2011 (10) TMI 700 - AT - Income Tax

Summary

Issues Involved:
1. Addition of alleged benefit value u/s 17(3).
2. Treatment of sum as income u/s 10(3).
3. Deletion of addition on account of bogus creditors.

Summary:

Issue 1: Addition of Alleged Benefit Value u/s 17(3)
The assessee, a non-employee director of SKCSPL, was added a value of Rs. 3,49,023/- by the AO as perquisite/profits in lieu of salary u/s 17(3) for expenses incurred on a business trip. The CIT(A) confirmed this addition, referencing section 2(24)(iv) and the case of Ravi Prakash Khemka v/s CIT 295 ITR 33 (Mad), stating that the benefit derived by the assessee is taxable. However, the ITAT noted that there was no employer-employee relationship between SKCSPL and the assessee, and thus, the addition u/s 17(3) was not justified. The ITAT allowed the assessee's appeal on this ground.

Issue 2: Treatment of Sum as Income u/s 10(3)
The AO treated Rs. 83,320/- incurred by SKPMIL for the assessee accompanying her husband on a business trip as casual and non-recurring receipt u/s 10(3). The CIT(A) upheld this addition, citing the case of Smt. Sudha Burman vs. Commissioner of Income-tax 296 ITR 96 (Del). The ITAT, however, found that the expenses were allowed as business expenditure in SKPMIL's case and the company had offered the expenditure for taxation. Since the assessee accompanied her husband on the company's request, the amount could not be considered casual or non-recurring income. The ITAT allowed the assessee's appeal on this ground as well.

Issue 3: Deletion of Addition on Account of Bogus Creditors
The AO added Rs. 20,86,980/- as unexplained cash credits, which included amounts from M/s UB Finance Pvt. Ltd., M/s UB Financial Services, and Shri U.R. Bhandari. The CIT(A) deleted this addition, noting that the credits were from earlier years and proper inquiries were not conducted by the AO. The ITAT upheld the CIT(A)'s decision, stating that the cash credits were opening balances from earlier years and the AO failed to carry out proper inquiries. The ITAT dismissed the revenue's appeal on this ground.

Conclusion:
The ITAT dismissed the revenue's appeal and allowed the assessee's appeal, concluding that the additions u/s 17(3) and 10(3) were not justified and the deletion of the addition on account of bogus creditors was appropriate.

Order pronounced in open court on 14-10-2011.