2013 (12) TMI 641 - AT - Income Tax

Addition on account of unexplained cash credits Held that - The person from whom amount was received admitted to have only one concern Deepak Corporation Whereas Ruchita Enterprise and Antima Corporation were operated by him for and on behalf of the assessee alone Observation of bank accounts presented by the assessee shows that the person has given false statement The assessee should be given chance for cross examining the person The issue set aside for fresh decision. Disallowance of bad debts written off Held that - Following CIT v. Shreyas S.Morakhia 2012 (3) TMI 103 - BOMBAY HIGH COURT - The brokerage having been credited to the profit and loss account of the assessee it is evident that a part of the debt is taken into account in computing the income of the assessee - Since both form a component part of the debt the requirements of Section 36(2)(i) are fulfilled where a part thereof is taken into account in computing the income of the assessee - The deduction should be allowed only to the extent of the debts as reduced by the value of shares in the hands of the assessee - Decided in favor of the assessee. Deduction on account of repairs and maintenance charges of computers Held that - the amount paid is capital in nature The depreciation at the rate of 30% is allowed on the amount - The remaining amount will be allowed as depreciation in later years Decided against assessee.

Summary

Issues:
1. Proper opportunity not granted by CIT(A)
2. Addition of Rs.18,00,000 on account of unexplained credits
3. Confirmation of addition of bad debts
4. Claim for deduction on account of repairs and maintenance charges for computers

Analysis:

Issue 1: Proper opportunity not granted by CIT(A)
The appeal challenged the order of the Commissioner of Income-tax (Appeals) for not granting proper opportunity to the assessee. The Assessing Officer noted discrepancies in cheques issued to certain concerns, leading to the addition of Rs.18,00,000 under section 68. The assessee requested cross-examination of Shri Kailash Kabra, but he did not appear. The CIT(A) remanded the matter, but ultimately upheld the addition based on Shri Kabra's statement, which the assessee disputed. The ITAT observed discrepancies in Shri Kabra's statement and bank transactions, necessitating cross-examination. The ITAT set aside the order and directed the AO to allow cross-examination to ascertain the truth.

Issue 2: Addition of Rs.18,00,000 on account of unexplained credits
The Assessing Officer added Rs.18,00,000 under section 68 due to unexplained credits from concerns associated with Shri Kailash Kabra. The CIT(A) upheld the addition based on Shri Kabra's statement. However, the ITAT found discrepancies between Shri Kabra's statement and bank transactions, necessitating cross-examination. The ITAT set aside the order and directed the AO to re-examine the issue after allowing cross-examination.

Issue 3: Confirmation of addition of bad debts
The assessee claimed deduction for bad debts, which was disallowed as the conditions of section 36(2) were deemed unfulfilled. Citing a relevant judgment, the ITAT directed the AO to allow the deduction after adjusting the value of shares held by the assessee in the debtors' companies. The AO was instructed to re-examine the facts and allow the appropriate deduction after providing an opportunity to the assessee.

Issue 4: Claim for deduction on account of repairs and maintenance charges for computers
The assessee sought deduction for repairs and maintenance charges for computers, which the AO deemed capital in nature. The AO disallowed the remaining amount after allowing depreciation. The CIT(A) upheld this decision, and the ITAT found no error in the order, stating that it was not conclusively proven that the payment was for repairs and not for purchase. Thus, the ITAT upheld the impugned order in this regard.

In conclusion, the appeal was partly allowed for statistical purposes, addressing the issues raised by the assessee regarding the assessment year 2004-2005.