2012 (10) TMI 20 - AT - Income Tax

Addition u/s 68 - loan creditors - Held that - From the record it is found that before the AO, the assessee did not get due opportunity to substantiate the loan creditors appearing in its books of account, therefore, application under Rule 46A was filed before the CIT(A) alongwith all the documentary evidence to satisfy the requirement of loan creditor u/s 68. The detailed finding recorded by the CIT(A) after considering the documents filed clearly establish that the assessee has not only satisfied the condition of identity of the loan creditor but also genuineness of loan transaction and creditworthiness of loan creditor to advance the required amount of loan. CIT(A) rightly deleted the addition. Dis-allowance of expenses on telephone, business promotion, transportation, repairs and maintenance etc - Held that - It is found that no where AO has pointed out as to which of item of expenses were not supported by bills or respective vouchers nor the AO has pointed out which part of the expenditure were not for the purpose of business. Looking to the volume of business, quantum of expenditure incurred was very much reasonable. CIT(A) rightly deleted the dis-allowance - Decided against Revenue

Issues Involved:
1. Addition of credits under Section 68 of the Income Tax Act, 1961.
2. Disallowance of expenses amounting to Rs. 1,34,600.

Issue-wise Detailed Analysis:

1. Addition of Credits under Section 68:

Hitakshi Media Solutions Pvt. Ltd. - Rs. 34,21,000/-:
The Assessing Officer (AO) added Rs. 34,21,000/- as unexplained unsecured loan. The appellant provided confirmation from Hitakshi Media Solutions Pvt. Ltd., including their PAN, ledger account, bank statement, and audited balance sheet. The CIT(A) observed that the transactions were through regular banking channels and the AO did not dispute the identity, creditworthiness, and genuineness of the transactions. Consequently, the addition was deleted.

Kishorilal Asera - Rs. 5,00,000/-:
The AO added Rs. 5,00,000/- on account of unsecured loan from Kishorilal Asera. The appellant provided confirmation, PAN, and bank statement of the creditor. The CIT(A) noted that the transactions in the bank account were regular and the AO did not dispute the identity, creditworthiness, and genuineness of the transactions. The addition was deleted.

Lake City Motors Pvt. Ltd. - Rs. 98,42,301/-:
The AO added Rs. 98,42,301/- as unexplained unsecured loan. The appellant provided a ledger account, bank statements, PAN, and audited balance sheet of Lake City Motors Pvt. Ltd. The CIT(A) found that the appellant had a regular running account with the creditor and the AO did not dispute the identity, creditworthiness, and genuineness of the transactions. The addition was deleted.

Sanjeev Maheshwari - Rs. 45,00,000/-:
The AO added Rs. 45,00,000/- as unexplained unsecured loan. The appellant provided confirmation, PAN, IT return acknowledgment, and bank statement of Sanjeev Maheshwari. The CIT(A) noted that the transactions were through regular banking channels and the appellant had explained the source of the funds. The AO did not dispute the identity, creditworthiness, and genuineness of the transactions. The addition was deleted.

Uma Maheshwari - Rs. 3,95,000/-:
The AO added Rs. 3,95,000/- as unexplained unsecured loan. The appellant provided confirmation, PAN, and bank statement of Uma Maheshwari. The CIT(A) noted that the transactions were through regular banking channels and the AO did not dispute the identity, creditworthiness, and genuineness of the transactions. The addition was deleted.

The Tribunal upheld the CIT(A)'s decision, confirming that the appellant had satisfied the conditions of identity, creditworthiness, and genuineness of the loan creditors under Section 68.

2. Disallowance of Expenses - Rs. 1,34,600/-:
The AO disallowed expenses amounting to Rs. 1,34,600/- under various heads such as telephone, business promotion, transportation, and repairs and maintenance. The CIT(A) deleted the disallowance, observing that the AO did not specify which expenses were unsupported by bills or vouchers, nor did he provide evidence that the expenses were not for business purposes. The Tribunal agreed with the CIT(A), noting that the disallowance was made without cogent reasons and the expenses were reasonable given the volume of business.

Conclusion:
The Tribunal dismissed the Revenue's appeal, confirming the CIT(A)'s decision to delete the additions made under Section 68 and the disallowance of expenses.

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