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Facts
The assessee challenged additions made by the Assessing Officer for A.Y. 2018-19, including disallowance of PF contribution, an addition of Rs. 15 lakhs as unexplained unsecured loans under Section 69A, and disallowance of a Rs. 16,500 donation under Section 80G. The assessee had voluntarily withdrawn the PF claim and offered Rs. 10 lakhs of unsecured loans for taxation, contesting only Rs. 5 lakhs of unsecured loans and the donation.
Held
The tribunal dismissed the appeal regarding the PF contribution as it was voluntarily withdrawn by the assessee. It partly allowed the appeal concerning unsecured loans, deleting the addition of Rs. 5 lakhs (from 50 employees) out of Rs. 15 lakhs, while confirming the remaining Rs. 10 lakhs. The tribunal allowed the appeal for the donation of Rs. 16,500 under Section 80G, accepting the assessee's explanation for non-production of receipts due to records being seized from the temple.
Key Issues
1. Whether the disallowance of PF contribution was justified. 2. Whether the addition of Rs. 15 lakhs as unexplained unsecured loans was justified. 3. Whether the disallowance of a Rs. 16,500 donation was justified.
Sections Cited
69A, 80G, 264
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Income Tax Appellate Tribunal, Hyderabad ‘ SM B ‘ Bench, Hyderabad
Before: Shri Vijay Pal Rao, Vice-Shri Madhusudan Sawdia
Per Vijay Pal Rao, Vice President
This appeal by the assessee is directed against the order dated 30/09/2024 of the learned CIT (A)-NFAC Delhi, relating to A.Y.2018-19.
The assessee has raised the following grounds of appeal:
3. Ground No.1 is general in nature and does not require any specific adjudication.
4. Ground No.2 is regarding a disallowance made by the Assessing Officer towards contribution to PF.
We have heard the learned AR as well as the learned DR and carefully perused the impugned order of the learned CIT (A). In para 4.2 of the impugned order, the learned CIT (A) has reproduced the statement of facts filed by the assessee along with Form-35. At page No.5 of the impugned order, the assessee has stated as under: “The issue was first contested in revision because at that time complete information was not available before me. However, subsequently on a minute verification of my records, the claim was found to be excessive and therefore,
Page 2 of 7 in the report submitted to Income Tax Officer Ward-1 Kadapa (in the revisionary proceedings u/s 264) this issue was withdrawn voluntarily by me. Accordingly, this issue is not contested in appeal before your honour”.
Thus, it is clear that the assessee itself has admitted the fact that the claim was excessive and therefore, this issue was withdrawn voluntarily by the assessee in the revision proceedings and not contested in the appeal before the learned CIT (A). The learned AR has not disputed this statement made by the assessee before the learned CIT (A). Accordingly, Ground No.2 of the assessee’s appeal is dismissed.
7. Ground No.3 is regarding an addition made by the Assessing Officer on account of unsecured loans. The learned AR of the assessee has submitted that out of Rs.15 lakhs shown as unsecured loan in the balance sheet, the assessee has pressed only Rs.5 lakhs as a loan raised by the assessee from 50 employees by collecting Rs.10,000/- each as a security deposit. In support of this claim, the assessee also furnished the names and addresses of these 50 persons from whom Rs.10,000/- each was received as security deposit and therefore, the addition sustained by the learned CIT (A) of total amounting to Rs.15 lakhs is highly arbitrary and unjustified.
On the other hand, the learned DR has submitted that the assessee has not discharged its onus of proving the identity, credibility of the creditors as well as genuineness of the Page 3 of 7 transactions. She has relied upon the impugned order of the learned CIT (A).
We have considered the rival submissions and carefully perused the relevant record. Before the learned CIT (A) the assessee has made the following submissions: “5. During the relevant A.Y, my earlier tax consultant has shown unsecured loans in balance sheet as on 31/03/2018 at Rs.15,00,000/-. The whole part of this loan is not true. The Tax Consultant could not give complete/proper reply before the faceless Assessing Officer and thus, addition came to be made at Rs.15 lakhs u/s 69A. After taking the file and on minute verification, it is seen that the loans up to Rs.10 lakhs are not warranted. I, therefore, have no hesitation to offer the same for taxation. However, the remaining 5 lakhs are genuine loans/advances which have been received by me from the contractual employees. During the relevant financial year 2017-18 the firm was in need of money to fund business 6. Sir, in this line of business, sometimes the salaries are to be paid to some of the contractual employees in advance before their salaries are actually received from govt. It is a common practice followed by most of the assessees in our line of business. Sometimes bills are delayed from govt. departments for months together and there is a pressure to pay salaries to some of the staff (not all). In order to overcome the problems, it was decided to take to take an advance of Rs.10,000/- each from about 50 employees. These employees are those employees who never pressed for payment of salaries till the respective departments released the salaries
Accordingly I have raised a loan/advance of Rs.5 lakhs from about 50 employees for collecting Rs.15,000/- each as security deposit. In this regard I have the names and addresses of all such persons from whom such advance is received. Accordingly on my request all such 50 officials have given an undertaking/certificate for having paid the security deposit to me during the financial year 2017-18 at Rs.10,000/- each which is not paid back to them till the end of the relevant financial year. I am willing to furnish their confirmations before the Hon'ble CIT(A). Since they are 50 in numbers, accordingly, the same will require sometime. In the confirmation, the PAN Nos. and mobile numbers of such employees is mentioned wherever possible/available. Further, the employees are also willing to appear before your honour to confirm the advance. It is therefore, to request humbly to kindly direct the Assessing Officer to delete the addition to the extent of Rs.5 lakhs which was made under the specific head u/s 69A towards unexplained money”.
Thus, it is clear that out of the total addition made by the Assessing Officer on account of the unsecured loan of Rs.15 lakhs, the assessee pressed the claim of Rs.5 lakhs received as security deposit from 50 employees and also furnished their details i.e. name and address of these employees. The assessee has also stated that all the employees are ready to appear before the authorities to confirm the advances. Accordingly, in the facts and circumstances of the case when the receipt of Rs.5 lakhs was shown by the assessee as security deposits of Rs.10,000/- each from 50 employees which is also recorded by the Assessing Officer in the assessment order, then the addition to the extent of Rs.5
Page 5 of 7 lakhs is not justified. Hence, we delete the addition of Rs.5 lakhs and confirm the balance addition of Rs.10.00 lakhs.
Ground No.4 is regarding the disallowance of donation of Rs.16,500/- claimed as deduction u/s 80G of the Act. The assessee has claimed the deduction of Rs.16,500/- as donation to Sri Sailam Devasthanam. The assessee has also explained that he donates every year and also keeps the receipts, however, unfortunately, due to some government action and raid on the management/administration of the said Temple, the receipt could not be taken as the entire record was seized by the authorities. The learned AR has submitted that the assessee could not make a false claim in respect of donation to the Temple as a devotee and therefore, the same may be allowed.
The learned DR has not disputed the incident of some action that was taken by the authorities on the management of the Temple and seized the record. However, she has relied upon the orders of the authorities below.
We have considered the rival submission as well as the facts and circumstances as explained by the assessee for non- production of the receipt of the said donation of Rs.16,500/-. We find that when the assessee has been making the donation regularly, then this claim of the assessee cannot be treated as bogus being a donation to the Temple in which the assessee is Page 6 of 7 having a faith as a devotee. Accordingly, the claim of the assessee is allowed.
In the result, appeal filed by the assessee is partly allowed.