2024 (8) TMI 1173 - AT - Income Tax

Ad-hoc disallowance of 20% expenses - assessee has not filed any supporting documents - HELD THAT - Assessee has claimed expenditure of employee benefit expenses, other expenses and fianc costs in its profit and loss account, however, while filing return of income assessee has not claimed any expenditure nor shown to have carry forward the loss, therefore, the assessee has not claimed any expenditure during the year hence, making adhoc disallowance is not proper. Accordingly, ground No.2 raised by the assessee is allowed. Addition u/s 68 - genuineness of the transaction of loan is not substantiated by the appellant company - HELD THAT - We observed that assessee has received unsecured loan from its sister concern - the assessee has demonstrated that the assessee has received above said unsecured loan from its sister concern and merely because the assessee has not submitted relevant information during assessment proceedings, the AO proceeded to make the disallowance. Even in the remand proceedings, and the amount sustained by the CIT(A) with the observation that the bank statements of the creditors other than sister concern was not submitted by the assessee company. We fail to understand that CIT(A) has sustained the addition with the observation that assessee has not submitted bank statement of the creditors other than sister concern while making the findings whereas that assessee has already submitted the confirmation and bank statements before the lower authorities, non submissions of the bank statements of other creditors has no role to play to adjudicate the issue in hand i.e. relating to unsecured loan, from sister concern when the assessee has submitted all the relevant data of this transaction before Lower Authorities, therefore, we are inclined to allow the grounds raised by the assessee. With regard to ground No.4, assessee has not pressed the same, therefore, the same is dismissed. Unexplained cash deposits in bank account - assessee has failed to prove the source of these cash deposits, therefore, the same are disallowed - HELD THAT - As we observed that the assessee has submitted cash book in the Paper Book wherein assessee has received share application money on various dates and received the same by way of cash on verification of the cash book submitted before us. We observed that on various dates, the assessee has maintained sufficient cash which are out of share application money and some bank withdrawals and it is substantiated that sufficient source of cash available with the assessee to make the bank deposit of Rs. 8 lacs - assessee has sufficient cash in hands to make above said dash deposit. Accordingly, additions made by the AO is deleted. Decided in favour of assessee.

Issues Involved:
1. Assessment of total income.
2. Ad-hoc disallowance of expenses.
3. Addition of unsecured loans as unexplained cash credits.
4. Addition under Section 43B of the Income Tax Act.
5. Addition of cash deposits as unexplained cash credits.
6. Treatment of bank account as books of account.
7. Assumption of income during the construction stage.
8. Nature of the appellate order.

Issue-wise Detailed Analysis:

1. Assessment of Total Income:
The Assessee challenged the assessment of total income at Rs. 5,07,77,239/- against the 'Nil' returned income. The Assessee argued that the findings were based on incorrect appreciation of facts and assumptions, and the order was cryptic and non-speaking.

2. Ad-hoc Disallowance of Expenses:
The Assessing Officer (AO) disallowed 20% of expenses claimed under various heads (Electricity, Printing & Stationary, Upfront Fee) due to the absence of supporting documents. The Assessee contended that no expenditure was claimed in the return of income. The Tribunal observed that the Assessee had not claimed any expenditure or carried forward the loss in the return of income, making the ad-hoc disallowance improper. This ground was allowed in favor of the Assessee.

3. Addition of Unsecured Loans as Unexplained Cash Credits:
The AO added Rs. 4,89,49,059/- as unexplained cash credits under Section 68, questioning the genuineness of loans from M/s Godwin Construction Pvt. Ltd. and six individuals. The Assessee provided confirmations, PAN numbers, and bank statements. The Tribunal noted that the Assessee demonstrated the receipt of loans through banking channels and provided relevant data. The addition was deemed improper and was deleted.

4. Addition under Section 43B:
The Assessee did not press this ground, leading to its dismissal.

5. Addition of Cash Deposits as Unexplained Cash Credits:
The AO added Rs. 8,00,000/- as unexplained cash deposits in the bank account. The Assessee argued that the bank books are not books of accounts and had sufficient cash to make the deposits. The Tribunal found that the Assessee maintained sufficient cash from share application money and bank withdrawals to justify the deposits. The addition was deleted.

6. Treatment of Bank Account as Books of Account:
The authorities treated the bank account as books of account for making additions under Section 68. The Assessee argued against this treatment, citing judicial pronouncements. The Tribunal did not specifically address this issue separately, but the deletion of the addition implies acceptance of the Assessee's argument.

7. Assumption of Income During the Construction Stage:
The Assessee argued that being in the construction stage, it could not have earned any income during the year. The authorities ignored judicial pronouncements on this issue. The Tribunal's decision to delete the additions supports the Assessee's argument.

8. Nature of the Appellate Order:
The Assessee contended that the order was cryptic and non-speaking, based on immaterial considerations. The Tribunal's detailed analysis and deletion of additions indicate that the appellate order was found lacking in proper consideration of the Assessee's submissions.

Conclusion:
The appeal filed by the Assessee was allowed, with the Tribunal deleting the additions and disallowances made by the lower authorities. The Tribunal emphasized the need for proper consideration of facts and evidence, and found the lower authorities' actions to be based on incorrect assumptions and lack of proper appreciation of the Assessee's submissions.

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