ITAT reduces unverified expenses, remands loan addition issue under section 68 for further examination.

The ITAT partially allowed the assessee's appeal by reducing the disallowed amount for unverified expenses from Rs. 100,000 to Rs. 50,000. Additionally, the ITAT remanded the issue of the Rs. 1,00,000 loan addition under section 68 of the Income-tax Act back to the AO for further examination, granting the assessee an opportunity to present evidence regarding the source and nature of the funds.

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Issues:
1. Sustenance of adhoc addition of Rs. 1,00,000 on account of unverified expenses.
2. Sustenance of addition of Rs. 1,00,000 made by the AO under section 68 of the Income-tax Act, 1961 on account of a loan taken from Sh. Prem Jeet Singh.

Issue 1: Sustenance of Adhoc Addition of Rs. 1,00,000 on Account of Unverified Expenses

The AO disallowed Rs. 1,00,000 as unverified expenses due to lack of supporting vouchers for cash payments made by the assessee. The ld. CIT(A) sustained this addition, noting the absence of complete vouchers to substantiate business expenses, especially for traveling expenses. The assessee argued that major expenses were supported by bills/vouchers, challenging the adhoc disallowance. The ITAT found the disallowance excessive, reducing it to Rs. 50,000. The ITAT noted that while most expenses were paid in cash, specific defects in the books of account were not highlighted, and complete vouchers were not provided by the assessee.

Issue 2: Sustenance of Addition of Rs. 1,00,000 Under Section 68 of the Income-tax Act

The AO added Rs. 1,00,000 to the assessee's income under section 68, concerning a loan from Sh. Prem Jeet Singh, as the source and nature of the funds in the creditor's bank account were not clarified. The ld. CIT(A) upheld this addition, emphasizing the lack of ITR and bank account details of the creditor. The assessee argued that the transaction was through a bank, providing the bank statement later, post the AO's closure of proceedings. The ITAT acknowledged the receipt of the loan via cheque but noted the absence of the creditor's ITR and his presence to establish creditworthiness. Consequently, the ITAT remanded the issue to the AO for further examination, allowing the assessee a fair opportunity to present evidence.

In conclusion, the ITAT partially allowed the assessee's appeal for statistical purposes, reducing the disallowed amount for unverified expenses and remanding the loan addition issue for reconsideration by the AO.

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