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2019 (1) TMI 143 - AT - Income Tax


Issues Involved:
1. Deletion of disallowance of ?3 crore as unexplained cash credit under Section 68 of the I.T. Act.
2. Disallowance of legal and professional charges amounting to ?60,22,000.
3. Non-consideration of expenses of ?36,000 shown under the head prior period expenses.

Issue-Wise Detailed Analysis:

1. Deletion of Disallowance of ?3 Crore as Unexplained Cash Credit:
The revenue challenged the order of the Commissioner of Income Tax (Appeals) [CIT(A)] in deleting the disallowance made by the Assessing Officer (AO) on account of the cost of the project being overruled at ?14.25 crores. The AO observed that two individuals had given interest-free advances of ?3 crore to the assessee, who were former directors and shareholders. The AO questioned the genuineness of these transactions and added the amount back to the income of the assessee as unexplained cash credit under Section 68. The CIT(A) deleted this addition, stating that the identity and sources of the advance were not in doubt and that any undervaluation should be taxed in the hands of the recipients, not the assessee. The Tribunal found that the CIT(A) had not considered the AO's findings correctly and remitted the matter back to the AO for further investigation and verification, directing the AO to pass a fresh order after providing an opportunity for hearing to the assessee.

2. Disallowance of Legal and Professional Charges Amounting to ?60,22,000:
The assessee challenged the CIT(A)'s order in confirming the disallowance of legal and professional charges amounting to ?60,22,000. The CIT(A) found that the legal expenses were partly related to the sale of shares by the promoters and the change of management, which should not be considered as business expenses of the assessee. The Tribunal upheld the CIT(A)'s decision, agreeing that these expenses were not incurred for the business of the assessee and should have been borne by the promoters in their personal capacity. The Tribunal found no new facts to rebut the CIT(A)'s findings and dismissed this ground of appeal.

3. Non-Consideration of Expenses of ?36,000 Shown Under the Head Prior Period Expenses:
The assessee also contested the CIT(A)'s decision in not considering the expenses of ?36,000 shown under the head prior period expenses. The CIT(A) noted that these expenses were not claimed in the return of income and no details were available to support the claim. The Tribunal agreed with the CIT(A)'s findings, noting that no new facts were presented to counter the decision. The Tribunal dismissed this ground of appeal as well.

Conclusion:
The Tribunal partly allowed the revenue's appeal for statistical purposes by remitting the issue of ?3 crore back to the AO for further investigation. The assessee's appeal was dismissed in its entirety, upholding the disallowance of legal and professional charges and the non-consideration of prior period expenses. The Tribunal emphasized the need for thorough inquiry and proper documentation in the assessment process.

 

 

 

 

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