2012 (12) TMI 745 - AT - Income Tax

Tribunal grants relief on some issues in assessee's appeal, upholds others due to lack of evidence.

The tribunal partly allowed both appeals by the assessee for statistical purposes. Relief was granted on specific issues such as the addition of ... Unexplained Opening Capital Balance – Held that:- Except in respect of FDs with M/s. Duncan Industries and cash in hand, all other investments have been substantiated and also accepted by the AO. The assessee brought evidence to show that FDs with M/s.Duncan Industries Limited were made before 1-4-09 and consequently, it is not liable to be treated an unexplained expenditure/investment and the addition of Rs.4,05,000/- on a/c of FDs with M/s. Duncan Industries Ltd stands deleted for the AY 2000-01 under appeal - assessee’s appeal is allowed. Unaccounted Cash - in - hand - Held that:- Holding of cash of Rs.3,03,000/- from the date of creation of the will of assessee’s Mother till 31-3-99 has been produced and will is also not a registered will no evidence whatsoever has been placed to substantiate the claim - claim amount of Rs.3,79,685.89 including the cash of Rs.3,03,000/- does not find any merit - in the circumstances, the addition of Rs.7,84,685.89 stands reduced to Rs.3,79,685.89. Disallowance of business loss and interest on bank O/D – Held that:- Assessee has not placed any evidence to substantiate his claim as shown in the trading and P & L account in these circumstances, thus disallowance of business loss as made by the AO and confirmed by the CIT (A) does not call for any interference - against assessee. Disallowance of bank interest on O/D - Held that:- Assessee has converted the FDs into MIS with West Bengal State Co-operative Bank Ltd. As the assessee has not been able to substantiate the use of the O/D for business, finding of the AO in disallowing the same and as confirmed by CIT (Appeals) is on right footing and does not call for any interference- against assessee. Legal expenses – Disallowance as not shown in the original return - Held that:- A perusal at the assessee’s paper book copy of the bill shows that a bill from the advocate has been placed by the assessee detailing the expenditure and that has not been examined by the Assessing Officer. In the circumstances issue is restored the file of AO after granting adequate opportunity of hearing to the assessee to substantiate his claim - in favour of assessee for substantial purposes. Payment made to Land Broker - Held that:- Assessing Officer has not disputed the existence of agreement or veracity of agreement. The agreement having been accepted, the expenditure incurred by the assessee on account of agreement is liable to be allowed - AO directed to delete the disallowance being the amount paid to the land broker while computing the long-term capital gains - in favour of assessee. Issues Involved:1. Addition of unexplained opening capital.2. Disallowance of business loss.3. Disallowance of interest on bank overdraft.4. Disallowance of legal expenses.5. Disallowance of business loss due to damaged goods.6. Addition of long-term capital gains.7. Disallowance of amount paid to land broker.Issue-wise Detailed Analysis:1. Addition of Unexplained Opening Capital:The assessee challenged the addition of Rs.7,84,685.89 out of the total opening capital of Rs.14,53,685.89. The Assessing Officer (AO) had accepted investments in furniture, machinery, FD with Midwest India, investment in land, and cash at the bank but not the FD with M/s. Duncans Industries Ltd and cash in hand. The tribunal found that the FDs with M/s. Duncan Industries Ltd were made before 31-3-2000 and thus could not be treated as unexplained investments. Therefore, the addition of Rs.4,05,000/- on account of FDs was deleted. However, for the cash in hand of Rs.3,79,685.89, the evidence provided was insufficient, leading to the reduction of the addition to Rs.3,79,685.89.2. Disallowance of Business Loss:The assessee contested the disallowance of business loss of Rs.25,670/-. The AO had disallowed the claim due to the non-production of books of account and supporting evidence. The tribunal upheld the disallowance, noting that no evidence was provided to substantiate the business loss claim.3. Disallowance of Interest on Bank Overdraft:The assessee also contested the disallowance of Rs.19,736/- as bank overdraft interest. The tribunal upheld the disallowance, stating that the assessee failed to substantiate the use of the overdraft for business purposes.4. Disallowance of Legal Expenses:The assessee challenged the disallowance of Rs.12,800/- in legal expenses. The AO had disallowed the expenses because they were not claimed in the original return. The tribunal restored the issue to the AO for further verification, allowing the assessee an opportunity to substantiate the claim.5. Disallowance of Business Loss Due to Damaged Goods:For the assessment year 2001-02, the assessee contested the disallowance of business loss of Rs.15,971/- due to damaged goods. Both parties agreed that the issue was identical to the disallowance of business loss for the previous year. The tribunal upheld the disallowance, following the same reasoning as in the earlier assessment year.6. Addition of Long-term Capital Gains:The assessee contested the addition of Rs.22,362/- as long-term capital gains. The tribunal upheld the addition, agreeing with the findings of the lower authorities.7. Disallowance of Amount Paid to Land Broker:The assessee challenged the disallowance of Rs.22,000/- paid to a land broker while computing long-term capital gains. The tribunal found that the agreement with the land broker was before the AO and had not been disputed. Therefore, the tribunal directed the AO to delete the disallowance.Conclusion:Both appeals by the assessee were partly allowed for statistical purposes. The tribunal provided relief on specific issues while upholding the disallowances and additions on others, ensuring a thorough examination and fair adjudication of the claims.