TaxTMI 
TaxTMI 
2014 (11) TMI 144
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....e of reimbursement of expenses and the same were not accounted in the books of accounts of M/s Alchemist Group of companies and hence these expenses remained unexplained in the hands of the assessee. 3. The ld. CIT (A) erred in deleting the addition of Rs. 72,698/- made under the head Business Promotion, staff welfare and entertainment as the assessee could not produce any documentary evidence that the said expenses were wholly and exclusively incurred for the business of the assessee. 4. The Ld. CIT (A) erred in restricting the disallowance made by the A.O. to 50% of Rs. 1,25,255/- on account of personal use of telephone, vehicle maintenance and depreciation on car etc. in absence of any documentary evidence that the said expenses were wholly and exclusively incurred for the business of the assessee." 2. Apropos Ground Nos.1 and 2, the Assessing Officer observed that there were current liabilities of Rs. 1,27,97,418/- against the name of Alchemist, Chandigarh in the balance sheet with the assessee as on 31.03.2009. On query, the assessee filed details vide letter dated 08.12.2011, submitting the following confirmations of the Alchemist Group of Companies:- (i) Alche....
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.... 1000000.00 25.11.2008 800000.00 16.12.2008 1500000.00 5.2.2009 2000000.00 12.3.2009 1500000.00 Total 2950000.00 22300000.00 2000000.00 Grand Total 27250000.00 As per Confirmations 2950000.00 22300000.00 2000000.00 Grand Total 27250000.00 Confirmations Balance as per Alchemist as on 31.3.2009 27250000 Less: Paid by Alchemist Hospitals Ltd. to DHR Holdings Ltd. for a machine, debited to Swaran Dental Clinic but not Accounted by Swaran Dental Clinic (Refer SDC Ledger a/c Books of Alchemist Holdings Ltd.) 400000 400000 26850000 Less: amount debited by SDC in various years but not Accounted by Alchemist Financial Year Annexure-A 58418.32 2006-07 Annexure-B 15,81,629.11 2007-08 Annexure-C 1,04,26,981.00 2008-09 Annexure-D 19,35,554.....
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.... that the expenses for all plant and machinery required to be purchased, for the research work to be done and for upgrading the set up shall be incurred and borne by the Alchemist Group; that certain expenses were incurred in the year under consideration, as also in the earlier years, on purchase of new plants and machinery and for upgradation of the business; that though in the assessee's balance sheet for the year under consideration, the assessee had shown a liability of Rs. 1,27,97,418/- to Alchemist under the head 'Current liabilities', the Assessing Officer had added an amount of Rs. 1,44,52,282/-, being the difference between the sum of Rs. 2,72,50,000/-, as confirmed by the Alchemist Group of Companies and the said amount of Rs. 1,27,97,418/-, shown as current liabilities by the assessee, as not reconciled; that as such, first of all, the addition could, in any case, not be beyond Rs. 1,27,97,418/-, the amount shown by the assessee as current liability payable to Alchemist; that the Alchemist Group of Companies had shown the total amount paid to the assessee as outstanding, to be recognized in their books of account on completion of the facility by the assessee; that this e....
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.... note of by the Assessing Officer in para 3 of the assessment order; that as such, it was clear that the assessee had shown the balance amount available with him, received from the Alchemist Group, which had been shown as a current liability and the Alchemist Group had shown the total amount given by them to the assessee from time to time and hence, there was no difference in the amount received by the assessee and shown by him as current liability; that it was not the case of the Assessing Officer, either that the assessee was showing a liability more than that shown by the Alchemist Group; that the Assessing Officer had himself issued notices u/s 133 (6) of the Act to the Alchemist Group, in response to which, the Alchemist Group had filed their confirmations; that if the Assessing Officer entertained any doubt, he could always have made further inquiry from the assessee, rather than making the unwarranted addition; that this, however, had not been done; that it was not a case where either the identity of the creditors had not been established, or their credit worthiness not proved, or where the transactions were not genuine; that the Assessing Officer had made the addition witho....
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....Alchemist Group had shown the total amount given by the assessee from time to time; that thus, there was no difference in the amount received shown as current liability by the assessee; that it was not a case where the identity of the creditor was not established, or creditor was not established or where their credit worthiness was in doubt, or even where the transactions were not genuine; that the Assessing Officer had made the addition without appreciating the accounting entries made and without analyzing the complete details placed before him to explain as to why the assessee had shown the amount of current liability at Rs. 1,27,97,417.89 in respect of the Alchemist Group, as against the amount confirmed by them at Rs. 2,72,50,000/-; that all relevant bills, vouchers, and ledger accounts, with complete books of account had been produced before the Assessing Officer, which the Assessing Officer had himself confirmed in the assessment order; that none of the creditors had stated that the amount had not been given to them by the assessee; that in any case, it could be said that the transaction was in the nature of a loan only till the time the Alchemist Group did not recognize it i....
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....Group duly filed confirmations before the Assessing Officer and the Assessing Officer did not make any further inquiry with the assessee, if he was entertaining any doubt with regard to the recitals therein; and that rather, the Assessing Officer went on to make the addition illegally, which was rightly deleted by the Ld. CIT (A). 11. Having heard the parties in this regard, we find that on query by the Assessing Officer, the assessee filed all details and documentary evidence in the shape of bills/vouchers along with complete books of account. As per the assessment order itself, these were examined. The Assessing Officer issued notices u/s 133 (6) to the Alchemist Group of Companies, in response to which, they duly filed their confirmations. They confirmed the amount of Rs. 2,72,50,000/-, whereas the current liability shown by the assessee was of Rs. 1,27,97,417.89. The difference between the two, amounting to Rs. 1,44,52,282/-, was added by the Assessing Officer. At the outset, addition, if any, as rightly observed by the Ld. CIT (A), could have been only to the extent of the liability shown, i.e., of the amount of Rs. 1,27,97,417.89. Be that as it may, even the said current l....
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....o certifying that the assessee had incurred a sum of Rs. 1,40,38,349/- as on 31.03.2009, towards creating Dental Facilities on behalf of Alchemist Holdings Ltd. out of the above amount and that the balance of Rs. 82,61,651/- was outstanding and also that the Facility would be recognized in the books of Alchemist Holdings Ltd. on completion thereof by the assessee. APB 61 is a chart of telephone expenses incurred, showing the places where the telephones were installed/used, along with number-wise chart of telephone and the name of the person using the same. The telephone numbers have also been given. APB 62-73 is a chart of repair and maintenance expenses along with major bills of expenses, showing the expenses to have been incurred mostly for petrol, parking, toll tax, new battery and tube, etc., incidental to the carrying on of the business of the assessee. APB 74-80 is a copy of the assessee's bank account with HDFC Bank, debiting the payments received by the assessee from the Alchemist Group. APB 81-85 is a copy of ledger account of business promotion and entertainment expenses in the books of the assessee. APB 86 is a copy of confirmation from Alchemist Hospitals Ltd., certifyi....
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....n 31.03.2007, showing an amount of Rs. 5,986.68 as payable to Alchemist. APB 136 is a copy of Profit & Loss Account of Swaran Dental Clinic for the year ended 31.03.2007. APB 137 is a copy of Schedule-I to the Balance Sheet of Swaran Dental Clinic as on 31.03.2007, showing the fixed assets as on 31.03.2007. All these documents are reported to have been filed before the Assessing Officer. There is no denial to this. 13. To reiterate, the Assessing Officer has himself stated in the assessment order that the details filed by the assessee were examined by her. All the three companies of the Alchemist Group duly furnished confirmations dated 26.12.2011 before the Assessing Officer on query u/s 133 (6) of the Act. However, the Assessing Officer observed that since the assessee had failed to furnish documentary evidence in support of his stand regarding the expenses made on behalf of the Alchemist group, such stand was not acceptable and that the accounts of all the three companies of the Alchemist Group for the relevant period remained unreconciled. These observations of the Assessing Officer, it is seen, are not sustainable either on facts, or in law and the Ld. CIT (A) has correctly....
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....from time to time. The confirmations filed by the Alchemist Group before the Assessing Officer were never questioned by him and no further investigation in this regard was carried out, evincing that the Assessing Officer was satisfied with such response to the notices issued u/s 133 (6) of the Act. Moreover, the Assessing Officer nowhere alleged that the assessee was showing a liability more as payable, as shown by the Alchemist Group. Also, the Assessing Officer did not conclude that it was a case of nonestablishing the identity of the creditor. The credit worthiness of the Alchemist Group was never doubted. Even the transactions were not stated to be not genuine. The result arrived at by the Assessing Officer, as such, is a result of complete misreading and non-reading of the voluminous material documentary evidence brought on record by the assessee. 15. Such non-application of mind by the Assessing Officer is also evident from the following facts. Complete details and vouchers for F.Y.s 2006-07 to 2008-09 were produced before the Assessing Officer. Invoice No.DHR/KAVO/001 dated 06.03.2009 (APB-55) shows purchase of one piece G-Healzone 2130C 1.000.0100 equipment, for Rs. 4,50....
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....ree Companies of the Alchemist Group for F.Ys. 2006-07, 2007-08 and 2008-09 (APB 89-95, 113-125 and 92-112, respectively) and the Schedules of loans and advances in the books of all the three companies of the Alchemist Group, for all the three years (APB 126, 127 and 128, respectively) were all, undisputedly, before the Assessing Officer. None of these documents, however, finds even as much as a mention in the assessment order. Still, the Assessing Officer goes on to hold the explanation of the assessee to be untenable. 17. And last, but not the least, the assessee not having claimed any expenses, rightly contended, no disallowance is possible. 18. For the above reasons, we do not find any error in the impugned order on this issue and the same is hereby confirmed. Ground Nos.1 and 2 raised by the department are, therefore, rejected. 19. Apropos Ground No.3, the Assessing Officer made an ad hoc disallowance of Rs. 72,698/- on account of expenses out of expenses claimed as business promotion expenses (Rs 1,81,688/-), staff welfare expenses (Rs 75,844/-) and entertainment expenses of Rs. 1,78,653/- (as debited in the Profit & Loss Account). While doing so, the Assessing Offic....
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....ther estimate. Finding the restriction of the disallowance, as ordered by the Ld. CIT (A), to be reasonable, we sustain the same. Accordingly, Ground No.4 is also rejected. 27. Ground Nos. 5 and 6 are general, requiring no adjudication. 28. In the result, the appeal filed by the department is dismissed. The order pronounced in the open court on 21.03.2014. ============= Document 1 Date Particulars Vch. Type Debit 15.7.2006 Expenses Payment 1105.00 16.7.2006 Expenses Payment 1006.00 4.10.2006 Expenses Payment 458.00 25.11.2006 Expenses Payment 516.00 17.12.2006 CREDIT CARD Payment 7379 AMERICAN EXP 41006 8.1.2007 Expenses Payment 483.55 2.2.2007 Expenses Payment 1007.00 8.2.2007 Expenses Payment 2808.00 11.2.2007 TRAVELING Payment 34933.00 SEMINAR CHANDIGARH 8.3.2007 Expenses Payment 6052.77 Document 2 15.3.2007 Expenses Payment Total 2670.00 58418.32 Annexure B 15.4.2007 18.4.2007 Raj Dental Traders Journal 91520.00 Noble Bio Care Journal 460112.00 Implants 20.4.2007 Noble Bio ....