2012 (10) TMI 570

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....f Rs. 2,50,000/- made for credits appearing in current account of the partner of the assessee-firm again confirmed by the CIT(Appeals).   2. Short facts apropos are that assessee running a hotel called Hotel Sri Lakshmi, filed its return of income declaring total income of Rs. 37,31,370/-. During the course of assessment proceedings, it was noted by the A.O. that assessee had charged a sum of Rs. 22,94,000/- as bad debts in the Profit & Loss account. Clarifications were sought. Reply of the assessee was that the said sum was paid to a person who had promised to get a loan of Rs. 8 Crores at a low rate of interest. Since the deal did not materialize and the concerned person duped the assessee, the amount was claimed as bad debt. Asse....

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....him were entirely different from what were given in the complaint filed by the assessee before the Police. Assessee could not establish any business link or commercial expediency for the commission of Rs. 25 lakhs paid to Shri Ramar. Assessee also could not produce any agreement or correspondence which could show that there was any business purpose behind the sum being given. Therefore, he held that the claim was not allowable and sustained the disallowance made by the A.O. 4. Now before us, learned A.R., strongly assailing the orders of lower authorities, submitted that assessee was intending to acquire next door building for extending its lodging business. It had planned expansion of existing business and the loan was only for acquirin....

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....l. If that was so, Shri K.P.S. Prakash would not have stated in the first instance that the amount was sought for purchase of land at Coimbatore. He could have very well stated that it was for the purpose of acquiring the adjacent land. In the complaint filed before the Police, there was not even a whisper that the proposal was for expansion of the assessee-firm's business. It is clear that the amounts were paid for the partner's personal purpose only. Nothing was produced before the CIT(Appeals) to show that assessee had any intention to purchase any adjacent property for expansion of the business. It would also be naïve to believe that assessee would have paid a sum of Rs. 25 lakhs just like that without any agreement. Without having....

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....debt was incurred during the course of business, for the purpose of its business. We are, therefore, of the opinion that the authorities below were justified in disallowing the claim of the assessee. 7. The facts regarding next issue raised by the assessee are that one of the partners named Shri K.P. Subbain had introduced the following sums through his current account into the business:- 01.09.2005 By cheque Rs. 25,000 -do- By cheque Rs. 5,25,000 01.10.2005 By cash Rs. 2,00,000 14.02.2006 By cash Rs. 1,00,000 19.03.2006 By cash Rs. 1,00,000 24.03.2006 By cash Rs. 1,00,000 28.03.2006 By cash Rs. 1,00,000 30.03.2006 By cash Rs. 1,00,000 8. Explanation of the assessee was that the said sums were r....