2015 (8) TMI 165 - AT - Income Tax

Addition u/s 40A (3) - CIT(A) deleted addition on the ground that payments of ₹ 132,000/- made on 21.03.2010 and ₹ 167,620/- on 28.03.2010 fall on Sundays and banks were closed which was one of the exceptions provided in Rule 6DD(j) - Held that - We find that learned CIT (A) has allowed relief only in respect of two payments which were made on Sundays and he has confirmed the balance disallowances u/s 40A (3). We also find that it is noted by the A.O. in the assessment order that these are cash purchases. Therefore, there is no requirement to find out the due date of the bill. This is not the case of the A.O. that these two dates are not on Sunday. Considering all these facts, we decline to interfere in the order of CIT (A) on this issue - Decided against revenue. Unaccounted cash credit - unaccounted deposits in saving bank account of HDFC Bank - CIT(A) deleted addition - Held that - A clear finding is given by CIT (A) that the balance sheet was prepared for business affairs and this bank account was a personal account. It is not shown by the revenue that any business transaction was carried out through this bank account and hence, we find no merit in the objection of the A.O that the HDFC Bank Account is not incorporated in Balance Sheet. Even if the assessee fails to establish the purpose for which the loan was stated to have been taken by the assessee, it cannot be said that for this reason alone, the loan is bogus and addition is called for. There is no merit in any of the objections of the A.O. The assessee has filed affidavits of all 98 persons and the A.O. called 10 person out of them and 9 appeared and confirmed. Hence, in our considered opinion, in the facts of the present case, there is infirmity in the order of CIT (A) on this issue - Decided against revenue. Unaccounted investment - addition u/s 69B deleted by CIT(A) - Held that - CIT (A) has decided this issue on this basis that this difference is with regard to payment of stamp paper purchased in cash and it was explained before CIT (A) that this payment was made out of cash available in personal capacity. Learned CIT (A) held that in the facts of the present case, it is reasonable to accept that the assessee may be having some cash as personal savings and he accepted this claim to the extent of ₹ 80,000/-. In our considered opinion, the amount of personal cash accepted by CIT (A) is not excessive and hence, we hold that there is no infirmity in the order of CIT (A) on this issue. - Decided against revenue.

Summary

Issues Involved:
1. Deletion of addition made under Section 40A(3) of the IT Act.
2. Deletion of addition of Rs. 18,00,000 by accepting the assessee's claim regarding personal bank account and loans.
3. Deletion of addition of Rs. 80,000 out of Rs. 155,955 made under Section 69B of the IT Act.

Issue-wise Detailed Analysis:

1. Deletion of Addition under Section 40A(3):

The revenue challenged the deletion of an addition of Rs. 2,99,620 made under Section 40A(3) on the grounds that payments were made on Sundays when banks were closed, which is an exception under Rule 6DD(j). The Assessing Officer (A.O.) argued that the assessee failed to demonstrate the necessity of making payments on Sundays. The CIT (A) allowed relief for payments made on Sundays and confirmed the balance disallowances. The Tribunal found no requirement to ascertain the due date of the bill as the payments were for cash purchases and confirmed that the dates in question were indeed Sundays. Consequently, the Tribunal upheld the CIT (A)'s decision and rejected the revenue's ground.

2. Deletion of Addition of Rs. 18,00,000:

The revenue contested the deletion of Rs. 18,00,000 by arguing that the savings bank account in question was personal and not reflected in the business books of accounts, and the interest earned was not included in the income computation. The CIT (A) found that the bank account was personal and not a business account, thus not subject to Section 68 of the IT Act, but rather Section 69. The CIT (A) noted that the assessee provided affidavits from 98 persons confirming the loans, and 9 out of 10 persons called by the A.O. appeared and confirmed the loans. The CIT (A) cited the case of Mehta Parekh and Co. vs. CIT, emphasizing that affidavits cannot be disbelieved without cross-examination. The Tribunal agreed with the CIT (A) that the A.O. did not provide sufficient evidence to discard the affidavits and failed to examine the creditors directly. Thus, the Tribunal found no merit in the revenue's objections and upheld the CIT (A)'s decision to delete the addition.

3. Deletion of Addition under Section 69B:

The revenue objected to the deletion of Rs. 80,000 out of Rs. 155,955 made under Section 69B, arguing that the assessee failed to explain the excess investment in property not shown in the balance sheet. The CIT (A) accepted the assessee's explanation that the excess amount was from personal savings used to purchase stamp paper. The Tribunal found the CIT (A)'s acceptance of Rs. 80,000 as personal cash reasonable and saw no infirmity in the decision. Thus, the Tribunal rejected the revenue's ground on this issue.

Conclusion:

The Tribunal dismissed the revenue's appeal, finding no merit in the objections raised against the CIT (A)'s decisions on all three issues. The orders of the CIT (A) were upheld, and the additions made by the A.O. were deleted as per the CIT (A)'s findings.