1. AO should consider debit and credit entries both to arrive at Unexplained Credits u/s 68. It is unfair to consider only credit entries in the account and add it as income of the assessee.
2. When the borrowed money is proved to be used for the purpose of the business the corresponding interest is an allowable expenditure
1. Assessee's case was selected for scrutiny assessment u/s 143(3)
2. AO added Rs. 24,82,150/- u/s 68 for unexplained credits in the bank account not declared in the regular books of accounts
3. AO added Interest on Bank Loan Rs. 1,95,470/- and Rs. 5,000/- on account of excess payment made to the related party by invoking the provisions of section 40A(3) of the Act.
4. Assessee appealed to CIT(A)
5. CIT(A) partly allowed the appeal and restricted the addition to the extent of Rs. 3,30,150/- out of Rs.24,82,150/- made on account of deposits in the bank and restricted the disallowance to Rs.65,090/- out of disallowance of Rs.1,95,470/- in respect of the interest expenditure claimed by the assessee. According to CIT(A) the AO failed to consider the corresponding debits in the bank accounts and merely added credits as unexplained credits.
6. Revenue moved to the Tribunal
7. Tribunal confirmed the view of the CIT(A) for the unexplained credits by saying that there are debit as well credit entries in the bank account and this fact is not controverted by the Revenue by placing any contrary material on record
8. The appeal of the Revenue is dismissed
1. For Cash Credits in the Bank Account not disclosed to the AO : The finding of the ld. CIT(A) that there were transactions of cash deposit and withdrawal. This fact is not controverted by the Revenue by placing any contrary material on record. We are of the considered view where there are deposit and withdrawal entries into the bank account, it would be presumed that the amount withdrawn was available with the assessee for depositing the same. Therefore, it cannot be concluded that the entire deposits were from unexplained source. We do not see any reason to interfere with the finding of the ld.CIT(A), the same is hereby upheld
2. For Bank Interest : The above finding of the ld.CIT(A) is not controverted by the Revenue by placing any contrary material on record. The contention of the Revenue is that the ld.CIT(A) has violated the Rule 46A of the IT Rules. There is no specific submission as what were the evidences which were considered by the ld.CIT(A) without giving opportunity to the AO and/or the evidences which were not available before the AO. Therefore, this contention of the Revenue is also devoid of any merit. Thus, we do not see any reason to interfere with the order of the ld. CIT(A), same is hereby upheld and Revenue’s ground No.2 is rejected.
Cases referred to