2013 (5) TMI 1033 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance of expenditure on improvement of flat.
2. Deletion of disallowance u/s 14A.
3. Deletion of addition u/s 68.

Summary:

Issue 1: Disallowance of expenditure on improvement of flat

The department challenged the CIT(A)'s order restricting the disallowance made on account of expenditure incurred on improvement of the flat to Rs. 1,20,000/-. The Assessing Officer (AO) disallowed Rs. 2,40,000/- claimed by the assessee for lack of supporting evidence. The CIT(A) allowed 50% of the expenditure as reasonable. The Tribunal upheld the CIT(A)'s decision, noting that the expenditure was recorded in the books of account impounded by the department, and thus could not be rejected outright.

Issue 2: Deletion of disallowance u/s 14A

The AO disallowed Rs. 1,19,749/- u/s 14A, stating that the interest paid on loans was not related to income not includible in total income. The CIT(A) deleted the disallowance, holding that there was no nexus between the loans taken and the investments in shares, as the investments were made in earlier years. The Tribunal upheld the CIT(A)'s decision, noting that the AO did not establish that investments in shares were made during the current year.

Issue 3: Deletion of addition u/s 68

The AO added Rs. 14,97,500/- u/s 68, questioning the genuineness and creditworthiness of loans received from two creditors. The CIT(A) deleted the addition, noting that the loans were received through banking channels and the creditors had sufficient sources, including chit auction proceeds. The Tribunal upheld the CIT(A)'s decision, stating that the assessee satisfactorily proved the identity, creditworthiness, and genuineness of the transactions. The AO's addition was based on doubts and suspicions without incriminating evidence.

Conclusion:

The appeal filed by the Revenue was dismissed, and the order of the CIT(A) was upheld on all grounds.

Order pronounced in the open court on 3rd May, 2013.