under Section 68 of the Income Tax Act:
The Assessing Officer (AO) scrutinized the share application money received by the assessee and found that the confirmations were stereotyped and the sources of investment were mostly unsubstantiated, leading to the conclusion that the share applicants were merely name lenders. The AO treated the entire amount of Rs. 30 lakhs as unexplained cash credit under Section 68, assessable as 'income from other sources'. The CIT(A) upheld most of the AO's findings, citing lack of credible evidence and regular bank transactions to support the investments. The tribunal confirmed the CIT(A)'s decision, emphasizing the need for proving the identity, creditworthiness, and genuineness of the transactions.

2. Difference in Job Work Charges/Conversion Charges:
The AO added Rs. 84,850/- to the total income, citing a discrepancy between job work charges credited to the Profit & Loss account and the amounts shown in TDS certificates. The assessee claimed that the difference represented transport charges. The CIT(A) upheld the AO's addition due to lack of satisfactory evidence. However, the tribunal deleted the addition, accepting the assessee's explanation that the difference was due to transport charges.

3. Disallowance of Contributions towards PF and ESI under Section 43B:
The AO disallowed unpaid PF and ESI contributions as per Section 43B. The CIT(A) confirmed the disallowance, following precedents. The tribunal, referencing the Supreme Court's decision in Allied Motors P. Ltd. vs. CIT, held that such contributions cannot be disallowed if paid before the due date of filing the return. The issue was remitted back to the AO for verification.

4. Reduction of 90% of Job Work Charges and Excise Duty:
The AO reduced 90% of job work charges and excise duty from profits of business by applying clause (baa) of Explanation to Section 80HHC, resulting in no deduction under Section 80HHC. The CIT(A) upheld this action. The tribunal directed the AO to recompute the deduction under Section 80HHC, following the Supreme Court's decisions in CIT vs. Lakshmi Machine Works and Ravindranthan Nair.

5. Treatment of Agricultural Income as Income from Other Sources:
The AO treated agricultural income as 'income from other sources' due to lack of evidence of agricultural operations and earnings. The CIT(A) partially upheld the AO's decision, treating only the net agricultural income as 'income from other sources'. The tribunal confirmed the CIT(A)'s decision in some instances and remitted the issue back to the AO in others, directing the assessee to provide concrete evidence of agricultural operations and income.

Conclusion:
The tribunal partly allowed the appeals for statistical purposes, directing the AO to reassess certain issues based on the provided guidelines and evidence. The judgment emphasizes the necessity of substantiating claims with credible evidence, particularly regarding unexplained credits and agricultural income.

 

 

 

 

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