TaxTMI 
TaxTMI 
2014 (6) TMI 539
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....r on taken up for scrutiny by issuing notice under section 143(2)/142(1) of the Act. During the course of scrutiny proceedings the AO noticed that the claims made by the assessee were not in accordance with law, which were disallowed and ultimately completed the assessment on a total income of Rs.57,91,270/-. We shall take up the facts concerning each ground separately. 4. Ground No. 1 reads as under: - "1. On the facts and in the circumstances of the case, the Hon'ble CIT(A) is justified in law in deleting the addition of Rs.12,76,655/- made u/s. 69C of the Act being the unexplained expenditure in the books of the assessee." 5. During the course of assessment proceedings the AO noticed that under the head "Capital Work-in-Progress" the assessee showed gross expenditure of Rs.12,76, 655/- on account of professional fees paid. Assessee furnished names of the parties, amount paid and proof of TDS. In the opinion of the AO merely because tax was deducted on payment made it does not automatically lead to justification of the purpose; assessee has to establish the purpose, genuineness and business expediency of such expenditu....
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....ase falls outside the ambit of section 69C of the Act. In this regard he observed as under: - "4.2 I have considered the findings of the AO as contained in paragraph 3.1 of the assessment order and also submissions as made by the appellant. It is a fact that AO does not dispute genuineness of the expenses as claimed. In fact it is on record that details of the payment as made to various parties along with their names, complete address, PAN details, amounts paid and further the TDS deducted were furnished before the AO. It is not disputed that from the details as furnished before the AO, it is seen that said parties are mainly consultants to whom the payments have been made. Thus on the said expenditure, the appellant had offered all the details which the AO had called for. It is not as though no explanation about the said expenditure or it source thereof were not explained to the satisfaction of the AO. Only objection taken by the AO is that justification for having incurred said expenditure has not been established. This reasoning of the AO is certainly outside the scope and ambit of the provisions of section 69C. In fact the....
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....the addition. Either he should have used the expression "CIT(A) is not justified in law in deleting the addition" or he should have questioned "whether the CIT(A) is justified in law". The ground raised by the AO, on the other hand, appears to have come from his heart i.e., the true position on this issue was reflected in the grounds of appeal. Though the Revenue preferred an appeal, neither the learned D.R. cared to look at the grounds nor the AO intended to change the grounds of appeal. Even if it is assumed that the AO seeks to challenge the order passed by the CIT(A) on this issue, even before us no material, whatsoever, was placed to show as to under which provision of law addition can be made with regard to the sum of Rs.12,76,655/- which as admittedly not claimed as business expenditure but was added to the capital work-in-progress. 9. Having heard the learned D.R. and the learned counsel for the assessee in this regard we are of the firm view that the AO has raised a soulless ground which deserves to be dismissed in limine. We could have saved a lot of time had the Commissioner not given his authorisation on such frivolous issues. On the contrary, it is incumbent upon the ....
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....mplementation agreement for Hydroelectric project Rs.7,88,845/- (c) Excess rent alleged to have been claimed Rs.2,800/- 12. Assessee challenged the disallowances before the CIT(A). It deserves to be noticed that copy of the grounds of appeal and statement of facts (if any) were not furnished by the Revenue at the time of filing the appeal before the ITAT but the learned D.R. appears to have been fully prepared without even knowing whether all the papers were available with him or not. Any way, we have gone through the order passed by the CIT(A) to understand as to what was the contentions of the assessee. It was stated before the learned CIT(A) that Rs.8,00,000/- had been paid to the Directorate of Fisheries, Himachal Pradesh for issue of NOC to the assessee's power project. It was submitted that the said expenditure was incurred to get clearance of flow of water downstream, since the nature of business of the assessee is to generate hydroelectric power and it is not possible to generate the same without flow of water. The assessee also produced a copy of the NOC from the Directorate of Fisheries, Himachal Pradesh to emphasise that it is not in the natu....
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....ppellant had capitalized the said expenditure. It is held that since the expenditure is incidental to the business carried on by the appellant, it has been correctly capitalized. As regards the balance of Rs.2,800/-, it is seen that said sum has been disallowed without assigning any specific reason or details. On the basis of the above discussion, it is held that the claim of the appellant for capitalization of the above stated expenditure in a sum of Rs.15,91,645/- requires to be allowed and is therefore directed to be allowed to be capitalized to the work-in-progress." 16. Revenue preferred an appeal and, as already noticed, the AO justifies the action of the CIT(A). It also deserves to be noticed that despite specific findings of the CIT(A) the Revenue did not choose to file papers to contradict the findings of the CIT(A) but merely relied upon by the order passed by the AO. The learned counsel for the assessee, on the other hand, adverted our attention to the paper book filed by the assessee company to submit that the payment for obtaining NOC and towards extension fees cannot, by any stretch of imagination, be treated as penalty in nature. With regard to the balance amount of....
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....paid towards share application money. The confirmation letter was not even singed by the Director of the company and no documentary evidence to prove the genuineness of the transaction, source and creditworthiness of the person advancing such amount was produced. He then referred to section 68 of the Act to highlight that the assessee has to fulfil three ingredients and mere explanation is not sufficient. If there is no explanation about the nature and source thereof a sum so credited can be charged to income tax under section 68 of the Act. In his opinion there is a difference between 'burden of proof' and 'onus of proof'; burden of proof lies on the person who has to prove a fact and it never shifts but the onus may shift. In his opinion the assessee did not discharge its initial onus even after availing sufficient opportunities and therefore by applying the doctrine of 'notorious fact' he assumed that the aforementioned share application money must have flown from the assessee and accordingly added the sum under section 68 of the Act. In the instant case the assessee stated to have received money from M/s. Toptrack Garments Pvt. Ltd. towards share application, but subsequently r....
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....lled for a remand report from the AO. In the remand report the AO admitted, by observing that no adverse conclusion can be drawn on this issue; in the light of the facts brought on record the AO admitted that no case can be made out to make addition under section 68 of the Act. However, with regard to admission of new evidence the AO objected by stating that under Rule 46A of the I.T. Rules the assessee has to show reasonable cause for non-production of the evidence before the AO whereas in the instant case ample opportunities were given by the AO to produce the details and hence the new evidence should not be admitted. 23. The learned CIT(A) considered the issue in the backdrop of the facts available on record before the AO as well as the submissions made before him and the remand report obtained from the AO. He concluded that it is a fit case for admission of additional evidence and on the facts he was of the view that no case was made by the AO to make the addition under section 68 of the Act. Detailed reasons given by the CIT(A) are extracted for immediate reference: - "6.3. The findings of the AO and the submissions as made by the appellant were considered....
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....he details produced now have been examined. In the audited balance sheet of M/s. Top Track Garments P. Ltd. of March 2007 in the Schedule IV (Investments) it is reflected that investment is made in 67000 shares @ Rs.10/- each of Growel Energy Co. Ltd. equivalent to Rs.67,00,000/- previous year it is shown at Rs.5,00,000/-. Further in the bank statement of M/s. Growel Energy Co. Ltd. and M/s Top Track Garments P. Ltd. the payments and receipt were duly reflected. Further in share allotment register shares numbering 46039 were shown against the name of M/s. Top Track Garments P. Ltd. As such no adverse conclusions can be drawn on this issue in light of the new facts brought on record." 6.5. The AO has raised objection regarding admissibility of the new evidence. In this regard it is to be stated that with regard to the share application money, the basic details such as name of the party, address, PAN and details of the cheque issued were already produced before the AO. Once preliminary details are furnished, then it is a settled legal position that the onus shift to the AO to controvert the assessee's stand if he is not agreeable with the submissions and evidence ....
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.... such efforts were made by the AO. In fact, under section 68 of the Act the AO is duty bound to prove that the assessee would have earned such additional income, by the use of the expression 'may' in section 68 of the Act, whereas in the instant case the AO tried to make a case on assumptions, without proving that the material available before the AO is wrong and insufficient. In fact only two opportunities were given and the assessee furnished the details. Thus the learned counsel for the assessee strongly supported the order passed by the learned CIT(A). 26. We have carefully considered the rival submissions and perused the record. The learned CIT(A) has taken note of the fact that M/s. Toptrack Garments Pvt. Ltd. cannot be treated as an associate company and duly authorised person has signed the confirmation letter. It is also not in dispute that payments were made by cheque and PAN details were also on record before the AO. Even at this stage the learned D.R. could not point out as to on what basis the Revenue can assail the order of the CIT(A). In such case it is the duty of the administrative Commissioner to take proper care to verify the facts thoroughly before appending hi....