2015 (7) TMI 1019 - AT - Income Tax

Appeals partially allowed, disallowances upheld for group gratuity insurance premium & forgery loss

M/s. Fasttrack Packers Pvt. Ltd., Ahmednagar Versus ACIT Central Circle-1 (1), Pune

M/s. Fasttrack Packers Pvt. Ltd., Ahmednagar Versus ACIT Central Circle-1 (1), Pune - TMI Issues Involved:1. Disallowance of group gratuity insurance premium under Section 40A(9) of the I.T. Act.2. Addition on account of receipt of unaccounted cash from M/s. Rajendra Trading Company.3. Disallowance of loss on account of forgery.Issue-wise Detailed Analysis:1. Disallowance of Group Gratuity Insurance Premium:The assessee appealed against the disallowance of Rs. 50,50,544/- for A.Y. 2009-10 and Rs. 30,04,387/- for A.Y. 2010-11 on account of group gratuity insurance premium under Section 40A(9) of the I.T. Act. The Assessing Officer (AO) disallowed these amounts because the contributions were not approved by the Commissioner of Income Tax (CIT). The CIT(A) upheld the AO's decision. The Tribunal followed its own decision in the assessee's case for preceding years (A.Y. 2007-08 and A.Y. 2008-09), where similar disallowances were upheld due to the lack of CIT approval. Consequently, the Tribunal dismissed the assessee's grounds on this issue for both assessment years.2. Addition on Account of Receipt of Unaccounted Cash:For A.Y. 2009-10, the AO added Rs. 16,83,500/- to the assessee's income based on the statement of Shri Rajendra S. Raka, who admitted to paying unaccounted cash to the assessee. The CIT(A) upheld this addition, emphasizing the evidentiary value of the statement recorded under Section 132(4) of the I.T. Act and the absence of coercion during its recording. The CIT(A) also noted that the assessee's denial and subsequent retraction by Shri Raka were not credible without corroborative evidence. However, the Tribunal found merit in the assessee's argument that no incriminating material was found during the search and that Shri Raka had retracted his statement. The Tribunal noted the lack of corroborative evidence and the improbability of Shri Raka incurring a loss by paying Rs. 500/- per bag to the assessee. Consequently, the Tribunal set aside the addition of Rs. 16,83,500/- for A.Y. 2009-10.For A.Y. 2010-11, a similar addition of Rs. 32,41,000/- was made by the AO based on the same modus operandi. The Tribunal, following its decision for A.Y. 2009-10, allowed the assessee's appeal and set aside the addition.3. Disallowance of Loss on Account of Forgery:For A.Y. 2010-11, the assessee claimed a loss of Rs. 36 lakhs due to forgery, which was disallowed by the AO on the grounds that the loss was capital in nature and not related to the assessee's business activities. The CIT(A) upheld the disallowance, noting that the assessee was not authorized to carry on the business of hire purchase of vehicles as per its Memorandum and Articles of Association, and no substantial steps were taken to recover the loss. The Tribunal found no infirmity in the CIT(A)'s order, as the assessee could not substantiate the allowability of the claim. Therefore, the Tribunal dismissed the assessee's grounds on this issue.Conclusion:The Tribunal partly allowed the appeals filed by the assessee, setting aside the additions on account of unaccounted cash receipts for both assessment years while upholding the disallowances related to group gratuity insurance premium and loss on account of forgery.