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2008 (7) TMI 1027 - HC - Income TaxDisallowance of expenses - Addition on unexplained cash credit - Disallowance on account of credit in respect of loan from Sit. Chanchal Lamba - Ad hoc disallowance of expenditure - Disallowance of l/10th of car expenses - Disallowance of depreciation. Addition on unexplained cash credit - identity of the creditors, genuineness of the transactions and the sources for making the credits not established - HELD THAT:- The department has not brought any material on record to doubt the identity of the creditors who have filed their confirmatory letters which have been reproduced hereinabove. In view of these details found on record, there remains no stock of doubting the genuineness of transactions of credits. On going through the assessment order it appears that the AO has raised suspicion only on those grounds which are not based on any material - Therefore, we are of the considered opinion that the assessee has successfully discharged its burden in proving the identity of the creditors; genuineness of the transactions of credit and the source of the credits. We are therefore, unable to concur with the findings of the learned CIT(a) and set aside the same. Consequently ground No.1 taken by the assessee stands allowed and the addition made by the AO and sustained by the learned CIT(A) is deleted. Disallowance on account of credit in respect of loan from Sit. Chanchal Lamba - HELD THAT:- The departmental authorities have doubted the genuineness of the transactions by making surmises and conjectures, which cannot be justified. The departmental authorities have also gone the test of human probabilities. However, no doubt can be raised about the genuineness of the transaction on the basis of probabilities and improbabilities - Merely because GPF advance was taken for purposes of marriage but was diverted for making advance of loan, it cannot be said that the transaction of advancing loan was not genuine. The creditor is an employee and she might have indulged in misconduct in utilizing the sanctioned amount for the purpose for which it was not sanctioned but for that action could have been taken against her by the department, if it was so considered - In any case merely on that basis the genuineness of the transaction cannot be doubted. Thus, we are unable to concur with the findings of the learned CIT(A) in relation to this credit also. Hence setting aside the order of the learned CIT(A) we allow ground No.2 in favour of the assessee. Consequently the addition made by the AO and sustained by the learned CIT(A) is deleted. Ad hoc disallowance of expenditure - AO proceeded to make disallowance without assigning cogent reasons - HELD THAT:- After having examined the books of account and vouchers, AO has not pointed out any specific instance to show as to why the expenditure was not allowable. The learned CIT(A) has also not appreciated this aspect properly - Therefore, the ad hoc disallowance of expenditure without pointing out and justifying the reasons for doing so, cannot be upheld. We, therefore, set aside the findings of the learned CIT(A) and delete the addition. This ground stands allowed in favour of the assessee. Disallowance of l/10th of car expenses - HELD THAT:- This disallowance is also justified on the ground of personal use of the vehicle. This disallowance is, therefore, upheld. Disallowance of depreciation - AO allowed l/6th of it - HELD THAT:- In appeal, the learned CIT(A) restricted the disallowance to 1/10th Car depreciation cannot be disallowed on the ground of persona! user of the car. The departmental authorities were therefore, not justified in disallowing any portion out of car depreciation. Our this view is supported by the decision in the case of Mukesh K. Shali vs. ITO [2004 (5) TMI 530 - ITAT MUMBAI]. This ground is therefore, partly allowed. In the result, the appeal is partly allowed.
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