2010 (4) TMI 1213 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of addition of Rs. 14,35,000/- on account of unexplained cash credit u/s 68 of the Income Tax Act.
2. Allowing relief of Rs. 50,000/- out of total addition of Rs. 2,32,000/- under various heads due to absence of proper regular vouchers.

Summary:

Issue 1: Deletion of Addition of Rs. 14,35,000/- on Account of Unexplained Cash Credit u/s 68 of the Income Tax Act

The Revenue appealed against the CIT(A)'s order deleting the addition of Rs. 14,35,000/- as unexplained cash credit u/s 68. The Assessing Officer (A.O.) had added the amount received as loans from four individuals, totaling Rs. 14,35,000/-, as unexplained cash credits. The assessee provided evidence including account payee cheques, PAN details, income tax returns, bank statements, and affidavits confirming the loans. The CIT(A) observed that the cash creditors were regular assessees, and the loans were received through account payee cheques, with the sources of deposits in the creditors' bank accounts reasonably explained. The CIT(A) concluded that the identity, genuineness, and creditworthiness of the creditors were established, and thus, the addition was deleted.

The ITAT upheld the CIT(A)'s decision, noting that the assessee had discharged the onus of proving the identity, creditworthiness, and genuineness of the transactions. The ITAT emphasized that the A.O. should not reject the explanation without proper basis and confirmed the CIT(A)'s order, dismissing the Revenue's ground.

Issue 2: Allowing Relief of Rs. 50,000/- out of Total Addition of Rs. 2,32,000/-

The A.O. disallowed Rs. 2,32,000/- on an adhoc basis due to the absence of proper supporting bills and vouchers for various expenses. The CIT(A) reduced the disallowance to Rs. 50,000/-, reasoning that the expenses were incidental to the business and that proper vouchers were not always practicable for such expenses. The CIT(A) upheld a partial disallowance for vehicle running, telephone, and mobile expenses, considering the possibility of personal use.

The ITAT agreed with the CIT(A)'s reasoning, noting that the disallowance was made on an adhoc basis and that the nature of the expenses did not warrant a full disallowance. The ITAT dismissed the Revenue's ground, confirming the CIT(A)'s order.

Conclusion:

The appeal filed by the Revenue was dismissed, with the ITAT confirming the CIT(A)'s order on both issues. The deletion of the addition of Rs. 14,35,000/- u/s 68 was upheld, and the relief of Rs. 50,000/- out of the total addition of Rs. 2,32,000/- was also confirmed.