UEM India Pvt. Ltd. v. ACIT - Taxpublishers.in

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The Tax Publishers2015 TaxPub(DT) 4757 (Del-Trib)div class=Section1> UEM India Pvt. Ltd. v. ACIT INCOME TAX ACT, 1961 --Income from undisclosed sources--Addition under section 68 Confirmation from creditors as to outstanding balances not complied with by assessee.--The assessee was engaged in the business of design, supply, erection and commissioning of water and waste water treatment plants, machinery and equipments. AO made addition of credit balance amounting to Rs. 1,41,17,462 on account of no confirmation of parties. In the instant case, according to CIT(A) as confirmation had been filed in three cases, same was being treated as explained. However, in the remaining four cases, confirmations of the parties had not been put on the record even after giving ample opportunity. So, out of addition of Rs.1,41,17,462, addition of Rs. 81,05,1701- was allowed. In the case of remaining balance pertaining to four parties, addition made by AO to the tune of Rs.60,12,2921- was confirmed. *Held:* If all the facts and circumstances were taken together, action of CIT(A) in confirming the addition on the basis of non-filling of confirmations, was not justified. CIT(A) should have considered the evidences filed by the assessee during appellate proceedings but he failed to consider the same and exclusively relied upon the remand repot of the AO. CIT(A) had sought comments from AO on its written submissions. However, AO did not comment on the merits during appellate proceedings. A.R. had demonstrated that credit balances were due to genuine business transactions and in succeeding years, the payments were actually made to those parties. It was found that section 68 relied upon by CIT(A) was not applicable in the present case as section 68 relates to unexplained credit outstanding in the books of account of the assessee, whereas the outstanding amounts in the books of account of the assessee related to business transactions of the assessee as had been demonstrated by A.R., therefore, the appeal filed by assessee was allowed. Income Tax Act, 1961, Section 68 *REFERRED :* FAVOUR : In assessee's favour. A.Y. : 2008-09 INCOME TAX ACT, 1961 --Income undisclosed sources--Addition under section 68Outstanding credit balances confirmed by creditors--The AO had made an addition of Rs. 59,10,262, on account of the differences between the balance as per the books of account and balance as per confirmation received from the parties. It was evident from the reply of the assessee, according to CIT(A), that there was mistake in issuing the notice under section 133(6), due to which whole the confusion had arrived, by giving opportunity during the course of earlier report, AO was provided all the details. However, AO had objected to the admission of the additional evidence in this regard. Action of AO, therefore, deserves to be deleted. *Held:* The CIT(A) on the basis of confirmation and explanation filed by assessee had allowed the relief to the assessee. Over all, CIT(A) had decided the issue in right perspective. However, in the case of A India Pvt. Ltd., the difference was explained to be due to a wrong entry for which the assessee had submitted that the same was reversed and was reduced from purchases in the succeeding year. However, CIT(A) without verifying such facts from the books of account of the succeeding year had allowed relief to the assessee. Therefore, verification should have been done and, this issue was remitted to the file of the AO who on the basis of relevant accounts of succeeding year would verify reversal of entry. Income Tax Act, 1961 Section 68 *REFERRED :* FAVOUR : Matter remanded. A.Y. : 2008-09 INCOME TAX ACT, 1961 --Business expenditure--AllowabilityAd hoc disallowance of administrative expenses--10% of administrative expenses had been disallowed. In this regard nothing had been brought on record by the AO as to how he had arrived at the figure of 10% and ad hoc disallowance had been made. On appeal, CIT(A) held that no disallowance of expense could be made by the assessing authority without giving cogent reasons and on the basis of conjectures and surmises. *Held:* The AO failed to provide any adverse comments during remand proceedings and, therefore, ad hoc addition of 10% of expenses without furnishing any cogent reason was not justified and CIT(A) had deleted the same relying upon a number of case laws and Tribunal was in agreement with his findings. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2015 TaxPub(DT) 4757 (Del-Trib)div class=Section1>

UEM India Pvt. Ltd. v. ACIT

INCOME TAX ACT, 1961

--Income from undisclosed sources--Addition under section 68 Confirmation from creditors as to outstanding balances not complied with by assessee.--The assessee was engaged in the business of design, supply, erection and commissioning of water and waste water treatment plants, machinery and equipments. AO made addition of credit balance amounting to Rs. 1,41,17,462 on account of no confirmation of parties. In the instant case, according to CIT(A) as confirmation had been filed in three cases, same was being treated as explained. However, in the remaining four cases, confirmations of the parties had not been put on the record even after giving ample opportunity. So, out of addition of Rs.1,41,17,462, addition of Rs. 81,05,1701- was allowed. In the case of remaining balance pertaining to four parties, addition made by AO to the tune of Rs.60,12,2921- was confirmed. Held: If all the facts and circumstances were taken together, action of CIT(A) in confirming the addition on the basis of non-filling of confirmations, was not justified. CIT(A) should have considered the evidences filed by the assessee during appellate proceedings but he failed to consider the same and exclusively relied upon the remand repot of the AO. CIT(A) had sought comments from AO on its written submissions. However, AO did not comment on the merits during appellate proceedings. A.R. had demonstrated that credit balances were due to genuine business transactions and in succeeding years, the payments were actually made to those parties. It was found that section 68 relied upon by CIT(A) was not applicable in the present case as section 68 relates to unexplained credit outstanding in the books of account of the assessee, whereas the outstanding amounts in the books of account of the assessee related to business transactions of the assessee as had been demonstrated by A.R., therefore, the appeal filed by assessee was allowed.

Income Tax Act, 1961, Section 68

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2008-09

INCOME TAX ACT, 1961

--Income undisclosed sources--Addition under section 68Outstanding credit balances confirmed by creditors--The AO had made an addition of Rs. 59,10,262, on account of the differences between the balance as per the books of account and balance as per confirmation received from the parties. It was evident from the reply of the assessee, according to CIT(A), that there was mistake in issuing the notice under section 133(6), due to which whole the confusion had arrived, by giving opportunity during the course of earlier report, AO was provided all the details. However, AO had objected to the admission of the additional evidence in this regard. Action of AO, therefore, deserves to be deleted. Held: The CIT(A) on the basis of confirmation and explanation filed by assessee had allowed the relief to the assessee. Over all, CIT(A) had decided the issue in right perspective. However, in the case of A India Pvt. Ltd., the difference was explained to be due to a wrong entry for which the assessee had submitted that the same was reversed and was reduced from purchases in the succeeding year. However, CIT(A) without verifying such facts from the books of account of the succeeding year had allowed relief to the assessee. Therefore, verification should have been done and, this issue was remitted to the file of the AO who on the basis of relevant accounts of succeeding year would verify reversal of entry.

Income Tax Act, 1961 Section 68

REFERRED :

FAVOUR : Matter remanded.

A.Y. : 2008-09

INCOME TAX ACT, 1961

--Business expenditure--AllowabilityAd hoc disallowance of administrative expenses--10% of administrative expenses had been disallowed. In this regard nothing had been brought on record by the AO as to how he had arrived at the figure of 10% and ad hoc disallowance had been made. On appeal, CIT(A) held that no disallowance of expense could be made by the assessing authority without giving cogent reasons and on the basis of conjectures and surmises. Held: The AO failed to provide any adverse comments during remand proceedings and, therefore, ad hoc addition of 10% of expenses without furnishing any cogent reason was not justified and CIT(A) had deleted the same relying upon a number of case laws and Tribunal was in agreement with his findings.