2014 (6) TMI 909 - AT - Income Tax

Addition u/s 68 - Held that - Assessee has filed confirmation letter of Shri. A. K. Shukla and the bank statements to show from where the money was received by the assessee. The entire transaction was undertaken through banking channel. Therefore, it should not be doubted on technical ground that at one point of time the assessee has stated that he received Canadian Dollars, whereas in the confirmation letter he has stated that he has received the loan in US Dollars. Since the assessee has filed enormous evidence to establish the genuineness of the transaction and creditworthiness of the creditor, addition is not called for unless and until it is proved otherwise. Accordingly, we find no merit in the addition and we delete the same - Decided in favour of assessee. Disallowance of travelling and conveyance charges on account of non-professional use - Held that - Undisputedly personal use of vehicles cannot be ruled out. Therefore, certain disallowance is called for. But the disallowance estimated by the ld. CIT(A) @ 20% is on higher side and we accordingly reduce the same to 10% to meet the ends of justice.- Decided partly in favour of assessee. Disallowance of depreciation on car at 25% on account of personal use - Held that - We reduce the disallowance on account of depreciation to 10% on account of personal use of the vehicle - Decided in favour of assessee in part Addition on agricultural income - Held that - We find that the assessee has filed copies of Revenue record before the ld. CIT(A) and the ld. CIT(A) himself has accepted that the assessee owns agricultural land, but he has confirmed the disallowance on the ground that no evidence was filed with regard to sale of agricultural produce and the expenses incurred in agricultural operation. In this regard, we would like to mention here that in a country like India farmers are not that much literate and they are not aware of the maintenance of accounts, etc. and no farmer maintains accounts for the expenses incurred in agricultural operation and agricultural income earned. Therefore, it is not proper to say that if the assessee does not maintain any accounts for agricultural operation, he is not entitled for any agricultural income. We are of the view that in such type of things, agricultural income is to be estimated on the basis of agricultural holdings. In this case, the assessee has sufficient agricultural holdings, therefore, the agricultural income declared by the assessee should be accepted. We accordingly set aside the order of the ld. CIT(A) on this issue and delete the addition. - Decided in favour of assessee.

Summary

Issues:
1. Addition of loan received from a foreign resident
2. Disallowance of travelling and conveyance charges for alleged non-professional purposes
3. Disallowance of depreciation on car for alleged non-professional purposes
4. Addition of agricultural income as income from other sources

Analysis:

Issue 1 - Addition of Loan Received from a Foreign Resident:
The appellant introduced a loan from a foreign resident, which the Assessing Officer treated as unexplained due to non-production of the creditor. The appellant submitted evidence like confirmation letters and bank statements to prove the transaction's genuineness, but the Assessing Officer did not accept it. The CIT(A) also confirmed the addition. The appellant argued that technicalities like the nature of currency and the creditor's residency should not invalidate the evidence provided. The appellant demonstrated the transaction's legitimacy through bank statements and a confirmation letter. The ITAT found the evidence sufficient to establish the transaction's genuineness and the creditor's creditworthiness. Therefore, the addition was deemed unjustified, and it was deleted.

Issue 2 - Disallowance of Travelling and Conveyance Charges:
The Assessing Officer disallowed a portion of travelling and conveyance charges for non-professional use, initially at 25% and later reduced to 20% by the CIT(A). The appellant contended that the vehicle was used for professional purposes. The ITAT acknowledged the possibility of personal vehicle use and reduced the disallowance to 10% to ensure fairness. The Assessing Officer was directed to re-calculate the disallowance at 10% of the total claim for personal vehicle use.

Issue 3 - Disallowance of Depreciation on Car:
The Assessing Officer disallowed depreciation on the car at 25% for personal use, later reduced to 10% by the ITAT. The ITAT upheld the reduction to 10% due to personal vehicle use, directing the Assessing Officer to re-calculate the disallowance accordingly.

Issue 4 - Addition of Agricultural Income:
The Assessing Officer estimated 30% of the declared agricultural income as income from other sources, which was challenged by the appellant. The CIT(A) upheld the addition due to lack of evidence on agricultural produce sales and expenses. The appellant argued that farmers in India often do not maintain detailed accounts. The ITAT noted the appellant's substantial agricultural holdings and deemed the declared agricultural income acceptable. The ITAT set aside the CIT(A)'s order, deleting the addition and directing the Assessing Officer to accept the declared agricultural income.

In conclusion, the ITAT allowed the appellant's appeal, overturning the additions and disallowances made by the lower authorities in the case.