TaxTMI 
TaxTMI 
2012 (11) TMI 906
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....08/06/10 the assessee was requested to furnish details as under: Loans and advances/Deposits Please file details of loans & advances and deposits in the given format. Name & Address of the person Amount Purpose Interest Charged if any? Rate of interest Whether Person Covered U/s 40 A 2(b) Source Of advance If interest Not charged, give reasons for the same It was also asked to furnish copy of accounts of all the relevant parties. In response to that after repeated request the assessee had not furnished the required detail, at last on 14/12/2010 the assessee had furnished part compliance to the said question. On verification of the detail furnished it was further noticed that the assessee had made substantial advance to a party namely M/s Chintamani Trading Co. under two different accounts i) M/s Chinatamani Trading Co. and M/s Chintamani Trading Co. (Adv.). However the assessee had not given the purpose of the advances and reasons for not charging interest thereon. As mentioned supra that on one hand the assessee has claimed interest expense to the tune of 18,49,243/- where as on the other hand it had given interest free advances to Chintamani Trading C....
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....her Type Voucher No. Debit Credit 01.04.06 O/ balance 89,43,946.00 18.09.06 Cr. Sales AJc waste Sales W/008 3,178.00 Sales W/009 3,672.00 Sales W/010 4,565.00 89,55,901.00 Dr. Cl. balance 89,55,901.00 89,55,901.00 89,55,901.00 The transactions shown in the account, reproduced above itself speaks the shallowness of the story cooked by the assessee. A party to whom someone has advanced Rs. 89,43,946/- had come on a particular day for purchase of waste and that was also of paltry sum of Rs.11,955/-, it is further interesting to look that the said sales of Rs.11,9551- was not by a single purchase, the assessee company had made four sales by four voucher and that were also in credit. On the basis of these credit sales the assessee company claims that it is not a case of advance but is a debtor party. From all these facts it crystal clear that the assessee has tried to make fool to the Department with a only intention to give justification of not charging the int....
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....38 7,600 4-5-2007 Cr. NNSB, C CA/C- 9026 Payment 113 4,200 5-5-2007 Cr. NNSB, C CA/C- 9026 Payment 117 23,700 Cr. NNSB, C CA/C- 9026 Payment 118 60,000 7-5-2007 Cr. NNSB, C CA/C- 9026 Payment 123 36,400 10-5-2007 Cr. NNSB, C CA/C- 9026 Payment 143 1,000 15-5-2007 Cr. NNSB, C CA/C-9026 Payment 157 40,400 31-5-2007 Cr. NNSB C CA/C-9026 Payment 222 1,01,000 5-2-2008 Dr. NNSB C CA/C-9026 Receipt 293 8,10,000 34,04,967 16,73,000 Dr. Closing Balance 17,31,967 34,04,967 34,04,967 From the transaction made in the above account is clear that during the year consideration also, the assessee company has made advances to the above named party. Therefore the explanation given by the assessee company is factually incorrect and it appears that the assessee has tried to mislead the department, as all the transactions are exclusively of financial nature. It may be noted that in that year also the assessee has not charged any interest on the advances made t....
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....noted that there are continuous transactions in the account of Chintamani Trading Co. during the year. In respect of Chintamani Trading Co. (advance) he has rightly observed that the sales are of meager amount and the transactions were in fact in the nature of advance. The claim of the appellant that the interest payment has been made for business purposes has also been examined and it is noted most of the interest expenses relates to the loan for working capital for borrowings made for business purposes etc. It is clear from the facts that the substantial portion of the borrowed money is blocked in the advances for which the appellant has not charged any interest. The advances are not for the purpose of business and all the transactions except for a small amount are in the nature of money lending. The transaction that relates to sale have been shown by the appellant to give the account a different colour. The appellant has also claimed that these advances were given to the party in earlier years and the appellant had sufficient interest free funds for these advances. The submission of the appellant has also been examined. The copies of account of Chintamani Trading Co. for differe....
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.... for cotton and cotton bales at Mehsana unit owned by GUJCO. During cotton season the party of the first part has borrowed loan of Rs.2.5 crores as working capital and thereon interest of Rs.11,96,555/- was paid on loan borrowed for business purposes and therefore, interest paid is allowable. Similarly the interest amount to Rs.6,52,688/- paid to banks and other parties was also for business purpose. Concluding his arguments, ld. counsel of the assessee submitted that the addition made by the A.O. and sustained by ld. CIT(A) deserves to be disallowed. 6. Ld. D.R., on the other hand, relied on the order of the lower authorities and further submitted that the contention of the assessee that assessee was having surplus interest free funds to the extent of Rs.6,94,13,331/- against interest free advance of Rs.1,06,87,868/- to M/s Chintamni Trading Company requires verification and therefore, it will be in the fitness of things, if the matter is restored back to the file of the A.O. for such verification. 7. After hearing both the parties and perusing the record, we find that the contention of the assessee that since the assessee was having surplus fund of Rs.6,94,13,331/- against ....
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....gh opportunities in series were given to it right from the beginning of the assessment proceeding to till date. From the submissions given by the assessee, it was observed that more than 3 years have passed from the date of transaction to till date not a single rupee has been paid. Section 41(l)(a) provides as under: Where an allowance or deduction has been made in the assessment year for any year in respect of loss, expenditure or trading liability incurred by the assessee (hereinafter referred as the first-mentioned person) and subsequently during any previous year,- (a) the first-mentioned person has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way remission or cessation thereof, the amount obtained by such person or value of benefit accruing to him shall be deemed to be profit and gains of business or profession and accordingly chargeable to income-tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not; It is clear from the above sec....
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....n from the creditors nor could it produce supporting evidences to prove that the liability still exists. The assessee could not clearly state when the liability would be possibly paid and also could not produce any relevant documents showing whether the creditors have filed any claim before the court or any other agency. It was made clear to the assessee that if it fails to submit any concrete information in respect of these creditors or to adduce any evidence to the effect that these liabilities are in fact payable, then the only logical conclusion that can be drawn will be that- these creditors are also no more payable and are ceased liabilities. The assessee has totally failed to discharge its onus in this regard and an adverse inference is drawn against the assessee. Therefore by order sheet dated 12/12/2010, a final opportunity was given to the assessee either to prove that these liabilities still exist or to show cause , why the same should not be considered to be ceased liability U/s 41(1) of the IT Act. The hearing for this purpose was fixed on 16/12/2010. On the said date, the assessee has neither furnished confirmation in any of the case nor filed any explanatio....
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....ation of liability during the year under appeal. Relying on the decision of Hon'ble Apex Court in the case of CIT Vs. Sugauli Sugar Mills Pvt. Ltd. 236 ITR 518 and the decision of Hon'ble ITAT, Ahmedabad Bench in the case of New Commercial Mills Company Ltd. 73 TTJ 893 it was argued that on these facts no addition u/s 41(1) can be made. We further find that the A.O. has not been able to demonstrate any cogent reason and has not brought any material on record to show that these liabilities have ceased in the year under appeal. Simply because assessee was not able to produce any confirmation regarding the creditors, the conclusion cannot be arrived that the liability has ceased to exist. We further find that the assessee had not passed any entry in its books of accounts which shows the intention of the assessee for making payments to these parties. The A.O. has not proved that the liabilities were either bogus or have ceased to exist. It is also not a case of the Revenue that the assessee had obtained any benefit by way of remission during the year. Non-availability of confirmation from the creditors does not lead to the conclusion that the debts have been obliterated. I....
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....r 24/01/2008 14000 Labour Charges Press Fitter 26/11/2007 14500 Labour Charges Press Fitter 19/12/2007 8700 3. Tasubha Parmar Labour Charges Press Fitter 10/01/2008 6000 Labour Charges Press Fitter 24/01/2008 14000 Labour Charges Press Fitter 23/02/2008 15820 Labour Charges Press Fitter 31/03/2008 9500 Total 68,520 4. Premaram N Chaudhary Labour Charges Press Fitter 1/1/2008 75750 Total 75,750 5. Ambaram Pattaram Labour Charges- Press Fitter 30/12/2007 1500 Labour Charges Press Fitter 1/1/2008 73500 Total 73,500 6. Sanjay Bahadursingh Gin fitter Charges 9/11/2007 19450 Gin fitter Charges 19/12/2007 10455 Gin fitter Charges 29/12/2007 10795 Gin fitter Charges 24/01/2008 7000 Gin fitter Charges 22/02/2008 8000 Total 55,700 ....
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....nded to pay the amount to all the labourers on individual basis, it could have also done so by directly debiting the labour expenses and crediting these labourers account. It has not done so which itself implies that it had entered into a contract with the so called main person and had paid the amount to the main person at the time of crediting his account and at this point of time the assesses was liable to deduct IDS on the amount credited to the main persons account. It is immaterial that to whom the assessee had made payments out of the total contractual payment of the contractor or so called main person. Actually, fact is that the assessee had made contract with these main persons however, being a labour oriented work the main person have engaged other persons for the said contractual work and the assessee had made payments to these persons, engaged by these contractors out of the total contract amount. But in this situation also the assessee was required to make TDS while making to payment to any one either to the so called main person or to the other persons. As contended by the assessee that they are enclosing the vouchers of payment to individual, is factually incorr....
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.... such as Kapasia loading, press fitter, Gin fitter charges were in the nature of contractual payment and the provisions of Section 194C were applicable. The assessee's contention was that the business of the assessee being a seasonal business and the assessee engaged labour on piecemeal basis without any type of written or oral contract, without fixing any charges, quality of work and period of work etc. Every year the labour get changed and no long term labourer is there. The payment was made by the assessee to the main person and in turn he made payment to the persons who were actually doing the work. The persons who have been mentioned in the assessment order were only intermediary and not the contractor. This contention was not disputed by ld. D.R. at the time of hearing before us. Therefore, we are of the opinion that the business of the assessee was seasonal work. He had employed different labourers to carry out the work as mentioned above. Ld. CIT(A) has, therefore, rightly accepted the contention of the assessee that the business were seasonal as the same were supported by the accounts of the assessee. The business was only for 2-3 months and at the end of year most of the ....
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....& Machinery Office Building Office Equipment Car Repairs 1. 3385 2271 1700 3000 2. 6447 1660 1050 1000 3. 8837 4145 1500 280 4. 1050 2040 210 3561 5. 601 80 875 10730 6. 1700 4375 670 1364 7. 7305 150 310 27172 8. 820 394 1220 320 9. 3317 1044 210 1057 10. 1400 5500 2200 1315 11. 172 2690 1250 595 12. 1475 2000 1100 4400 13. 3758 1000 1010 1412 14. 887 2360 - 1349 15. 1900 910 - 8252 16. 269 2955 - 6321 17. 220 1000 - 1412 18. 350 2160 - 2162 19. 135 3627 - 2858 20. 1254 1616 - 9963 21. 585 1265 - 15575 22. 5513 2000 - 14960 23. 100 713 - 240 24. 1280 2050 - 4399 25. 45 235 - 8008 26. 981 670 - 11306 27. 374 - - 4028 28. 437 - - 5809 29. 459 - 695 30. 45 - - 4300 31. 6285 - - - 2590 32. 7222 - - - 33. 396 - - - 396 34. 250 - - 35. 955 - - 36. 562 - - 562 37. 11100 - - ....
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....9/- 40,614/- Total 52,614/- 23. It is clear from the above that the only payment of Rs.52,614/- was not supported by bills and has been spent through self made vouchers. The assessee has claimed total expenses on account of repairs of Rs.5,59,978/-. Thus the amount that has been spent by self made vouchers is less than 10% of the total repair expenses incurred by the assessee during the year under appeal which appears to be quite reasonable as it is some times not possible to obtain bills for each and every expenditure incurred as repairing expenses are paid to different persons which may not have the bills with them. 24. In the light of these facts and circumstances of the case, we are of the considered opinion that ld. CIT(A) has rightly deleted the disallowance of Rs.3,05,477/- made by the A.O. 25. This ground of the Revenue is also dismissed. 26. Ground No.4 and 5 are general in nature and don't require any adjudication. 27. In the result, Revenue's appeal is dismissed. C.O. No.84 of 2012 (By assessee) 28. The assessee has taken following grounds in cross objection:- "1. That the appellant has not made any entry and claim....