2015 (7) TMI 1019 - AT - Income Tax

Disallowance of group gratuity insurance premium u/s.40A(9) - Held that - Tribunal in assessee s own case for A.Y. 2007-08 and A.Y. 2008-09 decided the issue against the assessee on the ground that no such approval has been received from the CIT till date. In view of the above and following the decision of the Coordinate Bench of the Tribunal in assessee s own case for the preceding two assessment years, the grounds raised by the assessee on this issue are dismissed. - Decided against assessee. Addition on account of receipt of cash from M/s. Rajendra Trading Company - Held that - find merit in the submission of the Ld. Counsel for the assessee that when the office of the assessee was simultaneously searched on the very same date and since no iota of evidence was found from the office of the assessee to show that it has received any unaccounted cash, therefore, merely on the basis of statement given by Shri Rajendra S. Raka, which has been retracted subsequently, cannot be the basis of any addition in the hands of the assessee. In this view of the matter, we hold that the CIT(A) was not justified in sustaining the addition made by the Assessing Officer amounting to ₹ 16,83,500/- on account of unaccounted cash received by the assessee from Shri Rajendra S. Raka of M/s. Rajendra Trading Company. - Decided in favour of assessee. Disallowance on account of loss on account of forgery - Held that - The assessee company is not authorised to carry on the business of hire purchase of vehicles as per Memorandum and Articles of Association. No steps have been taken to revise the Memorandum and Articles of Association following the Board Resolution dated 02-02-2009. The assessee purportedly rented out the cars on 25-02-2009 when the payment had not been made nor the physical ownership transferred to the assessee. No remedial measures have been taken to recover loss of ₹ 36 lakhs which is substantial amount. Not even a Police FIR has been registered by the assessee nor any criminal complaint filed against the suspect. The loss does not pertain to the impugned assessment year as the first instalment of ₹ 14,40,000/- was made through RTGS on 19-03-2009. Accordingly AO was justified in disallowing the loss claimed by the assessee u/s.37(1) as well as 36(1)(vii). The assessee could not controvert any of the observations given by the CIT(A) to substantiate the allowability of the claim. In absence of any valid argument by the Ld. Counsel for the assessee on this issue, we find no infirmity in the order of the CIT(A) upholding the addition made by the Assessing Officer which in the facts and circumstances of the case is legally justified and proper. - Decided against assessee.

Summary

Issues Involved:
1. Disallowance of group gratuity insurance premium under Section 40A(9) of the I.T. Act.
2. Addition on account of receipt of unaccounted cash from M/s. Rajendra Trading Company.
3. Disallowance of loss on account of forgery.

Issue-wise Detailed Analysis:

1. Disallowance of Group Gratuity Insurance Premium:
The assessee appealed against the disallowance of Rs. 50,50,544/- for A.Y. 2009-10 and Rs. 30,04,387/- for A.Y. 2010-11 on account of group gratuity insurance premium under Section 40A(9) of the I.T. Act. The Assessing Officer (AO) disallowed these amounts because the contributions were not approved by the Commissioner of Income Tax (CIT). The CIT(A) upheld the AO's decision. The Tribunal followed its own decision in the assessee's case for preceding years (A.Y. 2007-08 and A.Y. 2008-09), where similar disallowances were upheld due to the lack of CIT approval. Consequently, the Tribunal dismissed the assessee's grounds on this issue for both assessment years.

2. Addition on Account of Receipt of Unaccounted Cash:
For A.Y. 2009-10, the AO added Rs. 16,83,500/- to the assessee's income based on the statement of Shri Rajendra S. Raka, who admitted to paying unaccounted cash to the assessee. The CIT(A) upheld this addition, emphasizing the evidentiary value of the statement recorded under Section 132(4) of the I.T. Act and the absence of coercion during its recording. The CIT(A) also noted that the assessee's denial and subsequent retraction by Shri Raka were not credible without corroborative evidence. However, the Tribunal found merit in the assessee's argument that no incriminating material was found during the search and that Shri Raka had retracted his statement. The Tribunal noted the lack of corroborative evidence and the improbability of Shri Raka incurring a loss by paying Rs. 500/- per bag to the assessee. Consequently, the Tribunal set aside the addition of Rs. 16,83,500/- for A.Y. 2009-10.

For A.Y. 2010-11, a similar addition of Rs. 32,41,000/- was made by the AO based on the same modus operandi. The Tribunal, following its decision for A.Y. 2009-10, allowed the assessee's appeal and set aside the addition.

3. Disallowance of Loss on Account of Forgery:
For A.Y. 2010-11, the assessee claimed a loss of Rs. 36 lakhs due to forgery, which was disallowed by the AO on the grounds that the loss was capital in nature and not related to the assessee's business activities. The CIT(A) upheld the disallowance, noting that the assessee was not authorized to carry on the business of hire purchase of vehicles as per its Memorandum and Articles of Association, and no substantial steps were taken to recover the loss. The Tribunal found no infirmity in the CIT(A)'s order, as the assessee could not substantiate the allowability of the claim. Therefore, the Tribunal dismissed the assessee's grounds on this issue.

Conclusion:
The Tribunal partly allowed the appeals filed by the assessee, setting aside the additions on account of unaccounted cash receipts for both assessment years while upholding the disallowances related to group gratuity insurance premium and loss on account of forgery.