2022 (5) TMI 772 - AT - Income Tax

Addition u/s 68 of unsecured loan received from the appellant's wife - Addition on the basis of peak credit as against the addition of closing balance - HELD THAT - Assessee has not provided new address of M/s Firdos Mondal or filed documentary evidence in support of identity, creditworthiness or genuineness of the transaction in respect of loans received from M/s Firdos Mondal. Further, the Ld. CIT(A) has on perusal of the ledger account of M/s Firdos Mondal in the books of the assessee has directed to take peak credit for addition. In our opinion, CIT(A) is justified in treating peak credit and unexplained cash credit as the assessee is liable to discharge his onus in terms of section 68 of the Act for all the credit money which is received from M/s Firdos Mondal during the year under consideration. The Ld. CIT(A) has treated the peak of all credits after adjusting the money returned to her. We do not find any error or perversity in the order of Ld. CIT(A) on the issue-in-dispute and accordingly, we uphold the same. The ground No. 1 of the assessee is dismissed. Disallowance paid to mosque for providing free lunch to the assessee s employees - HELD THAT - It is evident from the letter of mosque produced by the assessee that the free lunch used to be provided by the mosque labourers/artisan etc. in that area. The facility of the assessee happened to be in vicinity of mosque so those employees were availing free lunch provided irrespective whether those were employed in the facility of the assessee or not. By way of making payment of Rs.1,00,000/- by the assessee to the mosque it could not be established that the payment was a quid pro quo for the free lunch facility extended to the labourers/Karagirs of the assessee. The mosque was not under control of the assessee and free lunch was provided to the other persons and not exclusively to the labourers of the assessee. Therefore, in such circumstances, it could not be treated that the payment made by the assessee was wholly and exclusively for the purpose of the business of the assessee and accordingly the action of the Ld. CIT(A) in disallowing the ground is upheld. The ground No. 2 of the appeal of the assessee is accordingly dismissed. Disallowance of travelling expenses being 20% on the ground of personal use - HELD THAT - Assessee failed to substantiate that there was no personal use in travelling and petrol expenses by the assessee. Therefore, we do not find any error in the order of Ld. CIT(A) in upholding 20% of travelling expenses for personal use disallowed in terms of section 37(1) of the Act. The ground of the appeal is accordingly dismissed.

Summary

Issues Involved:
1. Addition under Section 68 of the Income Tax Act for unsecured loan.
2. Disallowance of Rs. 1,00,000/- paid to mosque for providing free lunch.
3. Disallowance of Rs. 32,386/- being 20% of traveling expense on grounds of personal use.

Issue-wise Detailed Analysis:

1. Addition under Section 68 of the Income Tax Act for Unsecured Loan:
The assessee contested the confirmation of an addition under Section 68 for an unsecured loan received from his ex-wife, Mrs. Firdos Mondal. The assessee argued that he had provided necessary documents, including a divorce letter and dissolution of marriage, but could not furnish her current address due to the divorce. The Assessing Officer (AO) made an addition for the closing balance in the ledger account of Mrs. Firdos Mondal, while the Commissioner of Income-Tax (Appeals) [CIT(A)] directed to take peak credit in the said ledger account. The Tribunal noted that the AO had added Rs. 52,66,833/- as unexplained cash credit but restricted the addition to the loan from Mrs. Firdos Mondal due to the assessee's failure to provide her address. The Tribunal upheld the CIT(A)'s decision to treat the peak credit as unexplained cash credit, as the assessee did not discharge his onus to prove the genuineness of the transaction. Therefore, the Tribunal dismissed the assessee's ground on this issue.

2. Disallowance of Rs. 1,00,000/- Paid to Mosque for Providing Free Lunch:
The assessee claimed that Rs. 1,00,000/- paid to a mosque for providing free lunch to his employees should be allowed as a business expense under Section 37(1). The CIT(A) dismissed this claim, stating that no corroborating evidence was provided to substantiate the expenditure. The Tribunal noted that the mosque provided free lunch to laborers in the area, not exclusively to the assessee's employees. Since the payment was not a quid pro quo for the free lunch facility, it could not be treated as wholly and exclusively for the business purpose. Consequently, the Tribunal upheld the CIT(A)'s disallowance and dismissed the assessee's ground on this issue.

3. Disallowance of Rs. 32,386/- Being 20% of Traveling Expense on Grounds of Personal Use:
The assessee challenged the disallowance of Rs. 32,386/- out of traveling expenses on the ground of personal use. The CIT(A) sustained the disallowance, noting the element of personal use in traveling and petrol expenses. The Tribunal observed that the assessee failed to substantiate that there was no personal use in the traveling expenses. Therefore, the Tribunal upheld the CIT(A)'s decision to disallow 20% of the traveling expenses for personal use under Section 37(1) and dismissed the assessee's ground on this issue.

Conclusion:
The Tribunal dismissed the appeal of the assessee on all grounds, upholding the decisions of the CIT(A) regarding the addition under Section 68 for unsecured loans, disallowance of Rs. 1,00,000/- paid to the mosque, and disallowance of Rs. 32,386/- being 20% of traveling expenses on grounds of personal use. The order was pronounced in the open Court on 11/05/2022.