2011 (8) TMI 1078 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance u/s 40A(3) for cash payments.
2. Addition u/s 68 for unexplained cash loans.
3. Disallowance u/s 40(a)(ia) for non-deduction of tax at source.
4. Penalty u/s 271E for repayment of loans in cash.
5. Penalty u/s 271D for taking loans in cash.

Summary:

1. Disallowance u/s 40A(3) for cash payments:
The assessee argued that the cash payment of Rs. 74,647 was necessary due to a bank holiday and emergency circumstances. The Tribunal found the reasons sufficient and bona fide, thus deleting the addition of Rs. 14,647 made u/s 40A(3).

2. Addition u/s 68 for unexplained cash loans:
The assessee claimed that the cash loans totaling Rs. 14,10,000 were taken from six creditors due to business exigencies. The Tribunal noted that the assessee provided confirmation letters and affidavits from the creditors, which the Assessing Officer did not verify due to time constraints. The Tribunal held that the affidavits were valid evidence and the assessee had discharged the prima facie burden of proof. Consequently, the addition of Rs. 14,10,000 u/s 68 was deleted.

3. Disallowance u/s 40(a)(ia) for non-deduction of tax at source:
The assessee contended that the disallowance of accounting charges paid to site accountants was incorrect as they were not covered u/s 194J. The Tribunal accepted the assessee's explanation that the provision was misunderstood to be applicable from the next assessment year and deleted the addition.

4. Penalty u/s 271E for repayment of loans in cash:
The assessee explained that the cash repayments were due to urgent business requirements and lack of bank facilities. The Tribunal, considering the extenuating circumstances and the deletion of the quantum addition, held that the penalty was not exigible and deleted the penalty of Rs. 18,95,000 u/s 271E.

5. Penalty u/s 271D for taking loans in cash:
The assessee argued that the cash loans were taken due to urgent business needs and lack of bank facilities. The Tribunal, having accepted the genuineness of the loans in the quantum appeal, found the explanation reasonable and deleted the penalty of Rs. 19,15,000 u/s 271D.

Conclusion:
All the appeals of the assessee were allowed, and the additions and penalties were deleted.