2012 (11) TMI 615 - AT - Income Tax

Disallowance of expenditure for Assessment year 2007-08 - AO has made an adhoc disallowance of Rs.2,50,000 from the total expenditure of Rs.9,94,262/- claimed by the assessee as assessee is not able to verify expenses. It was contended by the learned AR that for the subsequent assessment year i.e.2008-09 the AO had accepted the expenditure claimed by the assessee and has only made a small disallowance of Rs.50,000/- from the expenditure claimed. Held that - Considering the totality of facts and circumstances involved, ends of justice will be met if the disallowance is restricted to Rs.1 lakh only - this ground of the assessee is allowed in part. Unexplained Cash Deposit - Issue restored to the file of the AO who shall examine the cash deposits in the bank account of the assessee and make an enquiry to find out whether these represent towards LIC premiums paid by policy holders to the assessee for remitting the same to the LIC if he deposits in the saving account are reconciled then the assessee s claim is to be accepted and, no addition can be made of the said amount u/s 68 of the Act. Levy of Interest- Being consequential to the final determination of income, the ground raised by the assessee has become infructuous and accordingly the same is dismissed as such - In the result, the appeal is treated as allowed in part for statistical purposes.

Summary

Issues:
1. Disallowance of expenditure claimed by the assessee.
2. Addition of cash deposit in Savings Bank A/c under section 68.
3. Levy of interest under section 234B.

Issue 1: Disallowance of Expenditure Claimed by the Assessee:
The assessee challenged the disallowance of expenditure claimed of Rs.2,50,000. The AO disallowed the amount as the assessee failed to produce necessary evidence to support the claim. The CIT (A) upheld the disallowance stating lack of evidence for staff welfare and conveyance expenses. The AR argued that the disallowance was unjustified as similar claims were accepted in the following year. Considering the facts, the Tribunal allowed the ground in part, restricting the disallowance to Rs.1 lakh.

Issue 2: Addition of Cash Deposit in Savings Bank A/c under Section 68:
The AO added Rs.22,99,500 as unexplained deposits in the Savings Bank A/c, as the source was not explained. The assessee claimed the deposits were from policy holders for LIC premiums. The CIT (A) rejected the claim due to insufficient evidence and lack of proper address details of policy holders. The AR presented a detailed list of policy holders and their premium amounts, along with bank statements to support the claim. The Tribunal found the CIT (A) did not consider the evidence properly and restored the issue to the AO for further examination, considering the acceptance of a similar claim in the previous year.

Issue 3: Levy of Interest under Section 234B:
The ground raised by the assessee regarding the levy of interest of Rs.2,58,060 under section 234B became infructuous due to the final determination of income. The Tribunal dismissed this ground accordingly.

In conclusion, the Tribunal allowed the appeal in part for statistical purposes, addressing the issues of disallowance of expenditure and addition of cash deposit in the Savings Bank A/c, while dismissing the ground related to the levy of interest under section 234B.