TaxTMI 
TaxTMI 
TaxTMI 
2014 (12) TMI 510
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....nfirming the disallowance of depreciation in respect of building observing that it is not a business asset. (6) The learned CIT(A) erred in confirming the disallowance of expenditure amounting to Rs. 79,6111- u/s 37 of the Act. (7) The learned CIT(A) erred in confirming the disallowance of Rs. 13,88,78,085/- u/s 68 of the Income Tax Act, 1961. (8) The CIT(A) ought to have appreciated the fact that the explanations offered by the appellant company regarding the source, genuineness and creditworthiness of the creditors. (9) The CIT(A) erred in confirming the initiation of penalty proceedings u/s. 271(1)(c) of the Act. 3. Brief facts of the case are that the assessee is a company engaged in the business of trading. It filed its return of income for A.Y. 2007-08 on 31.3.2008 declaring nil income. The AO completed the assessment by making the following additions and determined the total income at Rs. 13,90,32,377: (a) Income from house property Rs. 1,55,232 (b) Disallowance of depreciation Rs. 66,605 (c) Disallowance of expenditure u/s. 37 Rs. 79,611 (d) Addition unexplained cash credits u/s. 68 ....
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....rming of disallowance of expenditure amounting to Rs. 79,611 u/s. 37 of the Act. The CIT(A) observed that the AO made the addition because business expenditure had been claimed while absolutely no business had been conducted by the assessee-company. 8. The AO observed that the assessee company claimed business expenditure of Rs. 79,611/- for the A.Y. 2007-08 under different heads like audit fees, bank charges, rates & taxes and no business activity was carried out by the assessee during the year. Therefore, expenditure claimed by assessee company cannot be allowed as deduction as the same cannot be treated as expenditure incurred for the purpose of business and only expenditure that is allowable is the expenditure incurred for carrying out the business activity of assessee. It is very clear from the terminology used in section 37 of IT Act that only the expenditure that is laid out expended wholly and exclusively for the purpose of business is to be allowed as deduction in computing the income chargeable under the head business & profession. Here in this case as the expenditure not incurred during the course of business of assessee, the same cannot be allowed as deduction. Therefo....
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.... even confirmation letters could be produced from any of the parties. As per provisions of section 68 of IT Act, onus is on assessee to substantiate the amounts introduced in its books to the satisfaction of AO. The assessee-company being private limited company, more responsibility is cast on it to prove genuineness of huge amount introduced in form of advances as amounts will not be accepted from general public but known persons. Therefore, it should not be difficult for assessee to produce evidences substantiating the amount introduced. But in the present case assessee failed to produce even basic information. The fact that assessee could not file even confirmation letters proved beyond doubt that huge amount introduced as advances from various parties is nothing but undisclosed income of company. Since assessee failed to discharge onus of proving genuineness of credits introduced as per provisions of section 68 of Income tax Act, the amount introduced in names of various creditors Rs. 13,88,78,085 is considered as deemed income of assessee and charged to tax as its income from other sources for A.Y. 2007-08. 13. Before the CIT(A) the assessee produced as additional evidence ph....
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....rtunity to put its case and prayed that one more opportunity may be given to furnish necessary evidence to support its case and the inference drawn by the CIT(A) is improper and requested that the entire issue may be remitted back to the file of the CIT(A). He also placed reliance on the order of the co-ordinate Bench in assessee's own case for A.Y. 2006-07 in ITA No. 920/Hyd/2011 dated 29.11.2013 wherein held as follows: "5. We have considered the issues and examined the record. As far as various credits are concerned, the same are group transactions and the AO himself recorded in para 5 in assessment order that Assessee company filed confirmations from all creditor companies. In spite of that, the AO was of the opinion that due to lack of cross verification in some cases and variations in some entries, the amounts were added as income of Assessee. Assessee furnished further information in the course of appellate proceedings and on the basis of remand report, the learned CIT(A) deleted the amount to the extent of Rs. 15.42 crores. The amounts sustained to the extent of Rs. 3.17 crores are nothing but the discrepancies found between the accounts of Assessee and ....