2015 (8) TMI 698 - AT - Income Tax

Addition u/s 68 - CIT(A) deleted addition - Held that - AO wrongly considered the whole of the loans pertaining to the earlier as well as the year under consideration amounting to ₹ 31,87,902/- as not verifiable. Later on, he rectified the mistake and considered the creditors of ₹ 25,46,685/- as unverifiable and made the addition u/s 68 of the Act. The assessee due to illness could not produce the evidences before the AO however the same were furnished in the form of confirmation along with proper identification and the copies of acknowledgement of the returns filed by the creditors before the Ld. CIT(A), who after proper verification found that only the loans amounting to ₹ 1,32,000/- were received in this year and the assessee furnished the relevant documents for identification and confirmation. The Ld. CIT(A) forwarded the new evidences to the AO who simply stated that those should not be admitted, however, he had not given the reason as to why those were not admissible. It, therefore, appears that the addition made by the AO was based only on surmises and conjectures which is not enable particularly when during the year under consideration the amount received from the new creditors was only of ₹ 1,32,000/-. We, therefore, considering the totality of the facts do not see any infirmity in the order of Ld. CIT(A) on this issue.- Decided in favour of assessee. Disallowance of expenses - CIT(A) deleted the addition - Held that - In the present case, it appears that the books of accounts of the assessee were duly audited and the AO while making the ad hoc disallowance did not point out any specific item of the expenses which was not incurred for the business purposes. Therefore, the Ld. CIT(A) was fully justified in deleting the impugned addition made by the AO. We do not see any valid ground to interfere with the findings of the Ld. CIT(A) on this issue. As regards to the cross objection filed by the assessee is concerned, it is noticed that no specific relief has been sought and the assessee mainly supported the order passed by the Ld. CIT(A). and in the former part on this order, we have dismissed the appeal of the department. Therefore this cross objection in support of the order of the Ld. CIT(A) becomes infructuous. Accordingly the same is dismissed as infructuous.

Summary

Issues involved:
1. Deletion of addition made under section 68 of the Income Tax Act.
2. Disallowance of expenses by the Assessing Officer.

Issue 1: Deletion of addition made under section 68 of the Income Tax Act:
The departmental appeal challenged the deletion of an addition of Rs. 25,46,685 made by the Assessing Officer under section 68 of the Income Tax Act. The case involved the assessee's failure to produce relevant evidence before the AO due to illness. The Assessing Officer disallowed unsecured loans, but the CIT(A) found that only Rs. 1,32,000 was received as unsecured loans during the year. The CIT(A) verified the documents provided by the assessee, including confirmations and identification of creditors, and concluded that the addition made by the AO was based on surmises and conjectures. The Tribunal upheld the CIT(A)'s decision, noting that the AO did not provide valid reasons for rejecting the additional evidence submitted by the assessee. Therefore, the Tribunal found no merit in the department's appeal on this issue.

Issue 2: Disallowance of expenses by the Assessing Officer:
The second issue pertained to the disallowance of Rs. 2,17,621 in expenses by the Assessing Officer. The AO had restricted the claimed expenses to Rs. 4,00,000 and disallowed the remaining amount. However, the CIT(A) overturned this disallowance, stating that the AO did not identify any discrepancies in the balance sheet, profit & loss account, or supporting documents. The accounts were duly audited, and the ad hoc disallowance was deemed unjustified. The Tribunal agreed with the CIT(A), noting that the AO failed to specify any expenses that were not for business purposes. Consequently, the Tribunal upheld the CIT(A)'s decision to delete the disallowance.

In conclusion, the Tribunal dismissed the department's appeal and the assessee's cross objection, affirming the CIT(A)'s decisions regarding the deletion of the addition under section 68 and the disallowance of expenses. The Tribunal found no grounds to interfere with the CIT(A)'s findings on both issues, leading to the dismissal of the appeals.