2010 (7) TMI 1129 - AT - Income Tax

ITAT upholds CIT(A)'s decisions on trade creditors and disallowed expenses, rejects Revenue's appeal

Asstt. C.I.T., Circle-2, Gwalior Versus Jagdish Prasad Sharma

The ITAT dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on both issues. The addition under section 68 was deleted as the trade creditors ... - Issues involved: Appeal against deletion of addition made on account of unexplained cash credits u/s 68/69 and deletion of addition made on account of expenses disallowed.Unexplained cash credits u/s 68:The AO added Rs. 88,70,748 under section 68 of the Income-tax Act, 1961 as the assessee failed to provide confirmations or full details of sundry creditors. However, the CIT(A) deleted the addition stating that the trade creditors shown were reasonable considering the business volume and purchases made. The AR argued that the amount represented sundry creditors in the balance sheet and was paid in due course, not falling under the definition of cash credit. The ITAT upheld the CIT(A)'s decision, noting that the amount did not arise from deposits and was paid by the assessee as per normal business transactions.Expenses disallowed:The AO made an adhoc disallowance of Rs. 21,63,785 without specific details, which the CIT(A) reduced to Rs. 5,00,000. The AR confirmed that no appeal was filed by the assessee against this reduction. The ITAT observed that no specific expenditure was pointed out for disallowance, and without evidence that expenses were not for business purposes, no adhoc disallowance could be justified. As the Revenue was the appellant seeking to challenge the relief granted by the CIT(A), the ITAT upheld the CIT(A)'s decision, confirming that no interference was warranted.In conclusion, the ITAT dismissed the appeal filed by the Revenue, upholding the CIT(A)'s decisions on both issues.