2012 (11) TMI 760 - AT - Income Tax

Tribunal upholds CIT(A)'s decisions in appeal, validates notice under section 153A, adjusts disallowed expenses.

The tribunal dismissed both appeals filed by the revenue, upholding the CIT(A)'s decisions. The validity of the notice under section 153A was upheld due ... Unexplained Share Application Money – income from undisclosed sources u/s 68 - Following the judgement of Supreme court in case of [CIT Vs. Lovely Exports Pvt. Ltd 2008 (1) TMI 575 - SUPREME COURT OF INDIA] Held that:- if the share application money is received by the assessee-Company from promoters, whose names and PAN are given to the AO, then the Department is free to proceed to re-open their individual assessments in accordance with law and share application money cannot be treated as undisclosed income – in favour of assessee. Disallowance of Expenses and Salary and Wages in part – Held that:- Order of the CIT(A) on the ground that the disallowance sustained by the CIT(A) is reasonable as the assessee was not able to produce any evidence regarding the genuineness of expenditure even before us during the hearing is confirmed - disallowance only to the extent of 10% of the claim of assessee is sustained - ground of appeal is dismissed – in favour of assessee. Issues:1. Validity of notice u/s 153A of the Act without incriminating material2. Addition of unexplained share application money3. Disallowance of expenses under various headsIssue 1: Validity of notice u/s 153A of the Act without incriminating materialThe case involved a search and seizure operation where incriminating documents were found. The CIT(A) held that the AO was justified in issuing notice u/s 153A of the Act due to the seizure of such documents during the search operation. The appellant disputed this, claiming no incriminating material was found, but the CIT(A) upheld the AO's decision.Issue 2: Addition of unexplained share application moneyThe AO made an addition of Rs. 38,57,851/- towards unexplained share application money. The appellant argued that the AO should have verified the source of the money provided by the Promoter and relied on the decision of the Supreme Court in CIT Vs. Lovely Exports Pvt. Ltd. The CIT(A) agreed with the appellant, stating that if any addition were to be made, it should be in the promoter's hands, not the assessee's. The tribunal confirmed the CIT(A)'s decision based on the Supreme Court's ruling.Issue 3: Disallowance of expenses under various headsThe AO disallowed expenses totaling Rs. 52,27,861/- under different heads due to lack of supporting documents. The CIT(A) found discrepancies in the AO's observations and restricted the disallowance to 10% of the claimed amount. The tribunal upheld the CIT(A)'s decision, stating that the disallowance was reasonable as the assessee failed to provide evidence of the expenses' genuineness. Additionally, the CIT(A) restricted the disallowance of salaries and wages to Rs. 1,00,000/- from Rs. 9,99,576/- made by the AO, which the tribunal also confirmed as reasonable.In conclusion, both appeals filed by the revenue were dismissed by the tribunal, upholding the CIT(A)'s decisions on the issues of unexplained share application money and disallowance of expenses.