2013 (7) TMI 1106 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of addition u/s 68 of the Income-tax Act, 1961.
2. Deletion of disallowance of interest due to unexplained loans.
3. Deletion of disallowances of colliery and salary expenses.

Summary:

1. Deletion of Addition u/s 68 of the Income-tax Act, 1961:
The Revenue challenged the deletion of an addition of Rs. 50 lakhs made by the Assessing Officer (AO) u/s 68 on account of unsecured loans from M/s. Chamak Trexim Pvt. Ltd. The AO argued that the assessee failed to prove the creditworthiness of the company, citing huge fund rotations and the company being a mere paper entity. The CIT(A) deleted the addition, observing that the assessee provided sufficient documents, including confirmation letters, bank statements, audited accounts, and ITR acknowledgments. The CIT(A) found that the company was a registered NBFC with RBI, and the loan was repaid with interest after TDS deduction. The CIT(A) concluded that the identity, genuineness, and creditworthiness of the creditor were established, and the addition was unjustified.

2. Deletion of Disallowance of Interest:
The Revenue also contested the deletion of Rs. 5,56,148/- interest disallowance related to the loan from Chamak Trexim Pvt. Ltd. The CIT(A) deleted the disallowance, reasoning that since the loan was found to be explained, the interest paid after due TDS deduction should also be allowed.

3. Deletion of Disallowances of Colliery and Salary Expenses:
The AO disallowed Rs. 2,50,000/- out of colliery expenses and Rs. 1,00,000/- out of salary expenses, citing unverifiable self-made vouchers. The CIT(A) deleted these disallowances, noting that the net taxable income had significantly increased and similar disallowances in related cases were previously deleted. The CIT(A) found the disallowances unjustified given the overall increase in taxable income and the detailed findings in related cases.

Conclusion:
The ITAT upheld the CIT(A)'s decision on the deletion of the addition u/s 68 and the related interest disallowance, finding no infirmity in the CIT(A)'s detailed findings. However, regarding the disallowance of colliery and salary expenses, the ITAT directed the AO to restrict the disallowance to 20% of the cash expenditure incurred by the assessee. The appeal of the Revenue was allowed in part.