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2013 (2) TMI 123 - AT - Income TaxUnexplained credits u/s 68 - CIT(A) in sustaining the addition of Rs. 17,25,000/- out of share capital - whether unexplained investment in the share capital can be assessed in the hands of the company u/s 68 - Held that - As decided in G. Venkatareddy & Co. Vs. DCIT 2000 (10) TMI 182 - ITAT HYDERABAD-B merely filing confirmatory letters to establish the identity of the creditors is not enough and it cannot be said that onus lying on the assessee had been discharged. Therefore, the AO was justified in not being satisfied by the explanation offered by the assessee in relation to the impugned cash credits because assessee had not proved capacity of such creditors to advance the money and he was justified in making additions of the cash credits under sec. 68 - all the amounts introduced by the assessee-company under the guise of share application money is nothing but income earned from the sources not disclosed to the department and the same were brought into the books by way of share application on different names - uphold the order of the CIT(A) in sustaining the addition of Rs. 17,25,000/- out of share capital as unexplained credits u/s 68 - in favour of revenue. Difference in job work charges/conversion charges credited to the P&L a/c and the amount furnished in the TDS certificate - additions confirmed by CIT(A) - Held that - The assessee had produced the details of tax deducted at source with respect to job work charges and transport charges and the difference of Rs. 84,850/- represents the amounts paid by various parties on account of transport charges and has been credited to the account of transport charges. Therefore, the addition made by the Assessing Officer and confirmed by the CIT(A) on the ground that the assessee has not been able to produce satisfactory evidence in the matter, explaining the difference in the amount of job work charges as per TDS certificate and the amount offered as receipts, is deleted. Disallowance as contributions towards PF and ESI as per the provisions of section 43B - Held that - The deduction of payment of employees contribution towards provident fund and ESI cannot be disallowed under section 43B, if paid before the due date of filing the return. Set aside the order of the CIT(A) and restore the issue to the file of the AO with a direction to allow this ground of appeal of the assessee, if the payments of PF & ESI are made before the due date of filing of the return in the light of the decision of Allied Motors Pvt. Ltd. (1997 (3) TMI 9 - SUPREME COURT). Reducing 90% of the job work charges and excise duty from profits of business applying clause (baa) of Explanation to section 80 HHC - Held that - As decided in CIT Vs. Lakshmi Machine Works 2007 (4) TMI 202 - SUPREME COURT the excise duty refund is not includible in the total turnover for the purpose of computing deduction u/s 80 HHC. As regards the job work charges the same is covered by the decision of Ravindranthan Nair (2007 (11) TMI 10 - SUPREME COURT OF INDIA) wherein held that processing charges, which are part of gross total income, form an item of independent income like rent, commission, brokerage, etc., and, therefore, 90 per cent of the processing charges has also to be reduced from the gross total income to arrive at the business profits and, therefore, it has also to be included in the total turnover in the formula for arriving at the business profits in terms of clause (baa) of the Explanation to section 80HHC(3). Addition of agricultural income as income from other sources - Held that - The assessee itself agreed before the CIT(A) that the net agricultural income can be treated as income from other sources , therefore, we uphold the order of the CIT(A) in sustaining the addition of Rs. 1,61,050/- on this issue.
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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