2017 (7) TMI 765 - AT - Income Tax

Tribunal partially allows appeal, removes addition under Section 68 of Income Tax Act, upholds other disallowances.

The Tribunal partly allowed the appeal, deleting the addition of Rs. 7.00 lacs under Section 68 of the Income Tax Act due to sufficient evidence provided ... Addition u/s 68 - Held that:- The assessee filed the affidavits of the creditors giving the respective amounts by them to the assessee. The assessee also filed the statement given by the creditors before the AO. The assessee has also filed the certificates from Patwari of revenue deptt about land holdings in respect of the above cash creditors which indicate that these creditors had sufficient pieces of land. Taking into consideration the above facts and circumstances of the case, it is noted that the assessee had filed all the evidences like ID Proof, consolidated confirmations, separate affidavit by each of the creditors, copies of land holding showing their ownership on the agricultural land. Thus the genuineness, creditworthiness and capacity of the respective cash creditors are proved. Hence, the Ground No. 1 of the assessee is allowed. Addition on account of unexplained capital introduced - Held that:- AO observed some deficiencies in the submissions of the assessee like copy of death certificate has not been filed by the assessee evidencing the actual date of death of parents, the sources of ₹ 2.50 lacs as moveable assets with his parents could not be explained by the assessee, return of income / bank account in support of this contention could not be filed by the assessee, the assessee did not produce the other two brothers to evidence his claim etc. Hence, the AO was not satisfied with the submission of the assessee and thus made an addition of ₹ 2.50 lacs u/s 68 of the Act as unexplained credit in the hands of the assessee. In first appeal, the ld. CIT(A) confirmed the action of the AO with the observation that the assessee had not been able to produce his brothers before the AO for recording their statements to support his version that the amount was received by him on account of family partition of assets. The assessee was not able to show the evidence in support of the ownership of the assets and for sale of such assets. Hence, we concur with the findings of the ld. CIT(A) which is sustained. Thus Ground No. 2 of the assessee is dismissed. Disallowance on account of loss claimed by theft/ robbery - Held that:- As noted from the assessment order that the assessee had claimed loss by theft amounting to ₹ 11,735/- for which the AO required the assessee to explain and justify the same with evidences but the assessee did not file any documentary evidence as to theft of the amount. The AO disallowed the same and the ld. CIT(A) also confirmed the action of the AO as the assessee did not file a copy of the FIR or any other details of the incident for the loss claimed on account of theft. The assessee has also not filed any supporting evidence on this issue before the Bench at the time of hearing. Hence, I find no reason to interfere with the order of the ld. CIT(A) on this issue which is sustained. Thus Ground No. 3 of the assessee is dismissed. Disallowance of expenditure - Held that:- CIT(A) has granted sufficient relief to the assessee amounting to ₹ 22,234/- taking into consideration the assessment order and the submissions of the assessee before him. Hence, concur with the findings of the ld. CIT(A) on this issue. Thus Ground No. 4 of the assessee is dismissed. Issues Involved:1. Addition of Rs. 7.00 lacs under Section 68 of the Income Tax Act.2. Addition of Rs. 2.50 lacs as unexplained capital introduced.3. Disallowance of Rs. 11,735/- claimed as a loss by theft/robbery.4. Disallowance of various expenses (staff welfare, telephone expenses, depreciation on car, running & maintenance of car).5. Application of Section 145(2) of the Income Tax Act.Issue-wise Detailed Analysis:1. Addition of Rs. 7.00 lacs under Section 68 of the Income Tax Act:The assessee introduced a sum of Rs. 27.30 lacs in the cash book under 'Ramlal Imprest A/c.' The AO required the assessee to explain the sources of these deposits. The assessee provided a combined certificate from various creditors stating that the cash was provided from their agricultural income. The AO was not satisfied and observed deficiencies, leading to an addition of Rs. 7.00 lacs under Section 68, which was confirmed by the CIT(A) due to insufficient evidence provided by the assessee. However, upon appeal, the Tribunal noted that the assessee had filed all necessary evidence, including ID proofs, affidavits, and landholding certificates, proving the genuineness, creditworthiness, and capacity of the creditors. Therefore, the addition of Rs. 7.00 lacs was deleted.2. Addition of Rs. 2.50 lacs as unexplained capital introduced:The AO observed an increase in the assessee's capital by Rs. 2.50 lacs on 2-12-2003, which the assessee claimed was received from his brothers after the death of their parents. The AO found deficiencies in the evidence provided and made an addition of Rs. 2.50 lacs under Section 68. The CIT(A) confirmed this addition, noting the lack of supporting evidence for the ownership and sale of assets. The Tribunal concurred with the CIT(A) and sustained the addition due to insufficient evidence provided by the assessee.3. Disallowance of Rs. 11,735/- claimed as a loss by theft/robbery:The AO disallowed the claim of Rs. 11,735/- for loss by theft due to a lack of evidence. The CIT(A) confirmed this disallowance, noting that the assessee failed to provide any supporting documents such as an FIR. The Tribunal upheld the disallowance, as the assessee did not provide any supporting evidence during the hearing.4. Disallowance of various expenses:The AO disallowed a total of Rs. 37,234/- on account of staff welfare, telephone expenses, depreciation on car, and running & maintenance of the car, citing a lack of vouchers and personal usage. The CIT(A) found the disallowance to be on the higher side and restricted it to Rs. 15,000/-, granting a relief of Rs. 22,234/-. The Tribunal concurred with the CIT(A)'s findings and upheld the restricted disallowance.5. Application of Section 145(2) of the Income Tax Act:The assessee did not press this ground during the hearing. Consequently, the Tribunal dismissed this ground as not pressed.Conclusion:The appeal of the assessee was partly allowed, with the Tribunal deleting the addition of Rs. 7.00 lacs under Section 68 and upholding the other disallowances and additions made by the lower authorities. The order was pronounced in the open court on 18/11/2016.