NAGARAJ KURAPATI, HYDERABAD,HYDERABAD vs. ITO, WARD-4(1), HYDERABAD, HYDERABAD

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ITA 1654/HYD/2016Status: DisposedITAT Hyderabad11 May 2018AY 2011-123 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal deleted the disallowance under Section 40A(3) as the genuineness of the payments was not doubted and the assessee's explanation regarding exceptions under Rule 6DD was accepted. The addition under Section 68 was also deleted as the assessee had discharged the burden of proving the identity, creditworthiness, and genuineness of the credits.

What were the facts?

The assessee appealed against the disallowance of staff welfare expenses under Section 40A(3) and an addition made under Section 68. The disallowance under Section 40A(3) was higher than the total staff welfare expenses claimed, and the assessee argued exceptions under Rule 6DD applied. For the Section 68 addition, the assessee provided confirmation letters and PAN details of creditors.

What were the issues?

Whether the disallowance of staff welfare expenses under Section 40A(3) was justified, and whether the addition for unexplained cash credits under Section 68 was correct.

Which sections of the Income-tax Act were involved?

Section 40A(3),Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, HYDERABAD BENCH “B-SMC”, HYDERABAD

Before: SHRI J. SUDHAKAR REDDY

For Appellant: Shri P. Murali Mohan Rao
For Respondent: Shri K. Gopala Krishna
Hearing: 10/05/2018Pronounced: 10/05/2018

This is an appeal filed by the assessee directed against the order of CIT(A) – 1, Hyderabad dated 29/08/2016, passed u/s 250 of the Income-tax Act, 1961 (in short ‘the Act’).

2.

The issues that arise for my adjudication is whether the disallowance made u/s 40A(3) of the Act of Rs. 12,69,646/- is right in law and whether the addition made of Rs. 6,95,000/-, u/s 68 of the Act, is right in law.

3.

After hearing the rival contentions, I hold as follows:

4.

The disallowance u/s 40A(3) pertains to staff welfare expenses. After considering the material on record, I find that the total expenditure incurred and claimed under the head by the assessee is only Rs. 9,25,825/- and whereas the disallowance u/s 40A(3) is Rs. 12,69,646/-. This was a specific ground taken by the assessee

2 ITA No. 1654/Hyd/16 Nagaraj Kurapati (Ground No. 6) before the ld. CIT(A). This contention was not considered and adjudicated upon. The amount of Rs. 3,72,850/- incurred for tour and travel was not debited under the head ‘staff welfare’. Coming to the other payments, the assessee has explained by way of a chat and documents that the event for which payment made were held on Sundays and payments were made on that date but were accounted for later. The assessee has claimed that the expenditure is covered by the exceptions provided in rule 6DD of the Act as the payments had to be made on public holidays though accounted for subsequently. The genuineness of the expenditure is not doubted. The Hon’ble Calcutta High Court in the case of CIT Vs. Crescent Export Syndicate (ITA No. 202 of 2008, dated 30/07/2008) held that “therefore, the genuineness of the purchase has been accepted by the ld. CIT (Appeal) which has also not been disputed by the department as it appears from the order so passed by the learned Tribunal. It further appears from the assessment order that neither the Assessing Officer nor the CIT (Appeal) has disbelieved the genuineness of the transaction. There was no dispute that the purchases were genuine. Accordingly, in our opinion, the learned Tribunal has correctly came to the conclusion by deleting the addition of Rs.15,69,116/- under section 40A(3) of the Act.” Applying the proposition laid down in this judgement to the case on hand, I delete the addition as neither the CIT(A) nor the AO doubted the genuineness of the payment.

5.

Coming to the addition made u/s 68 of Rs. 6,95,000/-, I find that the assessee has filed confirmation letters before the authorities below as evidence of source of investment. PAN No. of each of the creditors was given. Thus, in my opinion, the assessee has discharged the burden of proof that lay on him to prove the identity, creditworthiness and genuineness of the credits received by him. Thus, this addition is hereby deleted.

3 ITA No. 1654/Hyd/16 Nagaraj Kurapati

6.

In the result, appeal of the assessee is allowed. Pronounced in the open Court on May, 2018.

Sd/- (J. SUDHAKAR REDDY) ACCOUNTANT MEMBER

Hyderabad, Dated: 10th May, 2018 kv

Copy to:-

1) Shri Nagaraj Kurapati, C/o P. Murali & Co., CAs, 6-3-655/2/3, 1st Floor, Somajiguda, Hyderabad – 82 2) ITO, Ward – 4(1), Hyderabad. 3) CIT(A) – 1, Hyderabad. 4) Pr. CIT - 1, Hyd. 5) The Departmental Representative, I.T.A.T., Hyderabad. 6) Guard File

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