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Issues involved: Cross appeals filed by the assessee and the Revenue against the orders passed by the Ld. CIT(A)-IX, Mumbai for the assessment year 2003-04.
Issue 1: Unexplained credit u/s. 68 of the I.T. Act - The appellant, a company engaged in the business of readymade garments, faced an addition of &8377; 20,50,000/- as unexplained credit u/s. 68 of the I.T. Act due to lack of confirmation letters during assessment proceedings. - Despite the appellant's efforts to explain the situation, including submitting copies of criminal complaints and legal notices regarding lenders' refusal to issue confirmations, the AO held the creditworthiness and identity of the loan givers remained unexplained. - The Ld. CIT(A) directed the AO to verify the claim from earlier assessment records for certain loans and delete the addition if they were found to be old advances reflected in previous balance sheets. - The Ld. CIT(A) confirmed the addition of &8377; 11,00,000/- in the case of one lender due to lack of satisfactory explanation or supporting evidence provided by the assessee. - Regarding other lenders, although evidence of legal action was submitted, the creditworthiness and genuineness of the transactions were not established to the satisfaction of the authorities. Issue 2: Disallowance of proportionate interest on loans - The assessee paid interest on secured and unsecured loans but faced disallowance of &8377; 12,53,435/- for interest-free loans that were connected to interest-bearing loans. - The AR clarified that the loans and advances amounting to &8377; 1,07,87,166/- included "Advance Income tax & TDS" and were not diverted for non-business purposes. - The Ld. CIT(A) held that the disallowance was unjustified as the amount of &8377; 1,07,87,166/- was indeed advance income-tax and TDS. - The Revenue challenged the decision, arguing that the disallowance should not have been deleted and questioning the characterization of the loans and advances as advance income tax and TDS. - An error was noted in the CIT(A)'s order regarding the figures related to advances and deposits, prompting a reevaluation by the Assessing Officer to verify the balance sheet and rework any disallowance if necessary. Conclusion: - The appeal filed by the assessee was allowed for statistical purposes, while the appeal filed by the Revenue was also allowed for statistical purposes.
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