2016 (8) TMI 904 - AT - Income Tax

Disallowance of deduction towards donation paid to political party u/s 80GGC - A.O. disallowed deduction for the reason that donation to JOGO party is not proved with necessary evidences- Held that - The assessee has paid donation to JOGO party by way of cheques. The assessee has furnished cheque details for having paid the amount. The assessee also furnished details of political party along with confirmation letter issued by the JOGO party. On perusal OF details available in the paper book, we find that JOGO party is registered u/s 29A of the Representation of People Act, 1951 by the election Commission of India. The assessee has furnished letter issued by the Election Commission of India, notification published in the Gazette of India and Form No. 24A a return of contributions submitted to Election Commission of India in terms of sec. 29C of the Representation of People Act, 1951. All the documents indicate that JOGO party is unrecognized registered political party u/s 29A of the Representation of People Act, 1951. The contribution return in form No. 24A filed with Election Commission of India, indicate the name and address of donor details. Therefore, we are of the view that the A.O. was erred in disallowing deduction claimed u/s 80GGC of the Act. Hence, we set aside the CIT(A) order and direct the A.O. to delete the addition. - Decided in favour of assessee Addition of unexplained creditor s - A.O. made additions towards sundry creditors for the reason that the assessee has failed to furnish confirmation letters - Held that - A plain reading of section 68 of the Act, makes it clear that any sum found credited in the books of accounts of the assessee is not explained to the satisfaction of the A.O., then sum found credited shall be treated as income of the assessee of that previous year. In other words, addition can be made for fresh credits of the year and no addition can be made for the amounts brought forwarded from the previous year. In the present case on hand, on perusal of facts, we find that all creditors are brought forward from last years and paid during the current financial year. Therefore, we are of the view that the A.O. was erred in treated sundry creditors brought forward from last year as unexplained creditors. The CIT(A) after considering details filed by the assessee and also taken in to account remand report of the A.O. deleted addition made by the A.O. The facts remain same even before us. The revenue has failed to prove the findings of fact recorded by the CIT(A) is incorrect. Therefore, we upheld the CIT(A) order and delete the addition made by the A.O.- Decided in favour of assessee Addition towards unexplained cash credits into ICICI Bank account - Held that - We find force in the arguments of the assessee for the reason that the assessee has not maintained any bank account with ICICI Bank and this fact was not disputed by the revenue. The assessee, on the other hand furnished copy of Axis bank account which was recorded in the regular books of accounts. On perusal of bank statement of Axis bank, we find that there are only two cash deposits of ₹ 1600 on 8-7- 2008 and ₹ 8900/- on 18-11-2008 for which sources has been explained. Therefore, we are of the view that the A.O. has made additions without any base. The CIT(A) after considering relevant details filed by the assessee and also taken into account remand report of A.O. deleted additions. The facts remain same even before us. The Revenue has failed to counter the contention of assessee that he does not operate any bank account with ICICI Bank. Therefore, we upheld the CIT(A) order and delete the addition made by the Assessing Officer.- Decided in favour of assessee Disallowance of expenditure - A.O. disallowed expenditure for the reason that the assessee has not explained the nature and source of income earned from the business - Held that - We find force in the arguments of the assessee for the reason that the assessee is the proprietor of M/s India Battery Works and Labelle Slimming and Beauty Clinic. We further noticed that she had reported gross sales income of ₹ 49,31,376/- from trading activity and indirect income of ₹ 16,49,400/- from the business of India Battery Works and Labelle Slimming and Beauty Clinic. The assessee has proved that she had incurred expenditure being interest on loan and depreciation on motor car used for the purpose of business. Therefore, we are of the view that the A.O. was erred in disallowing expenditure incurred for the purpose of business. The CIT(A) rightly deleted the additions. We do not see any error or infirmity in the order of CIT(A). - Decided in favour of assessee

Summary

Issues Involved:
1. Disallowance of deduction towards donation paid to political party u/s 80GGC.
2. Deletion of unexplained creditors.
3. Addition towards unexplained cash credits into ICICI Bank account.
4. Disallowance of expenditure related to Labelle Slimming and Beauty Clinic.

Detailed Analysis:

1. Disallowance of Deduction Towards Donation Paid to Political Party u/s 80GGC:
The assessee claimed a deduction for a donation paid to JOGO party, an unrecognized political party registered under Section 29A of the Representation of People Act, 1951. The A.O. disallowed the deduction on the grounds that the party was not recognized by the Election Commission of India and the assessee failed to provide a confirmation letter. The CIT(A) upheld this disallowance. However, the Tribunal found that the deduction under Section 80GGC is permissible for donations to political parties registered under Section 29A, regardless of recognition by the Election Commission. The assessee provided sufficient evidence, including cheque details, receipts, and confirmation letters, proving the donation. Consequently, the Tribunal directed the A.O. to delete the addition.

2. Deletion of Unexplained Creditors:
The A.O. added back sundry creditors to the assessee's income due to the failure to furnish confirmation letters, questioning the identity, genuineness, and creditworthiness of the creditors. The assessee argued that these were brought forward from the previous financial year and provided confirmation letters and ledger extracts. The Tribunal noted that Section 68 of the Act applies to fresh credits within the current year, not to amounts brought forward from previous years. The CIT(A) deleted the addition after verifying the details. The Tribunal upheld the CIT(A)’s decision, finding no error in the deletion of the addition.

3. Addition Towards Unexplained Cash Credits into ICICI Bank Account:
The A.O. made additions for unexplained cash deposits in an ICICI Bank account, which the assessee claimed not to operate. The assessee provided evidence of maintaining an account with Axis Bank, which was recorded in the regular books of accounts. The Tribunal found that the assessee did not maintain an ICICI Bank account, and the Axis Bank account showed only two small cash deposits with explained sources. The CIT(A) deleted the addition, and the Tribunal upheld this decision, noting the A.O. had no basis for the addition.

4. Disallowance of Expenditure Related to Labelle Slimming and Beauty Clinic:
The A.O. disallowed expenditure related to Labelle Slimming and Beauty Clinic, questioning the nature and source of income from the business. The assessee, as the proprietor, provided evidence of earning indirect income and incurring business-related expenses like interest on loans and depreciation. The Tribunal found the assessee had substantiated the business activity and related expenses. The CIT(A) deleted the disallowance, and the Tribunal upheld this decision, finding no error or infirmity in the CIT(A)’s order.

Conclusion:
The Tribunal allowed the appeals filed by the assessee and dismissed the appeals filed by the revenue, directing the deletion of the disallowances and additions made by the A.O. The judgment was pronounced in the open court on 15th July 2016.