2011 (3) TMI 1677 - AT - Income Tax

Summary

Issues Involved:
1. Addition u/s 69 for alleged unexplained investment.
2. Disallowance of petrol, vehicle depreciation, and telephone expenses.
3. Deletion of addition u/s 41(1) for cessation of liability.

Summary:

Issue 1: Addition u/s 69 for alleged unexplained investment

The assessee challenged the addition of Rs. 16,34,700/- made by the AO u/s 69 of the Act, based on the difference between the purchase price of properties and the stamp duty valuation. The AO treated this difference as unexplained investment, relying on section 50C. The CIT(A) upheld this addition, applying the deeming provision of section 50C to the buyer. However, the Tribunal held that section 50C, being a deeming provision, is strictly applicable only for the purpose of section 48 and cannot be extended to other sections like section 69. The Tribunal cited similar judgments from ITAT Ahmedabad and the Punjab and Haryana High Court, emphasizing that without positive evidence of additional consideration, the addition cannot be justified. Consequently, the Tribunal deleted the addition of Rs. 16,37,700/- made u/s 69C.

Issue 2: Disallowance of petrol, vehicle depreciation, and telephone expenses

The assessee contested the disallowance of Rs. 12,337/- for petrol expenses and vehicle depreciation, and Rs. 1,078/- for telephone expenses. The AO disallowed 1/5th of these expenses, attributing them to personal use. The Tribunal found no specific arguments against this disallowance and upheld the AO's decision, rejecting the assessee's ground.

Issue 3: Deletion of addition u/s 41(1) for cessation of liability

The Revenue appealed against the deletion of Rs. 6,80,732/- by the CIT(A), which was added by the AO u/s 41(1) due to the assessee's failure to furnish creditor confirmations. The CIT(A) found that the assessee had ongoing transactions and payments with these creditors in preceding and subsequent years, indicating that the liabilities were still alive. The Tribunal agreed with the CIT(A) that the basic condition of cessation of liability was not satisfied and upheld the deletion, dismissing the Revenue's appeal.

Conclusion:

The assessee's appeal was partly allowed, and the Revenue's appeal was dismissed. The Tribunal pronounced the order in Open Court on 18th March 2011.