2015 (9) TMI 1233 - AT - Income Tax

Addition u/s. 68 - unaccounted cash paid for obtaining the accommodation entries - CIT(A) deleted the addition - Held that - The creditworthiness is reflected through sources of funds in the balance sheet, the details of which were made available by the assessee during the assessment/ remand and appellate proceedings, on the basis of which it can be concluded that the lenders had sufficient funds to make the investment and to advance loans and those investments / loans have been duly disclosed in its Balance Sheet. We further note that in the Remand Report the AO has confirmed that he had examined the Director of Charm Investments Pvt. Ltd. and also recorded his statement on 19-08- 2009.In view of the above, we are of the considered view that the A.O. was not justified in making addition on account of unsecured loans to the extent of ₹ 17,50,000/- from the loan creditors. Therefore, the Ld. CIT(A) has rightly deleted the addition made on account of unsecured loans from the loan creditors and as a natural consequence, the additions on account of commission to the extent of ₹ 35,000/- was also rightly deleted. Since the Ld. CIT(A) has passed a well reasoned order and therefore, no interference is called for in the impugned order on our part, hence, we uphold the impugned order dated 03.12.2010 passed by the Ld. CIT(A) and accordingly dismiss the appeal of the Revenue. - Decided in favour of assessee. Treating the interest earned on Margin Money Deposits as income from other sources - denial of deduction u/s. 80IB - Held that - We have seen that the decision of the Hon ble Delhi High Court for the Assessee in the case CIT vs. Jaypee DSC Ventures Ltd. (2011 (3) TMI 309 - Delhi High Court) has not been considered by the Ld. CIT(A) while deciding the issue involved in ground no. 1, therefore, we are of the view that the Hon ble Delhi High Court has considered all the decisions mentioned by the Ld. CIT(A) in the impugned order and decide the issue in favor of the assessee. As submitted by the Ld. DR that the issue may be set aside to the file of the Ld. CIT(A) to decide the same afresh, after considering the decision of the Hon ble Delhi High Court. In view of the above, we think it proper that request of the Ld. DR seems to be genuine and should be accepted, therefore, we set aside the issue involved to the file of the Ld. CIT(A) to decide the same afresh, under the law, after considering the decision of the Hon ble Delhi High Court decision in the case of CIT vs. Jaypee DSC Ventures Ltd. 2011 (3) TMI 309 - DELHI HIGH COURT . Needless to add that the assessee should be given adequate opportunity of being heard. - Decided in favour of assessee for statistical purposes.

Summary

Issues Involved:
1. Deletion of addition made under Section 68 of the Income Tax Act.
2. Treatment of interest earned on Margin Money Deposits as income from other sources and denial of deduction under Section 80-IB.
3. Withdrawal of deduction under Section 80-IB on notional profits.

Issue-wise Detailed Analysis:

1. Deletion of Addition Made Under Section 68 of the Income Tax Act:

The Revenue challenged the deletion of Rs. 17,50,000/- added under Section 68 of the Income Tax Act and Rs. 35,000/- as unaccounted cash paid for obtaining accommodation entries. The Assessing Officer (AO) had made the addition citing unexplained cash credits. However, the CIT(A) deleted the addition, concluding that the addition was made without any material evidence. The CIT(A) noted that the assessee had provided sufficient documentation, including PAN, income tax returns, balance sheets, profit & loss accounts, and bank statements, to prove the identity, creditworthiness, and genuineness of the transactions. The Tribunal upheld the CIT(A)'s decision, emphasizing that the AO failed to obtain relevant information from the respective AOs of the loan creditors, who were assessed in Delhi. The Tribunal found no merit in the AO's action and noted that the assessee had discharged its onus of proving the identity and creditworthiness of the creditors and the genuineness of the transactions.

2. Treatment of Interest Earned on Margin Money Deposits as Income from Other Sources and Denial of Deduction Under Section 80-IB:

The assessee contested the CIT(A)'s decision to treat the interest earned on Margin Money Deposits of Rs. 7,77,656/- as income from other sources, thereby denying deduction under Section 80-IB. The assessee argued that the issue was covered in its favor by the Delhi High Court's decision in CIT vs. Jaypee DSC Ventures Ltd. The Tribunal noted that this decision was not considered by the CIT(A) and agreed with the Revenue's request to remand the issue to the CIT(A) for fresh adjudication, considering the Delhi High Court's decision. The Tribunal directed the CIT(A) to decide the issue afresh, giving the assessee an adequate opportunity to be heard.

3. Withdrawal of Deduction Under Section 80-IB on Notional Profits:

The assessee's cross-objection regarding the withdrawal of deduction under Section 80-IB on notional profits of Rs. 36,673/- was not pressed during the hearing. Consequently, the Tribunal dismissed this ground as not pressed.

Conclusion:

The Tribunal dismissed the Revenue's appeal and partly allowed the assessee's cross-objection for statistical purposes. The Tribunal upheld the CIT(A)'s deletion of the addition made under Section 68 and remanded the issue of treating interest earned on Margin Money Deposits as income from other sources back to the CIT(A) for fresh adjudication, considering the relevant Delhi High Court decision. The cross-objection regarding the withdrawal of deduction under Section 80-IB on notional profits was dismissed as not pressed.