2011 (6) TMI 868 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of addition of Rs. 7,85,000/- out of total addition of Rs. 8,85,000/- made by the Assessing Officer on account of unexplained loan credit u/s 68.
2. Confirmation of addition of Rs. 1 lac made u/s 68 by the Commissioner of Income Tax (Appeals).
3. Applicability of CBDT circular regarding the prescribed monetary limit for filing appeals.

Summary:

Issue 1: Deletion of Addition of Rs. 7,85,000/- u/s 68
The revenue appealed against the order of the Commissioner of Income Tax (Appeals) who deleted the addition of Rs. 7,85,000/- out of a total addition of Rs. 8,85,000/- made by the Assessing Officer on account of unexplained loan credit u/s 68 of the Income Tax Act. The Tribunal noted that the tax effect in the present appeal is below the prescribed monetary limit for filing an appeal before the Tribunal, which is Rs. 3,00,000/-. The Tribunal cited several precedents where appeals were dismissed due to the tax effect being below the prescribed limit, including the cases of Rajan Cloth Stores, ACIT vs. M/s. Shriram Nutrients Ltd., and Himanshu Flour Mills. Consequently, the appeal of the revenue was dismissed on the ground of low tax effect.

Issue 2: Confirmation of Addition of Rs. 1 lac u/s 68
The assessee filed a cross objection against the confirmation of the addition of Rs. 1 lac made u/s 68 by the Commissioner of Income Tax (Appeals). The assessee contended that the loan of Rs. 1 lac was taken from Shri Ravindra Jain by account payee cheque, and the genuineness of the transaction and the creditworthiness of the loan creditor were established. The Tribunal reviewed the evidence, including the summons issued u/s 131, the affidavit of the assessee, and the bank account details of Shri Ravindra Jain. It was found that the identity, creditworthiness, and genuineness of the transaction were satisfactorily proven. Therefore, the Tribunal deleted the addition of Rs. 1 lac made by the lower authorities.

Issue 3: Applicability of CBDT Circular on Monetary Limit
The Tribunal discussed the applicability of the CBDT circular which revised the monetary limit for filing appeals by the department. The circular, effective from 9.2.2011, set the monetary limit for filing appeals before the ITAT at Rs. 3,00,000/-. The Tribunal referred to the decision of the Hon'ble jurisdictional High Court in CIT v. Ashok Kumar Manibhai Patel & Company, which held that the circular is applicable to pending appeals. Following this, the Tribunal dismissed the revenue's appeal due to the tax effect being below the prescribed limit.

Conclusion:
The appeal of the revenue was dismissed due to the tax effect being below the prescribed monetary limit, and the cross objection of the assessee was allowed, resulting in the deletion of the addition of Rs. 1 lac made u/s 68. The Tribunal's decision was pronounced in open court on 29th June, 2011.