AI Drafter 
TaxTMI 
TaxTMI 
2015 (2) TMI 985
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....- claimed as deduction u/s.37(1) of the I.T. Act are not genuine and is not wholly and exclusively for the purpose of the business/profession of the assessee?" 2.1 Facts of the case, in brief, are that the assessee is an individual and is engaged in the business of liaisoning consultant. He filed his return of income on 30-10-2007 declaring taxable income of Rs. 17,46,750/-. During the course of assessment proceedings, the AO observed from the various details furnished by the assessee that the following expenses are not genuine and are not incurred wholly and exclusively for the purpose of business of the assessee. Sr.No. Date Name Amount Cheque No Purpose 1. 23-03-2007 Raman P. Shah 6,25,000 409246 Clearance expenses 2. 14-03-2007 Navin A. Surani 5,00,000 409244 Service charges 3. 23-03-2007 Babulal M. Maheshwari 5,00,000 409246 Service charges 4. 23-03-2007 Navin V. Gala 5,00,000 409247 Commission charges 5. 14-03-2007 Kishor K. Sheth 5,00,000 409243 Brokerage and commission charges 2.2 Rejecting the various explanations given by the assessee, the AO disallo....
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....missions and sanctions from Govt. departments and therefore he has to make payments to mediators for further liaisoning with various authorities and politicians towards clearing expenses, service charges, commission and brokerage expenses. It was submitted that the payments were made by crossed account payee cheques and therefore are genuine payments. The expenses of these persons and the payments made to them is established in view of the information of their bank accounts supplied by the bank to the AO. It was argued that the assessee has communicated to the AO the address of the 5 mediators who rendered services to the assessee. It was submitted that the assessee is not responsible for difference in signature of the said persons, particularly in view of the fact that genuineness of the payments to the said persons was proved on enquiry made by the AO with banks of the said persons. It was further argued that if the amount is disallowed than the resultant net profit would be 73% on a gross receipt of Rs. 65,25,000/- which is impossible. Accordingly, it was argued that the addition made by the AO should be deleted. 4. Based on the arguments advanced by the assessee the Ld.CIT(A....
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....ed at 40% cannot be accepted. considering the totality of the facts and to meet ends of justice, the net profit of the appellant is estimated at 50% of the gross receipts of Rs. 65,25,000/- i.e. at Rs. 32,32,500/- as against the net profit declared by the appellant at Rs. 19,16,858/-. The resultant addition upheld on this count shall be Rs. 13,45,642/- as against the addition of Rs. 26,25,000/- made by the A.O. on account of disallowance of expenses. The A.O. is directed accordingly." 4.1 Aggrieved with such order of the CIT(A) the revenue is in appeal before us. 5. The Ld. Departmental Representative strongly objected to the order of the CIT(A). He submitted that during the course of assessment proceedings the AO has conclusively proved that the expenses of Rs. 26,25,000/- debited to the P&L Account by the assessee are not genuine and not wholly and exclusively incurred for the purpose of his business. The AO has even gone to the extent of establishing that the assessee has adopted a circuitary route of withdrawing money from the books of account in the guise of expenses and bringing the same back into the books of account in the form of unsecured loans. He submitted that th....
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....s failed to discharge the onus cast on him by bringing sufficient evidence to prove that such expenditure is incurred wholly and exclusively for business purpose and the very nature of such expenses as stated by the assessee before the Ld. CIT(A) is against public policy, therefore, such expenses in our opinion cannot be allowed. Further, the Assessing Officer had also given a finding that the money has come back to the assessee indirectly. Under these circumstances, we are unable to uphold the order of the CIT(A) and the same is set-aside and the order of the Assessing Officer is restored. Grounds of appeal No. 1 & 2 by the revenue are accordingly allowed. 8. Grounds of appeal No.3 & 4 by the Revenue are as under : "3. Whether on the facts and in the circumstances of the case, the Ld.CIT(A)-I, Nashik was justified in holding that the amount of Rs. 52,97,171/- is in the form of 'advance' and not 'income' of the assessee? 4. Whether on the facts and in the circumstances of the case, the Ld.CIT(A)-I, Nashik was justified in ignoring the fact that the amount of Rs. 52,92,171/- received by the assessee from NITCO has all the ingredients therein to consider the ....
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....s not advanced the same to the owners of the property or company. In view of the facts discussed above, the A.O. has held that the amount of Rs. 52, 97, 171/- represents the assessees income and therefore, has brought the same to tax." 9. Before CIT(A) the assessee submitted that Nitco Tiles Ltd., has in fact paid an advance to the assessee for making necessary payment to seller of the land and for necessary expenses to be incurred for transferring the land without deduction of TDS. Later on, TDS was deducted to be on safer side. It was submitted that section 199 is an enabling provision for claiming deduction of TDS in subsequent years etc., The A.O. is not bound to assess the income in the year to which the TDS certificate relates as actual amount received by assessee is only Rs. 50 lakhs. The unclaimed TDS would result into loss of Rs. 2,97,171/- for no reason if deal is not finalized. Even if, for the sake of debate, it is assumed that Nitco Ltd. has made payment towards advance fees to the assessee, it shall not be the income of the assessee as the necessary services in the form of obtaining permission from government for transferring land under Forest Zone and Coastal R....
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....ities is necessary. The appellant has to comply with various rules and regulations and papers and documents for obtaining the permission. The appellant has not obtained the said permission and hence the proposed deal in respect of the land is pending. In view of the above facts, it is clear that the amount paid by the NITCO Ltd. is advance payment for which required services were not rendered by the appellant. 8.3.4 In view of the fact that the required services for which the payment was made were not rendered by the appellant in the form of necessary permissions from Government authorities and the actual purchase deal by arranging registered purchase deed between NITCO Ltd. and Shri S.S. Patil in respect of the said land. In view of these facts no 'income' accrued to the appellant in the year under appeal. What is to be taxed is income and receipt an amount cannot be the basis for levy of tax. 8.3.5 On perusal of the decision of Hon'ble Supreme Court in the case of CIT Vs. Shoorji Vallabhadas & Co. 46 ITR 144 relied on by the appellant, it is noticed that the Hon'ble Apex Court has pointed-out that I.T.Act takes into account two points of time on which the li....
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....pertaining to the services rendered only got vested in the assessee and the rest of the amount was rightly taken as liability to be adjusted in the subsequent year as and when the services shall be rendered. 8.3.7 The Accounting Standard 9 prescribed by the Institute of Chartered Accountants of India also lays down that the revenue is to be recognized only after accomplishment of work after rendering services. It also lays down that such performance should be regarded as being achieved when no significant uncertainly exists regarding the amount of consideration that will be derived from rendering the services. 8.4 In view of the above facts and discussion and respectfully the ratio laid down by the above mentioned decisions of Hon'ble Supreme Court and I.T.A.T., Delhi Bench, I am of the considered view that the amount of Rs. 52,97,271/- was not income of the appellant for the year under appeal. The addition of Rs. 52,97,271/- is deleted. The A.O. is directed accordingly." 10.1 Aggrieved with such order of the CIT(A) the Revenue is in appeal before us. 11. The Ld. Departmental Representative strongly opposed the order of the CIT(A). He submitted that since the assess....
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....us decisions cited before us. From the letter addressed by Nitro Tiles Ltd. to the assessee on 23-01-2007, a copy of which is placed at paper book page 31, we find Nitco Tiles Ltd. has given assessee an amount of Rs. 50,00,000/- as advance payment against the purchase of the property at Khandivali. Similarly, from page 34 of the paper book, we find Nitco Tiles Ltd., vide letter dated 01-04-2009 has confirmed the debit balance of the assessee in its books at Rs. 52,97,171/- as on 31-03-2009. All these details were very much available with the AO but he has not considered all these things. Since Nitco Tiles Ltd. has paid an amount of Rs. 50 lakhs as advance to the assessee for proposed purchase of land belonging to one Shri S.S. Patil and since the deal could not be materialised due to certain clearances, therefore, the assessee in our opinion has rightly shown the amount as advance in its books and the Ld.CIT(A) was justified in treating the same as advance and not revenue in nature. In this view of the matter and in view of the detailed reasons given by the Ld.CIT(A) on this issue we do not find any infirmity in his order on this issue. Accordingly, we uphold the same and the groun....
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.... also includes substantial reimbursement of travelling expenditure to the staff. As regards expenses for land owners Rs. 24,912 the appellant has pointed out that substantial expenses to the extent of Rs. 19,671/- are made by cheques. It has also been noticed that the auditor has certified that the profit shown by the appellant is true and fair and has not pointed out any discrepancy towards excessive and unreasonable claim of expenditure as alleged by the A.O. The expenditure incurred by the appellant on account of salary, travelling etc. appears to me to be reasonable considering the nature of business. However personal element in travelling expenditure incurred by the appellant at Rs. 91.037/- other than travelling expenses of staff and Hotel expenses etc. for land owners at Rs. 24,912/- cannot be ruled out. This expenditure is disallowed to the extent of Rs. 11.550/- i.e. 10% of Rs. 1,15,949/- (Rs. 91,037/- + Rs. 24,912/-). The balance disallowance of expenditure of Rs. 8,54,374 is deleted. This ground of appeal is partly allowed." 16.1 Aggrieved with such order of the CIT(A) the Revenue is in appeal before us. 17. After hearing both the sides, we do not find any infirmit....
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....ed 19-11-2011 requesting the Ld.CIT(A) for admitting the abovementioned additional evidences under Rule46A of the I.T. Rules. The Ld.CIT(A) called for a remand report from the AO. However, since the AO did not file his comments by way of remand report till the passing of the order, the Ld.CIT(A) passed the order and deleted the addition by observing as under : "6.4 I have carefully considered the facts of the case, the assessment order, the rival submissions and the position of law on the subject. The only reason stated by the A.O. for making the addition u/s. 68 is that the appellant has not filed confirmation letter from S.D. Corporation and hence the above mentioned amount of Rs. 25,00,000/- shown as loans and advances is not proved. The A.O. has not filed his comments by way of remand report upto the date. Therefore, it is legally presumed that the AO has no objection to their admission. Accordingly, additional evidences are admitted on merits. It is undisputed fact that the appellant has received the amount of Rs. 25,00,000/- from S.D. Corporation by cheque. The appellant could not obtain confirmation letter from S.D. Corporation during assessment proceedings in December, 2....
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....ed fact that the amount has been received by the appellant by bank cheque from S.D. Corporation. Further, as per the confirmation letter of S.D. Corporation in the form of assessee's account, it has been noticed that the said payment has been made by M/s. S.D. Corporation to the appellant in April, 2007 and credited by the appellant in its books in the same month and has deposited the cheque in Karnataka Bank. From the submission of the appellant, it has been noticed that in respect of other payments received from S.D. Corporation, the appellant has deducted TDS as the same were received towards fees but no TDS has been deducted in respect of payment of Rs. 25,00,000/- given as loan/advance. In view of the above facts and confirmation letter of M/s. S.D. Corporation, I am of the considered view that the A.O. is not justified in treating the amount of Rs. 25,00,000/- received by the appellant by bank cheque as unexplained cash credit. The addition u/s. 68 of Rs. 25,00,000/-, is therefore, deleted. The A.O. is directed accordingly. This ground of appeal is allowed." 19.1 Aggrieved with such order of the CIT(A) the Revenue is in appeal before us. 20. We have considered the r....
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.... 01-07-2007 30,000/- 30,000/- Out of Rs. 2,00,000/- received by cash from Shri Girish Shah on 31-05-2007 C 05-09-2007 14-09-2007 03-10-2007 04-12-2007 5,000/- 25,000/- 4,000/- 13,000/- Out of cash withdrawals of Rs. 15,000/- on 18/08/07, Rs. 15,000/- on 24/08/2007, Rs. 7,000/- on 29/08/2007, Rs. 5,000/- on 20/09/2007, Rs. 5,000/- on 23/09/2007, from the same bank. D 11-01-2008 16-01-2008 4,50,000/- 5,50,000/- Out of Rs. 6,00,000/- received from Shri. Jaysukh Dave on 09/01/2008 by cash and Rs. 4,00,OOO/- received on 15/01/2008 from Shri. Pravin Mehta by cash Total 11,57,000/- The AO, however, held that the assessee did not file the requisite details with supporting evidences to explain the source of such deposits. He, therefore, made addition of Rs. 11,57,000/- to the total income of the assessee. 22. In appeal the Ld.CIT(A) deleted the addition by observing as under : "7.3 I have carefully considered the facts of the case, the assessment order and the rival submissions. On perusal of the same, it has been noticed that the said deposits of Rs. 11,57,000/- in Karnataka Bank have been recorded by the appellant ....