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2014 (1) TMI 1932 - AT - Income TaxAddition u/s 40A(2)(b) - addition was made on the ground that interest paid by the assessee @ 24% to various persons covered u/s 40A(2)(b) is too excessive and therefore AO allowed the interest @12% - CIT-A restricted the addition - HELD THAT - After appreciating the facts that the cost of loan to be taken from the bank is high because of legal charges document charges etc. and therefore unsecured loans at higher rate of interest has been taken keeping in view the business expediency. The view taken by the ld. CIT(A) in restricting the disallowance of interest u/s 40A(2)(b) need to be upheld. The ground No.2(i) of the assessee s appeal and ground No.1 of Revenue s appeal are dismissed. Disallowance credit card expenses paid by the assessee are not open for verification - HELD THAT - Neither before both the authorities below nor before us the assessee has produced the supporting evidences; therefore the view taken by the ld. CIT(A) confirming the disallowance of Rs.18, 000/- is upheld. This ground of appeal is rejected. Disallowance of computer expenses - assessee failed to produce relevant bills - HELD THAT - As assessee fairly admitted that the same is not traceable. In this view of the matter we decline to interfere. This ground of appeal is rejected. Disallowance of interest - Interest free advances - assessee was paying interest but has advanced interest free loan to the same person to whom interest has been paid in the proprietary concern and in one case same was claimed to be advance to a friend of the assessee but no interest has been charged on the same - HELD THAT - DR has not disputed the availability of interest free advance in personal books of accounts of the assessee as on 31.03.2005. The advance to Falguni A Shah and Anup A Shah (HUF) were made by the assessee out of capital balance available in the personal books of accounts and therefore no disallowance is called for. The advance to Online Business System Rs.205000/- is a business advance given to obtain franchisee. Therefore on this advance also no notional interest can be charged. We are convinced that there was no necessity to work out the notional interest and made disallowance - The view taken by the ld. CIT(A) in the impugned order in this regard is upheld and ground of this appeal is rejected. Addition on account of low Gross Profit by rejecting the books of accounts u/s 145(3) - HELD THAT - The books of accounts of the assessee are audited u/s 44AB. The assessee has also filed confirmation of all the parties to whom notices u/s 133(6) of the Act remain unserved. Q-tally and confirmations could not be filed on account of non availability of sufficient opportunities as the case was getting time-barred. Be that it may be since no remand report was submitted by the AO on additional evidences furnished we are of the view that it will meet the end of justice if GP addition is restored to the file of the AO with the direction that the Assessing Officer will re-examine the books of accounts in the light of additional evidences furnished before the ld. CIT(A) and re-adjudicate the GP addition afresh after allowing adequate opportunity of being heard to the assessee. Addition on account of low household withdrawal - addition was made on the ground that the assessee failed to furnish the bill of electricity of his residence - CIT(A) has deleted the addition - HELD THAT - As it is pertinent to note that this addition has been made on doubts and suspicion; therefore the view taken by the ld. CIT(A) in this regard is upheld. This ground of appeal is rejected.
Issues Involved:
1. Retention of certain additions by CIT(A). 2. Disallowance of Rs.18,000 as a business expense. 3. Disallowance of Rs.13,100 out of computer expenses. 4. Addition of Rs.15,60,234 due to alleged low G.P. 5. Restriction and deletion of additions by CIT(A) on various grounds raised by Revenue. Detailed Analysis: 1. Retention of Certain Additions by CIT(A): The assessee contested the CIT(A)'s decision to retain certain additions made in the assessment order, arguing that the returned income should be accepted without any additions or modifications. The CIT(A) had retained the addition of Rs.15,60,234 for low G.P. but deleted other additions. The Tribunal upheld the CIT(A)'s order, dismissing the assessee's ground. 2. Disallowance of Rs.18,000 as a Business Expense: The assessee challenged the disallowance of Rs.18,000 claimed as a business expense. The CIT(A) confirmed the disallowance, stating that the credit card expenses were not verifiable. The Tribunal upheld this view, noting that no supporting evidence was provided by the assessee. This ground of appeal was rejected. 3. Disallowance of Rs.13,100 out of Computer Expenses: The assessee contested the disallowance of Rs.13,100 out of computer expenses. The disallowance was made due to the failure of the assessee to produce relevant bills. The Tribunal upheld the disallowance as the assessee admitted that the bills were not traceable. This ground of appeal was rejected. 4. Addition of Rs.15,60,234 Due to Alleged Low G.P.: The Assessing Officer (AO) had made an addition of Rs.65,61,499 due to low gross profit by rejecting the books of accounts under section 145(3). The CIT(A) confirmed an addition of Rs.15,60,234 but deleted the balance. The Tribunal noted that the AO had rejected the books of accounts primarily because the assessee failed to produce Q-tally of items. The CIT(A) admitted additional evidence and reconciled discrepancies but found certain losses unexplained. The Tribunal remanded the issue back to the AO for re-examination of the books of accounts in light of the additional evidence provided. 5. Restriction and Deletion of Additions by CIT(A) on Various Grounds Raised by Revenue: a. Disallowance of Interest (Rs.7,77,169): The AO had disallowed interest paid by the assessee at 24% as excessive, allowing only 12%. The CIT(A) restricted the disallowance to Rs.5,51,313 and deleted Rs.2,25,856. The Tribunal upheld the CIT(A)'s decision, noting that the higher interest rate was justified due to business expediency. b. Deletion of Addition of Rs.40,135 on Account of Disallowance of Interest: The AO had disallowed interest on interest-free loans advanced to certain parties. The CIT(A) deleted the addition, noting that the advances were made from the assessee's capital and were business advances. The Tribunal upheld this decision, rejecting the Revenue's ground. c. Deletion of Addition of Rs.50,000 on Account of Low Household Withdrawal: The AO had made an addition for low household withdrawal. The CIT(A) deleted the addition, finding no evidence of higher household expenses. The Tribunal upheld this decision, noting that the addition was based on doubts and suspicion. d. Deletion of Addition of Rs.20,07,340 on Account of Unexplained Cash Credit: The AO had treated sundry creditors as unexplained cash credits. The CIT(A) deleted the addition, allowing the benefit of telescopy. The Tribunal remanded the issue back to the AO to examine the nature of the credits and re-adjudicate after considering necessary evidence. Conclusion: Both the appeals by the assessee and the Revenue were partly allowed for statistical purposes, with certain issues remanded back to the AO for re-examination. The cross-objections filed by the assessee were rendered infructuous and needed no adjudication.
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