2012 (4) TMI 801 - AT - Income Tax

Summary

Issues involved:
The judgment involves issues related to unexplained loans, bogus purchases, and penalty charges.

Unexplained loans:
The department appealed against the deletion of an addition of Rs. 32,10,000 made by the AO on account of unexplained loans from various parties. The CIT(A) deleted the amount based on the assessee's evidence, including bank statements and PAN numbers of loan creditors. The AO considered the loans as bogus due to discrepancies in addresses and missing income tax returns of the parties. The ITAT observed that the matter required reconsideration by the CIT(A) to establish the genuineness, creditworthiness, and identity of the loan creditors. The issue was restored to the file of the CIT(A) for fresh consideration.

Bogus purchases:
The AO made an addition of Rs. 82,95,347 for bogus purchases by the assessee. The CIT(A) deleted this addition, citing lack of opportunity for the assessee to address discrepancies in addresses of parties and payments made by account payee cheques. The ITAT set aside the CIT(A) order and restored the matter for fresh consideration, emphasizing the need for adequate opportunities for both sides.

Penalty charges:
The AO disallowed Rs. 42,03,426 claimed by the assessee as penalty charges on contract delays. The CIT(A) considered the payment as damages for breach of contract and allowed the deduction under section 37(1) of the Act. The ITAT upheld the CIT(A) decision, stating that the amount paid for breach of contractual obligation was an allowable deduction as business expenditure. The appeal was partly allowed for statistical purposes.