2018 (10) TMI 354 - AT - Income Tax

Addition on account of disallowance of expenses - Held that - AO noted that assessee has only income from FDR which is taxed under the head Income from Other Sources . Therefore, expenses were not allowed. The Ld. CIT (A) on the same reason dismissed the appeal of the assessee. During the course of arguments, the assessee did not point out any infirmity in the orders of the authorities below. Since, income is earned under the head Income from Other Sources . Therefore, assessee shall have to prove that expenses have been incurred on account of earning of interest on FDR. However, no evidences have been produced by the assessee before the authorities below. Even no arguments are made before us. Ground of appeal of the assessee is dismissed. Undisclosed sources u/s 68 - Held that - Initial burden upon the assessee to prove identity of the investors, their creditworthiness and genuineness of the transaction have been discharged by the assessee. AO thereafter, did nothing in the matter, therefore, no addition could be made against the assessee. Therefore, it is not a fit case to remand matter to the CIT(A). We are, therefore, of the view that assessee proved identity of the investors, their creditworthiness and genuineness of the transaction in the matter. Therefore, no addition could be made against the assessee. We, accordingly, set aside the orders of the authorities below and delete the addition.

Summary

Issues involved:
1. Addition of income from undisclosed sources u/s 68 of the Income Tax Act, 1961.
2. Disallowance of expenses claimed by the assessee.

Analysis:

Issue 1: Addition of income from undisclosed sources u/s 68 of the Income Tax Act, 1961:
The Appellate Tribunal considered the challenge by the assessee against the addition of ?35 lakhs as income from undisclosed sources under section 68 of the Income Tax Act. The Assessing Officer (AO) had noted that the assessee received sums from various companies as share application money. However, concerns were raised regarding the genuineness of these transactions. The AO required the production of directors of these companies for verification, but the assessee failed to do so. The AO also highlighted that the companies in question were linked to providing accommodation entries. Despite the assessee's submission of various documents, including share application forms, bank statements, and confirmations, the AO made the addition under section 68. The Appellate Tribunal, after thorough analysis, found that the assessee had provided sufficient documentary evidence to establish the genuineness of the transactions. The Tribunal emphasized that the burden was on the Revenue to prove their case, especially in the absence of evidence to discredit the documents provided by the assessee. Relying on precedents and legal principles, the Tribunal concluded that no adverse inference could be drawn against the assessee, and thus, the addition of ?35 lakhs was deleted.

Issue 2: Disallowance of expenses claimed by the assessee:
The AO disallowed expenses claimed by the assessee amounting to ?1,24,563, as the only income was from interest on Fixed Deposit Receipts (FDRs) taxed under "Income from Other Sources." The Appellate Tribunal affirmed this disallowance, stating that the assessee failed to prove that the expenses were incurred in relation to earning interest on FDRs. The Tribunal noted the lack of evidence or arguments presented by the assessee to support the claim. Consequently, the appeal on this ground was dismissed.

In conclusion, the Appellate Tribunal partially allowed the appeal of the assessee, deleting the addition of ?35 lakhs under section 68 while upholding the disallowance of expenses claimed. The Tribunal's decision was based on the assessee's successful demonstration of the genuineness of the transactions and the lack of evidence to support the expenses claimed in relation to the income earned.