2023 (4) TMI 227 - AT - Income Tax

ITAT Delhi upholds deletion of addition under sec 68

Income Tax Officer, Ward-58 (6), New Delhi Versus Affy Foodtech LLP

The ITAT Delhi dismissed the Revenue's appeal, affirming the deletion of the addition under section 68 of the Income Tax Act and rejecting the ad-hoc ... Addition u/s 68 - non-submission of details of investors - Unexplained source of capital contribution - HELD THAT:- CIT(A) concluded that the source and the flow of funds in the hands of the partner/ capital contributor Shri Arvind Billa is clear and have been explained. Shri Arvind Billa had withdrawn the money from M/s AFFY Parenterals in which he was 80% partnership. The amount withdrawn from the partnership M/s AFFY Parenterals was duly received in the HDFC Bank account being the personal bank account of Shri Arvind Billa. It was from this bank account that the amount was received as capital contribution in M/S AFFY Food Tech LLP. From the details filed before the A.O., it was clear that the source / capacity/genuineness stand explained. It is also fact on record that Shri Arvind Billa duly appeared before the A.O. in remand proceedings. As such, all requirements at the end of appellant stand fulfilled. The A.O. has also confirmed this fact in his report - Addition as deleted by the ld. CIT(A) stands confirmed in the absence of any material contra brought before us. The appeal of the revenue on this ground is dismissed. Disallowance of Salary Expenses - no details were filed, the AO disallowed 75% of the salary expense - CIT(A) deleted the addition based on the report of the AO wherein the AO submitted that the requisite details were duly provided - HELD THAT:- As noted from the AO's report and from the assessee's submissions that the requisite details were duly provided to the A.O. at the time of assessment itself - there is no basis for ad-hoc disallowance of 75% of wages. A.O. has not pointed out in his assessment as to which 75% of wages were not incurred for purposes of business. CIT(A) Correctly deleted the addition based on the report of the AO wherein the AO submitted that the requisite details were duly provided. Hence, the addition made by the AO on the grounds that “no details were filed” cannot be upheld. The order of the CIT(A) is affirmed on this ground. Appeal of the Revenue is dismissed. Issues:1. Addition under section 68 of the Income Tax Act2. Ad-hoc disallowance of salary expensesIssue 1: Addition under section 68 of the Income Tax ActThe appeal was filed by the Revenue against the order of the ld CIT(A)-30, New Delhi dated 12.12.2019 regarding the addition of Rs. 6.04 crores under section 68 of the Income Tax Act. The assessee submitted details and the source of capital contribution from M/s. Affy Parenterals. The submission included documents proving the identity, genuineness, and creditworthiness of the transactions. The ld. CIT(A) held that the source and flow of funds were clear and explained, with funds withdrawn from M/s AFFY Parenterals by the partner, Shri Arvind Billa, and then contributed as capital in M/S AFFY Food Tech LLP. The ld. CIT(A) concluded that all requirements were fulfilled, and the addition was deleted as confirmed by the A.O. The appeal of the Revenue on this ground was dismissed.Issue 2: Ad-hoc disallowance of salary expensesDuring assessment proceedings, the AO disallowed 75% of the salary expenses claimed by the assessee amounting to Rs. 1.39 crores due to non-submission of month-wise and person-wise details of salaries and the applicability of ESIC and PF provisions. The ld. CIT(A) noted that the requisite details were provided to the AO at the time of assessment itself. The AO did not specify which 75% of wages were not incurred for business purposes. The ld. CIT(A) deleted the addition based on the report of the AO confirming the submission of details. The ad-hoc disallowance was not upheld, and the order of the ld. CIT(A) was affirmed on this ground.In conclusion, the ITAT Delhi dismissed the Revenue's appeal on both issues, affirming the deletion of the addition under section 68 of the Income Tax Act and rejecting the ad-hoc disallowance of salary expenses. The judgment emphasized the importance of providing detailed documentation to support transactions and expenses, ultimately leading to the favorable decision for the assessee.