2012 (8) TMI 183 - AT - Income Tax

Tribunal's Mixed Ruling on Appeal Decisions

The Tribunal partly allowed the Revenue's appeal for AY 2007-08, allowed the assessee's appeal for statistical purposes, and dismissed the Revenue's ... Addition u/s 68 of the Act - unexplained cash credits – Held that:- Assessee did not care to submit even confirmations of the sixteen creditors before the AO and there is no material on record, establishing creditworthiness of these creditors or genuineness of transactions nor the ld. CIT(A) recorded any findings on these aspects - CIT(A) suffers from lack of reasoning and is not a speaking order – matter remanded to CIT Disallowance u/s 40A(2)(a) of the Act – according to AO interest paid @ 15% paid excessive and unreasonable – Held that:- There is nothing to suggest that the AO ever brought any material on record on this aspect before concluding that interest @ 15% was excessive or unreasonable nor even cited any comparable instances in respect of the fair market value of the interest on unsecured loans. In view the foregoing, especially when there is no material on record to hold that payment of interest @ 15% pa to unsecured creditors was excessive – disallowance deleted Disallowance of depreciation on computer accessories like printer & scanner – Held that:- Printer and Scanners are integral part of the computer and therefore claimed depreciation @ 60% - depreciation on Printers and Scanners is allowable @ 60% - In favor of assessee Issues Involved:1. Deletion of addition on account of unexplained cash credits.2. Deletion of disallowance of interest payable.3. Disallowance of interest u/s 40A(2)(b) of the Income-tax Act, 1961.4. Disallowance of depreciation on computer accessories.Issue-wise Detailed Analysis:1. Deletion of Addition on Account of Unexplained Cash Credits:The primary issue revolves around the deletion of the addition of Rs. 8,35,40,000/- out of a total addition of Rs. 9,57,40,000/- made by the Assessing Officer (AO) on account of unexplained cash credits. The AO had added this amount due to the assessee's failure to establish the genuineness of the creditors and the transactions. Despite repeated notices and opportunities, the assessee did not provide all the necessary confirmations or evidence. On appeal, the CIT(A) admitted additional evidence under Rule 46A, accepting confirmations from 16 out of 22 creditors. However, the CIT(A) disallowed Rs. 17,00,000/- due to the absence of PAN and address details, reducing the addition to Rs. 1,22,00,000/- and disallowing interest of Rs. 3,43,065/-.The Tribunal noted that the CIT(A) did not record findings on the creditworthiness of the creditors or the genuineness of the transactions. The Tribunal emphasized that the onus is on the assessee to establish the identity, creditworthiness, and genuineness of the transactions. The Tribunal found the CIT(A)'s order lacking in reasoning and not a speaking order. Therefore, the matter was remanded back to the CIT(A) for a fresh decision, requiring a detailed analysis and a speaking order.2. Deletion of Disallowance of Interest Payable:The AO disallowed interest of Rs. 81,80,651/- related to the unexplained cash credits. The CIT(A) allowed interest of Rs. 78,37,586/- based on the confirmations provided, disallowing only Rs. 18,559/- related to the disallowed cash credits. The Tribunal found that the CIT(A) did not adequately address the creditworthiness of the creditors or the genuineness of the transactions. The Tribunal remanded the matter back to the CIT(A) for a fresh decision, requiring detailed findings on these aspects.3. Disallowance of Interest u/s 40A(2)(b) of the Income-tax Act, 1961:For AY 2007-08 and AY 2008-09, the AO disallowed interest payments to related parties, considering 15% interest excessive and allowing only 12%. The CIT(A) deleted these disallowances, stating that the AO did not establish that the payments were more than the fair market value and noting that the assessee paid 14.5% interest to the bank. The Tribunal upheld the CIT(A)'s decision, noting that the AO did not bring any material to show that the interest rate was excessive or unreasonable.4. Disallowance of Depreciation on Computer Accessories:For AY 2008-09, the AO restricted depreciation on printer, scanner, and UPS to 15%, considering them not part of the computer. The CIT(A) allowed 60% depreciation on printer and scanner, treating them as integral parts of the computer, but restricted UPS depreciation to 15%. The Tribunal upheld the CIT(A)'s decision, citing the Delhi High Court's ruling that computer accessories and peripherals are entitled to higher depreciation.Conclusion:The Tribunal partly allowed the Revenue's appeal for AY 2007-08 and allowed the assessee's appeal for statistical purposes, while dismissing the Revenue's appeal for AY 2008-09. The matters regarding unexplained cash credits and related interest were remanded back to the CIT(A) for a fresh decision with a requirement for a detailed and reasoned order.