2013 (12) TMI 1722 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of disallowance of various expenses.
2. Deletion of disallowance of commission expenses.
3. Deletion of disallowance of Kharajat expenses.
4. Deletion of disallowance of unexplained cash credit.
5. Deletion of disallowance u/s 68.
6. Deletion of disallowance u/s 69A.
7. Deletion of disallowance of unexplained outstanding credits.
8. Deletion of disallowance of interest chargeable on interest-free advance.

Summary:

1. Deletion of disallowance of various expenses:
The A.O. disallowed Rs. 74,732/- on account of vehicle and telephone expenses, citing lack of supporting bills and personal use. The CIT(A) deleted the disallowance, noting that such expenses are petty and usually incurred in cash without verifiable receipts. ITAT upheld the A.O.'s addition as the Assessee had agreed to it during assessment proceedings.

2. Deletion of disallowance of commission expenses:
The A.O. disallowed Rs. 14,400/- out of Rs. 72,000/- commission expenses paid in cash, suspecting suppression of profits. CIT(A) deleted the disallowance, stating the commission was paid to the Assessee's father for business supervision, and the genuineness was not disputed. ITAT upheld the A.O.'s addition as the Assessee had not objected during assessment.

3. Deletion of disallowance of Kharajat expenses:
The A.O. disallowed Rs. 2,59,940/- out of Rs. 10,39,760/- Kharajat expenses due to lack of verifiable documents. CIT(A) reduced the disallowance to 10%, granting partial relief. ITAT further reduced the disallowance to 15%, considering the substantial cash expenses and lack of third-party evidence.

4. Deletion of disallowance of unexplained cash credit:
The A.O. added Rs. 60,000/- as unexplained cash credit due to a discrepancy in the balance shown by Lakhani Enterprises. CIT(A) deleted the addition, accepting the Assessee's explanation of accounting the draft in the subsequent year. ITAT upheld the A.O.'s addition due to lack of evidence supporting the Assessee's explanation.

5. Deletion of disallowance u/s 68:
The A.O. added Rs. 10 lakhs as unexplained cash credit u/s 68, questioning the genuineness of the loan from Markandeshwar Scrap Traders. CIT(A) deleted the addition, noting the Assessee had provided sufficient documentary evidence, and the onus was on the A.O. to disprove it. ITAT remitted the issue back to CIT(A) for fresh examination due to contradictory statements and lack of evidence.

6. Deletion of disallowance u/s 69A:
The A.O. added Rs. 16.50 lakhs u/s 69A, suspecting unrecorded income. CIT(A) deleted the addition, accepting the explanation of Markandeshwar Scrap Traders. ITAT remitted the issue back to CIT(A) for fresh examination due to contradictory statements and lack of evidence.

7. Deletion of disallowance of unexplained outstanding credits:
The A.O. added Rs. 83,19,857/- as unexplained outstanding credits due to lack of confirmations and supporting documents. CIT(A) deleted the addition, noting the transactions were business-related and the Assessee had provided sufficient details. ITAT upheld CIT(A)'s decision as the Revenue could not controvert the findings.

8. Deletion of disallowance of interest chargeable on interest-free advance:
The A.O. disallowed Rs. 4,02,177/- interest expense, citing interest-free advances given by the Assessee. CIT(A) deleted the addition, noting the A.O. failed to establish a nexus between interest-bearing loans and interest-free advances. ITAT upheld CIT(A)'s decision as the Revenue could not provide contrary evidence.

Conclusion:
The appeal of the Revenue is partly allowed for statistical purposes.