1994 (11) TMI 149 - AT - Income Tax

Assessing Officer, Dispose Of, Interest On Borrowed Capital, Power To Admit Additional Evidence

Summary

Issues Involved:
1. Confirmation of addition towards loan (cash credits) and interest.
2. Confirmation of various other additions under different heads.

Summary:

1. Confirmation of Addition Towards Loan (Cash Credits) and Interest:
The assessee borrowed loans from seventeen different persons aggregating to Rs. 4,34,400, with some amounts received through cheques, bank demand drafts, and petty cash. The loans were recorded in the account books maintained on a mercantile basis. The Assessing Officer (AO) demanded proof of these loans but the assessee failed to provide satisfactory evidence within the given time frame. Consequently, the AO added the loans and interest amounting to Rs. 4,69,400 as unexplained income u/s 68. The Appellate Commissioner (A/c.) confirmed this addition despite partial evidence provided by the assessee during the first appeal.

The Tribunal admitted additional evidence filed by the assessee, including confirmation letters, affidavits, and account copies, under Rule 29 of the ITAT Rules. The Tribunal remitted the case back to the AO to conduct a thorough enquiry into the loan transactions and to provide a fair opportunity to the assessee to prove the genuineness of the loans.

2. Confirmation of Various Other Additions:
- Low Yield (19th Ground): The Tribunal reduced the addition from Rs. 5,000 to Rs. 2,500 considering the turnover and production results.
- Intercom Expenses (20th Ground): The disallowance of Rs. 7,030 treated as capital expenditure by the AO was upheld.
- Religious Expenses (21st Ground): The disallowance of Rs. 2,500 was upheld.
- Bardan Kharajat Expenses (22nd Ground): The disallowance of Rs. 6,000 was upheld due to lack of satisfactory explanation and evidence.
- Interest Payment (23rd Ground): The Tribunal directed the deletion of Rs. 2,500 disallowed by the AO, stating that mere debit balance in a partner's account does not justify disallowance of genuine interest payment.
- Deduction u/s 80J (24th Ground): The Tribunal upheld the A/c.'s decision to restore the matter to the AO for examination of the claim under section 80J.

Conclusion:
The appeal was partly allowed, with the Tribunal providing relief on some grounds while upholding the A/c.'s decisions on others.