2017 (2) TMI 737 - AT - Income Tax

Addition u/s 68 - CIT(A) allowed claim - Held that - DR could not point out any infirmity in the order of the ld CIT(A), therefore in view of this we confirm the finding of the ld CIT(A) in deleting the addition u/s 68 after obtaining the proper details which proves the identity, creditworthiness and genuineness of the transactions. - Decided in favour of assessee. Disallowance of interest expenditure - Held that - A.O. has taken the view that the appellant has not utilized the borrowed funds for the purpose of the business and the advance given was more than the borrowed funds. This cannot be a justified basis for disallowance of the interest claim in the light of the fresh advance received from the customers and the fresh unsecured loans. The total advance received and unsecured loans of ₹ 40323252/- in itself is sufficient evidence to established that the complete advance given of ₹ 40022398/- was financed through such advance and unsecured loan Accordingly the contentions and the submission of the counsel of appellant has strong a acceptance. The A.O. has not considered the advance from customer and unsecured loan received by the appellant during the year which financed the source of the advances given. Thus disallowance need to be rejected - Decided in favour of assessee.

Summary

Issues Involved:
1. Appeal by the revenue against the order of the ld CIT(A)-I, New Delhi for the Assessment Year 2007-08.
2. Deletion of addition of ?1.42 crores made by the AO u/s 68.
3. Disallowance of interest expenditure of ?1,372,277.
4. Cross objection filed by the assessee.

Deletion of Addition u/s 68:
The revenue appealed against the deletion of the addition of ?1.42 crores made by the AO u/s 68. The ld CIT(A) deleted the addition after the assessee submitted confirmations of sums received along with supporting documents. The ld AR argued that all necessary details were provided, and the additions were unjustified as the material was not found during the search. The ld DR supported the AO's order. The ld CIT(A) found the submissions valid and deleted the addition, emphasizing that the appellant proved the identity, creditworthiness, and genuineness of the transactions. The Tribunal confirmed the ld CIT(A)'s decision, dismissing the revenue's appeal.

Disallowance of Interest Expenditure:
The revenue contested the deletion of interest expenditure disallowance of ?1,372,277. The AO disallowed 50% of the interest without proving a nexus between advances given and interest paid. The ld CIT(A) overturned this decision, noting that the total advances received far exceeded the advance amount, rendering the disallowance unjustified. The ld DR and ld AR presented their arguments, but the Tribunal upheld the ld CIT(A)'s decision, stating that the disallowance lacked sufficient grounds and evidence. The Tribunal dismissed the revenue's appeal on this issue.

Cross Objection:
The assessee filed a cross objection, albeit 671 days late, seeking condonation of the delay. The assessee failed to provide a cogent reason for the delay, leading to the dismissal of the cross objection. The Tribunal did not find sufficient cause to condone the delay, resulting in the dismissal of the cross objection. Both the appeal by the revenue and the cross objection by the assessee were ultimately dismissed by the Tribunal.

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