2011 (5) TMI 992 - AT - Income Tax

Summary

Issues involved:
1. Addition of Rs. 10 lakhs u/s 68 of the Income Tax Act
2. Deletion of addition of Rs. 43,003/- made on account of disallowance of business expenses

Addition of Rs. 10 lakhs u/s 68 of the Income Tax Act:
The Assessing Officer (AO) raised concerns regarding the addition of Rs. 10 lakhs claimed to have been received as share application money from a party, noting contradictions in the documents provided by the assessee. The AO found the evidence insufficient to establish the creditworthiness of the party. However, the Commissioner of Income Tax (Appeals) [CIT(A)] considered additional evidence including a bank statement from the creditor, confirming the investment from his NRE account in ICICI Bank Ltd. The CIT(A) concluded that the appellant had satisfactorily addressed all doubts raised by the AO, establishing the identity and creditworthiness of the creditor. Citing relevant judicial pronouncements, the CIT(A) held that the addition made by the AO was unjustified. The Tribunal upheld the CIT(A)'s decision, emphasizing the established identity and creditworthiness of the party and the genuineness of the transaction.

Deletion of addition of Rs. 43,003/- made on account of disallowance of business expenses:
The AO disallowed Rs. 43,003/- as business expenses, considering the income earned by the assessee to be exempt under certain sections. The CIT(A) noted that the appellant had already disallowed a portion of the expenses in accordance with the law and argued that the remaining expenses were necessary for statutory compliance and the functioning of the company. Referring to relevant case law, the CIT(A) concluded that the expenses claimed were essential for the operation of the company, even in the absence of active business activities. The Tribunal upheld the CIT(A)'s decision, stating that the disallowance lacked sufficient reasoning and that the expenses were minimal and crucial for the business. The Tribunal found no fault in the CIT(A)'s order and dismissed the revenue's appeal.