2012 (5) TMI 808 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of disallowance u/s 68 of the Act on account of unexplained credits.
2. Deletion of disallowance out of operation and other expenses incurred by the assessee.

Summary:

Issue 1: Deletion of disallowance u/s 68 of the Act on account of unexplained credits

The Revenue's appeal contested the CIT(A)'s deletion of the disallowance of Rs. 1,97,61,900/- u/s 68 of the Act, which was added as unexplained cash credit. The AO had questioned the creditworthiness of Shri Sunil Bhatia, a director of the assessee company, who contributed the amount through foreign remittance without furnishing RBI approval. The AO relied on case laws such as CIT Vs. Mussadilal Ram Bharose and Sumati Dayal Vs. CIT. The CIT(A) admitted additional evidence under Rule 46A, including bank statements and passport copies, and deleted the addition, stating that the evidence was crucial to the issue. The Revenue argued that the CIT(A) admitted the evidence without proper justification and failed to consider the AO's objections regarding the share premium. The Tribunal found that the CIT(A) admitted the additional evidence without following Rule 46A requirements and set aside the matter back to the CIT(A) for fresh consideration.

Issue 2: Deletion of disallowance out of operation and other expenses incurred by the assessee

The Revenue also contested the deletion of Rs. 8,92,396/- out of operation and other expenses. The AO had disallowed 25% of the expenses, arguing that the company worked only for three days in the relevant year. The CIT(A) allowed the expenses, stating that the veracity of the expenses was not questioned by the AO. The Tribunal found that the CIT(A) did not provide proper reasons for deleting the addition and directed the CIT(A) to decide the issue on merits after perusing the original assessment record.

Conclusion:

The Tribunal allowed the Revenue's appeal for statistical purposes, directing the CIT(A) to reconsider both issues afresh after examining the assessment record and complying with Rule 46A requirements.