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of <h1>Appeal partially allowed: 100% deduction granted under section 80IC, unexplained cash deposits deleted.</h1> <h3>Shri Subhash Chand, C/o Shree Bhagwati Industries Versus The ACIT Circle – 5 (1) Chandigarh</h3> Shri Subhash Chand, C/o Shree Bhagwati Industries Versus The ACIT Circle – 5 (1) Chandigarh - TMI Issues Involved:1. Confirmation of addition made by restricting the deduction under section 80IC to 25% instead of 100%.2. Sustenance of addition of Rs. 5,75,000/- on account of unexplained cash deposit.3. Interest income from bank guarantee of Rs. 1,71,719/-.Issue-wise Detailed Analysis:1. Restriction of Deduction under Section 80IC:The primary issue in this appeal was the confirmation of the addition made by the Assessing Officer (A.O.) by restricting the deduction under section 80IC of the Income Tax Act, 1961 to 25% instead of 100% claimed by the assessee. The facts revealed that the assessee had claimed 100% deduction for five years starting from the Assessment Year (A.Y.) 2008-09 and again claimed 100% deduction during the 7th year based on substantial expansion made in the Financial Year (F.Y.) 2011-12. The A.O. restricted this deduction to 25%, and this view was upheld by the Commissioner of Income Tax (Appeals) [CIT(A)]. However, the assessee argued that the Hon'ble Apex Court in the case of Pr. CIT, Shimla Vs. M/s Aarham Softronics had settled this issue, concluding that 100% deduction should be granted even in the year of substantial expansion. The Tribunal, considering the Supreme Court's decision, directed the A.O. to allow the assessee's claim for 100% deduction under section 80IC.2. Unexplained Cash Deposit of Rs. 5,75,000/-:The second issue concerned the addition of Rs. 5,75,000/- made by the A.O. on account of unexplained cash deposits. The A.O. noted cash deposits in the joint bank account of the assessee and his wife, which the assessee failed to explain satisfactorily. The CIT(A) also confirmed this addition, noting the lack of documentary evidence to substantiate the source of the deposits. The assessee contended that the deposits were made from his wife's old savings and rental income. The Tribunal found the explanation for the Rs. 2,00,000/- deposit on 08/05/2014 to be unsubstantiated. However, it accepted the explanation for the Rs. 3,75,000/- deposit on 08/11/2014, considering the withdrawal of Rs. 2,00,000/- on 10/09/2014 and the rental income. Thus, the Tribunal deleted the addition of Rs. 3,25,000/- and sustained the remaining addition of Rs. 2,50,000/-.3. Interest Income from Bank Guarantee:The third issue was regarding the addition of Rs. 1,71,719/- on account of interest income from a bank guarantee. The assessee's counsel opted not to press this ground, acknowledging the CIT(A)'s order. Consequently, this ground was dismissed as not pressed.Conclusion:The appeal was partly allowed. The Tribunal directed the A.O. to allow the 100% deduction under section 80IC as per the Supreme Court's ruling and deleted part of the addition related to unexplained cash deposits. The ground concerning interest income from the bank guarantee was dismissed as not pressed.
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