2015 (9) TMI 1729 - AT - Income Tax

Addition u/s 68 - Unexplained cash credits - HELD THAT - We agree with the contention of DR that in view of the peculiar facts of the assessee s case the decision in the case of Orissa Corporation (P) Ltd ( 1986 (3) TMI 3 - SUPREME COURT may not be applicable and recording of the statement of the creditor is essential so as to ascertain whose money was actually deposited in the bank account of the creditor, whether it was unaccounted cash of the assessee or it was the cash in hand of the creditor. Therefore, we set aside the orders of the authorities below and restore the matter back to the file of the AO - We direct the assessee to produce all the 11 creditors before the AO. AO will record their statements and will also consider the explanation/evidences as may be furnished by them and thereafter readjudicate the issue in accordance with law. Addition of cash credit - Allowance/disallowance of interest would be consequential to the acceptance or otherwise of the cash credit. We, therefore, set aside the orders of the authorities below on this point also and restore the matter back to the file of the Assessing Officer to be re-adjudicated along with the issue of addition for cash credit. Addition of 20% disallowance out of telephone expenditure - HELD THAT - Assessee is a partnership firm. The personal use of telephone by the partners cannot be ruled out. However, we deem it proper to reduce the disallowance to ⅙ (one sixth) as against 20% made by the Assessing Officer.

Summary

Issues: Validity of the Order, Addition of Unsecured Loans, Enhancement of Addition, Disallowance of Telephone Expenditure, Charging of Interest u/s 234B/C/D

Validity of the Order:
The appeal challenged the order of the Commissioner of Income-Tax (Appeals) for Assessment Year 2006-07, specifically questioning the validity of the order due to the alleged failure to consider a submission dated 24.06.2010. However, during the hearing, the ground was not pressed by the Assessee's counsel and was rejected as not pressed.

Addition of Unsecured Loans:
The appeal contested the addition of Rs.29,80,000 in respect of eleven depositors, arguing that necessary evidence regarding the identity and creditworthiness of the depositors had been provided. The Commissioner of Income-Tax (Appeals) upheld the addition under section 68 for cash credit in the account of 11 parties. The Tribunal noted that the cash deposits were made by an employee of the assessee as per the partner's instructions, and the creditors did not appear before the Assessing Officer despite notices. The Tribunal directed the assessee to produce the creditors for statements to ascertain the source of the deposited cash.

Enhancement of Addition:
The appeal challenged the enhancement of the addition by disallowing interest paid to the depositors. The Tribunal, after setting aside the addition of cash credit, deemed allowance/disallowance of interest consequential to the acceptance of cash credit. The matter was restored to the Assessing Officer for re-adjudication along with the cash credit issue.

Disallowance of Telephone Expenditure:
The appeal contested the 20% disallowance of telephone expenditure. The Tribunal acknowledged the possibility of personal use by partners but reduced the disallowance to one-sixth instead of 20% made by the Assessing Officer.

Charging of Interest u/s 234B/C/D:
The appeal challenged the charging of interest under sections 234B/C/D, admitted to be consequential. The Tribunal directed the Assessing Officer to re-calculate the interest after the income re-determination as per the Tribunal's order.

In conclusion, the Tribunal partly allowed the assessee's appeal, addressing various issues related to the addition of unsecured loans, enhancement of addition, disallowance of telephone expenditure, and charging of interest, while directing further actions by the Assessing Officer for re-examination and re-calculation in accordance with the law.