ITAT allows appeal, deletes disallowance u/s. 14A & addition u/s. 68. Assessee proves transactions' genuineness.

The ITAT allowed the appeal of the assessee, directing the deletion of disallowance u/s. 14A exceeding the exempt income and the addition u/s. 68. The ITAT found that the assessee successfully proved the genuineness of the transactions and the lender's capacity, leading to the removal of the additions made by the AO in both instances.

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Issues:
1. Disallowance u/s. 14A
2. Addition u/s. 68

Issue 1: Disallowance u/s. 14A:
The assessee, a company engaged in investment and trading in shares, filed its return for A.Y. 2012-13 declaring a loss. The AO determined the total loss, and the CIT(A) granted partial relief. The dispute arose regarding the disallowance u/s. 14A. The AO disallowed an amount under 14A, which the assessee contested. The AR argued that the disallowance cannot exceed the exempt income earned, citing relevant case laws. The ITAT, following High Court decisions, directed the AO to delete the disallowance exceeding the suo moto amount disallowed by the assessee, thus allowing the ground raised by the assessee.

Issue 2: Addition u/s. 68:
During assessment, the AO noted unsecured loans received by the assessee and made an addition u/s. 68 due to lack of documentary evidence proving the transaction's genuineness. The CIT(A) upheld the AO's decision despite additional evidence provided by the assessee. The AR argued before ITAT, presenting ledger accounts, bank statements, and ITR of the lender to establish the genuineness of the transaction. The AR highlighted the lender's capacity to advance the loan based on income and banking transactions. The ITAT, considering the burden on the assessee under section 68, found that the lender's identity, capacity, and genuineness were adequately proven through evidence. Thus, the ITAT directed the deletion of the addition made by the AO, allowing the ground raised by the assessee.

In conclusion, the ITAT allowed the appeal of the assessee, directing the deletion of disallowance u/s. 14A exceeding the exempt income and the addition u/s. 68, as the assessee successfully proved the genuineness of the transactions and the lender's capacity.

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