1997 (3) TMI 141 - AT - Income Tax

Summary

Issues Involved:
1. Addition of cash credits in the accounts of Anil Gupta and Ajay Gupta.
2. Addition of unexplained cash credit in the account of Hanuman.
3. Disallowance of interest paid to Anil Gupta and Ajay Gupta.
4. Disallowance under section 40A(8) of the Act.
5. Disallowance under section 37(3A) of the Act.

Detailed Analysis:

1. Addition of Cash Credits in the Accounts of Anil Gupta and Ajay Gupta:
The first ground of appeal relates to the additions of Rs. 2,47,286 and Rs. 2,65,638 on account of cash credits in the accounts of Anil Gupta and Ajay Gupta, respectively. The assessee argued that the cash credits were genuine, supported by affidavits and other documentary evidence demonstrating the creditworthiness and identity of the depositors. The Tribunal noted that Anil Gupta and Ajay Gupta had been regularly assessed to tax, and their financial status was substantiated through wealth-tax assessments and other financial documents. The Tribunal found no evidence to suggest that the transactions were not genuine or that the amounts belonged to the company. Therefore, the additions were deleted.

2. Addition of Unexplained Cash Credit in the Account of Hanuman:
The second issue pertains to the addition of Rs. 30,000 as unexplained cash credit in the account of Hanuman. The AO found discrepancies in the statements of Hanuman's son, Krishan Kumar, who allegedly provided part of the loan. Despite affidavits and explanations provided by both Hanuman and Krishan Kumar, the AO and CIT(A) upheld the addition. The Tribunal, however, emphasized that both individuals were genuine and had admitted to the transactions. The Tribunal concluded that the enquiry should be directed towards Krishan Kumar and not the company, leading to the deletion of the addition.

3. Disallowance of Interest Paid to Anil Gupta and Ajay Gupta:
The third issue involves the disallowance of interest amounting to Rs. 51,290 paid to Anil Gupta and Ajay Gupta. Since the Tribunal had already deleted the additions related to the deposits made by these individuals, the interest paid on these deposits was also allowed. The Tribunal noted that there was no evidence to suggest that the interest claimed was bogus.

4. Disallowance under Section 40A(8) of the Act:
The fourth ground relates to the disallowance of Rs. 22,155 under section 40A(8) of the Act. This issue was not pressed by the learned counsel for the assessee and was dismissed as infructuous.

5. Disallowance under Section 37(3A) of the Act:
The fifth issue concerns the disallowance of Rs. 2,722 under section 37(3A) of the Act. Similar to the previous issue, this ground was not pressed by the assessee's counsel and was dismissed as infructuous.

Conclusion:
The Tribunal allowed the appeal in ITA No. 4606/Del/1989, deleting the additions related to cash credits in the accounts of Anil Gupta and Ajay Gupta, as well as the unexplained cash credit in the account of Hanuman. The interest disallowance in ITA No. 4607/Del/1989 was also allowed, while the other grounds were dismissed as infructuous. The overall result was that ITA No. 4606/Del/1989 was allowed, and ITA No. 4607/Del/1989 was partly allowed.