2018 (3) TMI 522 - AT - Income Tax

Unexplained cash credits u/s 68 - Held that - CIT(A) has observed that the bank account clearly indicates the possibility of cash withdrawals forming part of source for subsequent cash credits and no other evidence was shown by the revenue demonstrating that the cash withdrawals are used for any other purpose either for personal or business credits. Therefore, we do not find any infirmity in the order of the Ld.CIT(A) and the same is upheld. Appeal of the revenue is dismissed on this ground. Staff Salaries and Bonus and accounting charges disallowed - Held that - DR did not bring any tangaible material to substantiate the disallowance of salaries at 30% and disallowance of entire expenditure in respect of staff bonus and accounting charges. No other material was placed on record before us to controvert the finding of Ld.CIT(A). Therefore, we do not find any reason to interfere with the order of the Ld.CIT(A) and accordingly ground of revenue s appeal are dismissed.

Summary

Issues:
1. Disallowance of staff salaries, bonus, and accounting charges.
2. Addition of unexplained cash credits under section 68 of the Income Tax Act.

Analysis:
1. Disallowance of Staff Salaries, Bonus, and Accounting Charges:
The appellant, a revenue entity, challenged the order of the Commissioner of Income-Tax (Appeals) regarding the disallowance of staff salaries, bonus, and accounting charges. The Assessing Officer had made significant additions to the returned income, which were disputed by the assessee. The CIT(A) restricted the disallowance percentages for staff bonus, accounting charges, and salaries. The revenue raised grounds of appeal against these restrictions, arguing that the disallowances were insufficient given the lack of supporting documentation. However, the Tribunal upheld the CIT(A)'s decision, emphasizing that the disallowance percentages set by the CIT(A) were reasonable and fair. The Tribunal found no tangible material presented by the revenue to substantiate the higher disallowances made by the AO, leading to the dismissal of the revenue's appeal on these grounds.

2. Addition of Unexplained Cash Credits under Section 68:
The second issue revolved around the addition of unexplained cash credits under section 68 of the Income Tax Act. The AO added a substantial amount as unexplained cash credits based on cash deposits made in the assessee's bank account. The assessee explained a portion of the deposits, but the remaining amount was treated as unexplained cash credits. On appeal, the CIT(A) directed the AO to tax the peak credit amount instead of the entire cash deposits. The revenue challenged this decision, arguing that all cash deposits should be taxed unless each deposit's source was explained. However, the Tribunal upheld the CIT(A)'s decision, highlighting that the assessee provided a plausible explanation for the cash deposits by demonstrating a pattern of withdrawals and subsequent deposits. The Tribunal distinguished a case law cited by the revenue, emphasizing the lack of evidence showing the cash withdrawals were used for other purposes. Consequently, the Tribunal dismissed the revenue's appeal on this ground.

In conclusion, the Tribunal upheld the CIT(A)'s decisions on both issues, leading to the dismissal of the revenue's appeal in its entirety.