TaxTMI 
TaxTMI 
2006 (6) TMI 146
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....AO's order in his order. (iv) The CIT(A) has erred in law in giving relief of Rs. 6,64,500 disal1owed by the AO out of entertainment expenses ignoring the mal factual proposition that in absence of evidence possibility of non-business purposes could not be absolutely ruled out." 3. The facts in relation to the first ground are that the assessee company is engaged in the manufacturing of auto components. It filed a return of income declaring an income of Rs. 1,61,62,044, which was accompanied by audited balance sheet and manufacturing and trading account along with necessary annexures, etc. The AO noticed that although the total turnover of the assessee had increased during the year, however, there was a nominal decline of 0.13 per cent in the GP ratio as compared to the preceding year. After considering the explanation of the assessee for such decline, the AO made the addition of Rs. 7,37,750 by increasing the GP ratio by 0.13 per cent. In appeal, the assessee assailed the addition both on facts and in law. The CIT(A) called for a remand report from the AO in this regard. After considering the explanation of the assessee as well as the remand report of the AO, the CIT(A) in terms....
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....assessee submitted to the AO that the deposits were raised from the public in terms of s. 58A of the Companies Act, 1956; that the deposits were raised by way of advertisement to general public at large in terms of the approval granted by the respective authorities under the Companies Act, 1956. The assessee submitted list of the deposit holders along with their addresses. The assessee also submitted that the deposits have since been repaid fully and also filed the evidence for the same. As an illustrative instance, the assessee tiled deposit application forms in the case of three depositors totalling to Rs. 2,63,000. The AO after considering the explanation of the assessee held that the assessee company had failed to prove the identification, creditworthiness and genuineness of the transaction and he has, therefore, treated a sum of Rs. 2,09,37,000 (i.e., total of Rs. 2,12,00,000 minus Rs. 2,63,000 for which application forms were submitted by the assessee) as income from undisclosed sources. In appeal, the assessee reiterated the submissions that the number of depositors were 1,331; that the entire deposits were raised in terms of a scheme approved by the RoC under the provisions....
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....record clearly indicates that the assessee has been able to demonstrate that the public deposits in question have been received genuinely. That in any case, the assessee has submitted to the AO that if he was not satisfied with the evidence placed before him, it was open to the AO to depute his official for obtaining further evidences, if required, and that the assessee was prepared to bear expenses for conducting such an exercise. For this, our attention has been drawn specifically to communication addressed to the AO, dt.28th Feb., 2001, which is placed in the paper book at p. 2 onwards. 9. We have considered the rival submissions as also the material on record to which our attention has been drawn during the course of the hearing. The undisputed facts are that the assessee is a company incorporated under the Companies Act, 1956. In terms of s. 58A of the Companies Act, 1956, the assessee, under a scheme approved by the RoC, invited deposits from public. A copy of the said scheme is placed at pp. 132 to 136 of the paper book. The deposit was to be made by way of the prescribed application form, sample copy of which is also placed at p. 135 of the paper book. The application form....
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....here is no adverse observation in this regard on record. Thus, the bona fides of the action of the assessee in inviting public deposits cannot be doubted. Secondly, the entire deposits have been received through normal banking channels. We find that the details of the depositors along with their addresses were very much before the lower authorities. The assessee submitted, as an illustration, copies of three application forms whereby it had received deposits for Rs. 2,63,000 which have been accepted as explained. The fact that the AO was satisfied about the nature and source of the credit on the basis of the application forms in the case of three creditors itself shows an inconsistency in his approach. If according to him, the vetting of the application form was enough to discharge the onus cast on the assessee under s. 68 of the Act, he ought not to have made any addition. It is starkly evident that if the AO was satisfied that the assessee had discharged the onus cast under s. 68 on the basis of the application forms of three depositors, nothing prevented him from being satisfied with the rest of the deposits also. This is for the reason that there is no denying the fact that the....
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.... of the CIT(A) in concluding the issue, nevertheless, the CIT(A) has, in extenso referred to the submissions of the assessee as also the remand report of the AO in this regard. Therefore, merely because the order of the CIT(A) is brief, cannot be a reason to interpret it as a non-speaking order. In contrast, a non-speaking order is to be understood as one, which shows a lack of application of mind on the part of the authority writing the order. Having noted the manner in which the CIT(A) has proceeded to examine the rival claims, it cannot be said that there is an absence of application of mind on his part. Therefore, the grievance of the Revenue on this count is misplaced. Accordingly, the Revenue fails on this ground. 13. The facts relevant to the third ground are as follows. The AO noticed that the assessee had incurred a sum of Rs. 21,25,814 on foreign travelling undertaken mostly by its directors. The assessee explained that the purpose of the visit was for exploring market for its products. The AO disallowed 50 per cent of the expenditure on an estimation basis, not being satisfied with the evidence produced by the assessee. Hence, the addition of Rs. 10,52,231. In appeal, i....