The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) upheld the Commissioner of Income Tax(Appeals) [ CIT(A) ]’s decision regarding unexplained cash credits under Section 68 of Income Tax Act,1961, confirming the reduction of additions based on peak credit and denying the telescoping of income.
Atiresh Sales Pvt. Ltd.,appellant-assessee,was in the business of manufacturing and trading mill board paper, cone, S.S. rolled patta, and also acted as a commission agent. The company filed its return of income showing Rs. 2,77,330/-, but during assessment, the Assessing Officer (AO) increased the total income to Rs. 61,45,700/- by adding deposits from three parties, whose creditworthiness was not proven.
The AO found that the HUF of Shri B. J. Shah had not filed a return, and the appellant did not provide proof of the depositor’s business. Cash deposits were made in the depositor’s bank account and transferred to the assessee’s account on the same day, leading the AO to conclude these were the appellant’s own funds.
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Similarly, a Rs. 60,000/- deposit from Shri Jasubhai Shah was made and transferred on the same day, with no return of income filed. The assessee also failed to provide necessary details for a deposit of Rs. 8,79,868/- from Vinod Textile.
As a result, the AO added Rs. 58,68,368/- under Section 68 of the Income Tax Act.
The CIT(A) confirmed the addition of Rs. 49,28,500/- for B. J. Shah HUF, but reduced it to Rs. 24,63,178/- based on loan repayments. The appeal regarding the Rs. 60,000/- deposit from Shri Jasubhai Shah was allowed, as there were no issues with creditworthiness. For the Rs. 8,79,868/- deposit from M/s. Vinod Textiles, the CIT(A) reduced the addition to Rs. 6,58,663/- after considering loan repayments.
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The assessee’s request for telescoping of Rs. 17,16,445/- was denied. The assessee argued that this led to double taxation and reserved the right to amend grounds. The assessee’s counsel highlighted that the identity and genuineness of the transactions were proven, and the AO overlooked repayments of Rs. 25,87,322/-. Similar points were made for M/s. Vinod Textiles.
The two member bench comprising Siddhartha Nautiyal(Judicial Member) and Annapurna Gupta(Accountant Member) upheld the CIT(A)’s decision, agreeing that the assessee could not prove the creditworthiness of the depositors or the genuineness of the transactions. The CIT(A) had already considered the assessee’s repayments and reduced the additions to Rs. 24,63,178/- for B. J. Shah-HUF and Rs. 6,58,663/- for M/s. Vinod Textiles, based on the peak credit during the year.
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The appellate tribunal also noted that the CIT(A) allowed peak credit for loans in AY 2012-13, which was under appeal by the Department, and did not affect the current case.
Regarding the request for telescoping of Rs. 17,16,445/-, the tribunal agreed with the CIT(A) that no telescoping benefit should be allowed, as the assessee had taken new loans during the year.
In short,the appeal filed by the assessee was dismissed.
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