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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
The captioned appeal is preferred by the assessee and is directed against the impugned order dated 13/12/2013 of CIT(A)-36, Mumbai, pertaining to the assessment year 2010-11 which in turn has arisen from an order passed by the Assessing Officer dated 24/12/2012 under section 143(3) of the Income Tax Act, 1961( in short “the Act”).
In this appeal the assessee has raised the following Grounds of appeal:-
The learned Commissioner of Income Tax (appeals) erred in confirming the assessment order passed u/s. 143(3) determining total income at Rs.1,01,185/-.
2. The learned Commissioner of Income Tax (appeals) erred in confirming the disallowance of Rs.1,00,000/- on account of unexplained investment u/s.69 of the income Tax Act. 3. The learned Commissioner of Income Tax (appeals) failed to appreciate the fact that the advances were given by the appellant company to its associate concern M/s. R.M.Investment Trading Co. Pvt. Ltd. In which the director of the appellant company is director. 4. The learned Commissioner of Income Tax (appeals) erred in confirming the disallowance of a following business expenditure of Rs.4,092/- Sr.No. Nature of Expenditure Amount (Rs.) 1. Rent of office premises 1,200 2. Audit Fees 2,400 3. Depreciation 52 Total 4,092
The appellant is a company incorporated under the provisions of the Companies Act, 1956 and for the year under consideration it filed a return of income declaring nil income. In the course of scrutiny assessment, the Assessing Officer noticed that the ‘Advances recoverable’ shown in the balance sheet as on 31/3/2010 has increased by Rs.1.00 lac and in the absence of production of books of account, the source of the same could not be established conclusively. Therefore, increase in the balance of ‘Advance recoverable by Rs.1.00 lac was treated as investment out of unverifiable and unexplained sources and added to the total income of the assessee under section 69 of the Act. The said addition has since been affirmed by CIT(A) also and accordingly, assessee is in further appeal before the Tribunal.
In the course of hearing, the Ld. Representative for the assessee pointed out that in the reply furnished during the assessment proceedings, a copy of which has been placed at page -13 of the Paper Book, assessee had explained that during the year under consideration five loans of Rs.20,000/- each, totaling to Rs.1.00 lac were advanced in cash to M/s. R.M. Investments & Trading Pvt. Ltd. On this basis the Ld. Representative for the assessee contended that the increase in the advances recoverable shown in the balance sheet vis-à-vis the earlier year was clearly explained. By referring to the copy of the reply filed to the Assessing Officer dated 23/11/2012, it has also been explained that the relevant extract of the cash book for the period under consideration was also furnished, copy of which has been placed in the Paper Book at page-30. Ld. Representative for the assessee explained that the entries of the cash book would show that five loans of Rs.20,000/- each totalling to Rs.1.00 lac has been advanced out of the available cash in hand, therefore, it could not be construed as unverifiable or unexplained. Ld. Representative for the assessee also assailed the finding of the CIT(A).
On the other hand, Ld. Departmental Representative appearing for the Revenue contended that the addition was made on account of non-production of relevant records and also for the reason that in the case of the recipient, M/s. R.M. Investments & Trading Pvt. Ltd., the same has been added as unexplained credit within the meaning of section 68 of the Act.
I have considered the rival submissions. With regard to the addition made under section 68 of the Act in the hands of the recipient of loan i.e. M/s. R.M. Investments & Trading Pvt. Ltd., is concerned, the Ld. Representative for the assessee contended that such proceedings cannot ipso-facto mean that the impugned advances made by the assessee were unverifiable or from unexplained sources. Ld. Representative for the assessee contended that the cash book, which was produced before lower authorities and a copy of which is placed in the Paper Book clearly establishes that the amounts have been advanced out of available cash in hand. The aforesaid factual assertions of the assessee are borne out of record and, therefore, I am unable to uphold the finding of the authorities below that the advances of Rs.1.00 lac made during the year are unverifiable or are out of unexplained sources. Thus, on facts as they appear on record, I find no reason to uphold the addition of Rs.1.00 lac made under section 69 of the Act. Thus, in so far as Ground of appeal No.2 is concerned, the same is allowed.
7. The next substantive Ground is by way of Ground No.4, wherein assessee has challenged the order of CIT(A) confirming the disallowance of Rs.4,092/- representing expenditure on account of rent/audit fee and depreciation. The Ld. Representative for the assessee submitted that it was a case of double addition because the loss as per P&L account was Rs.4,092/- but in the computation of income assessee had declared nil income. In support, reference has been made to pages 3&4 of the Paper Book to show that assessee had filed a return of income at ‘Nil’. Therefore, under these circumstances, further addition of Rs.4,092/- was not merited. The aforesaid factual matrix is borne out of record and is also not disputed by the Ld. Departmental Representative in the course of hearing before me. As a consequence, the addition of Rs.4,092/- made by the Assessing Officer is hereby deleted.
In so far as Ground of appeal Nos. 1 & 3 are concerned, no specific arguments have been made by the appellant, accordingly, the same are dismissed.
In the result, the appeal of the assessee is partly allowed.
The above decision was pronounced in the open court at the conclusion of the hearing on 20/10/2015.