2010 (7) TMI 789 - AT - Income Tax

Summary

Issues Involved:
1. Set off of unabsorbed depreciation for the assessment year 2002-03.
2. Addition of Rs. 4,29,600 as a balancing charge under section 41(2) of the Income-tax Act.
3. Addition of Rs. 30,000 under section 68 of the Income-tax Act.

Issue-wise Detailed Analysis:

1. Set off of Unabsorbed Depreciation for Assessment Year 2002-03:
The assessee challenged the disallowance of set off of unabsorbed depreciation of Rs. 31,64,143 for the assessment year 2002-03. The Assessing Officer (AO) noted that the revised returns for the assessment years 2002-03 and 2003-04 were filed beyond the prescribed time-limit under section 139(5) of the Income-tax Act, rendering them invalid. Consequently, the AO remarked that unabsorbed depreciation could only be allowed if it was determined as a result of a valid assessment, which was not the case here since no depreciation was claimed in the valid return for the assessment year 2002-03. The learned CIT(A) upheld the AO's decision, noting that the revised returns were invalid and that no business income or depreciation was declared in the original return for the assessment year 2002-03. Therefore, there was no question of carrying forward unabsorbed depreciation to the subsequent year. The Tribunal confirmed the findings of the authorities below, stating that section 32(2) of the Income-tax Act, which deals with the carry forward of unabsorbed depreciation, would not apply since no business income or depreciation was declared in the assessment year 2002-03.

2. Addition of Rs. 4,29,600 as a Balancing Charge under Section 41(2):
The assessee also contested the addition of Rs. 4,29,600, which the AO disallowed as a loss on the sale of vehicles, treating it as a capital loss already included in the short-term capital loss allowed to be carried forward. The CIT(A) upheld this addition, noting that the AO had correctly computed the short-term capital loss and that the revised returns filed by the assessee were invalid. The Tribunal agreed with the CIT(A)'s findings, noting that the assessee's claim for set off of unabsorbed depreciation was invalid due to the invalid revised returns and the absence of any business income or depreciation claim in the original return for the assessment year 2002-03.

3. Addition of Rs. 30,000 under Section 68:
The AO made an addition of Rs. 30,000 under section 68 of the Income-tax Act, noting that the assessee had taken loans in cash from two persons without providing sufficient details to establish their creditworthiness. The CIT(A) confirmed this addition, stating that the amounts were given in cash, the depositors were not assessed to tax, and no source of income was established. The Tribunal upheld the authorities' findings, stating that the assessee had failed to discharge the onus of proving the genuineness of the credits by not providing evidence of the creditors' creditworthiness or source of income.

Conclusion:
The Tribunal dismissed the appeal of the assessee, confirming the findings of the authorities below on all grounds. The set off of unabsorbed depreciation was disallowed due to invalid revised returns and the absence of business income or depreciation claim in the original return for the assessment year 2002-03. The addition of Rs. 4,29,600 as a balancing charge and the addition of Rs. 30,000 under section 68 were also upheld due to the lack of evidence supporting the assessee's claims.