TaxTMI 
TaxTMI 
2015 (4) TMI 222
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....he AO from the books of accounts disregarding the fact that such was not the case and the difference of salary (Faridabad Branch) between salary sheet submitted and P&L account amount in to Rs. 4,60,462/- was disallowed since even though vide submission dated 13.12.2010, assessee submitted that the difference is due to salary paid to two employees not covered under the ESI Act, upon examination of contention, it was found that without prejudice, even if the contention of the assessee was conside4red, there was still a difference of Rs. 72,461/- since the salary amount paid to two employees is Rs. 3,88,0001- and accordingly, it was clear that the assesses' s explanation was incorrect and difference of salary (Faridabad Branch) between salary sheet submitted and P&L account amounting to Rs. 4,60,462/- was not due to the reason adduced by the assessee. "3. Whether in the facts and circumstances of the case, the CIT(A) has erred in deleting addition of Rs.I,88,412/- on account of disallowance of loss on fire stock holding that the AO was not justified in making addition on account of difference between stock loss claimed and insurance claim made by assessee as the terms of the i....
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....ion expenses. Ld. A.R. submitted that the supplier was new to the assessee and, therefore, assessee had to make payments in cash as the supplier was not accepting payments through banking channel and such payment was covered by exceptions. 3.1 Arguing upon 2nd ground of appeal, Ld. A.R. submitted that difference in salary account was due to the fact that assessee had employed persons for which EPF was being deducted and, there was another group of people from the salary of whom no PF was deducted. He submitted that remaining difference as pointed out by A.O. was on account of arrears of salary. He submitted that complete reconciliation was submitted before Ld. CIT(A) and Ld. CIT(A) had dealt with the issue and therefore, had rightly allowed the relief. 3.2 Regarding 3rd ground of appeal, Ld. A.R. submitted that there was a fire in the premises of the assessee and the loss suffered by assessee could not be fully recovered from insurance company and, therefore, the difference of Rs. 1,88,412/- which could not be recovered, was debited to profit & loss account. 3.3 Regarding 4th ground, which is in respect of addition on account of rent, Ld. A.R. submitted that the rent claim....
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....ls had already been furnished in the course of assessment proceedings and the same are again furnished in support which have been placed on record. The voucher clearly proves the fact that imprest had been used for making the payments on different dates. ⦁ Rs. 22,000/- cash paid to Sharma Transport on account of van hire - This amount has also been paid out of imprest on different dates. This practice is commensurate with the trade norms in the business. The pick-up van was hired by the appellant for 20 days in the month for picking up local supplies. While the fuel payment was made by the appellant's employees from their imprest account, the final payment was then adjusted to that extent. Had the payment of fuel not been made by the appellant's employees, the smooth running of van would not have been possible which, in turn, would have resulted in loss of business to the appellant. Also, the payments were made on periodic basis. However, single voucher was prepared to book the amount which does not mean that entire payment was made in a single day. ⦁ Rs. 40,000/- paid on behalf of Kamlesh Bansal - The rented premises of the appellant caught fire. Howeve....
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....er, single voucher was prepared to book the amount which does not mean that entire payment was made in a single day. ⦁ Rs. 45,000/- cash paid for purchasing TV for gift - The appellant had provided for sales promotion program for 3 business executives. The scheme was that the one who would achieve the targets would receive TV as gift. One of the executives won the scheme. The appellant had to make the payment in cash as there was no other way the person could have purchased the television (considering that a lot of shopkeepers do not accept cheques and want down payment of cash). In this regard, the appellant had also relied on the decision of High Court of Calcutta in Girdharilal Goenka v. CIT [1989] 179 ITR 122 wherein it has been held that the ITO should take a practical approach to problems and strike a balance between the direction of law and hardship to the appellant. He should not enmesh himself in technicalities. After all, the object is not to deprive the appellant of the deduction which he is otherwise entitled to claim. In view of the above submissions and documents placed on record, it is clear that the payments are not covered under the provisions of secti....
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....ote that both of these employees have been paid by cheques and they are assessed to income tax. Further, the difference of Rs. 72,153/- was on account of arrears paid to employees which were duly verified by the AO from the books of account during the course of assessment proceedings. In view of the above submissions and documents placed on record, it is hereby held that the Assessing Officer was not justified in making addition on account of difference of salary as above. The addition of Rs. 4,60,462/- made on this count is, accordingly, hereby deleted. 10. Ground No. 6 relates to the disallowance of Rs.l,88,412/- on account of difference between stock loss claimed and insurance claim made by assessee. It has been observed by the Assessing Officer that vide order sheet entry dated 01.12.2010, the assessee was asked to show cause why loss on fire stock not be disallowed. Vide submission dated 13.12.2010, the assessee submitted that estimated cost of loss due to fire was Rs. 23 lakh and received less claim by Rs. 4,04,483.94 which had been debited to P&L account. In this regard, it is noted from the documents submitted by the assessee along with submission dated 13.12.2010, that ....
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....redit. Thus, the input tax credit is also a loss for the dealer, as VAT department does not allow the availability in view of specific provisions in the Act and the insurance company does not make the payment on account of same in the event of loss. In essence, that also means that in view of input credit reversal, the same is added back to the purchase price and is not available as credit for set-off against output tax liability. Accordingly, the loss on account of fire would need to be calculated based on the purchase price only. Thus, the appellant has satisfactorily explained the difference between stock Loss claimed and insurance claim made by assessee. In view of the above discussion, it is hereby held that the Assessing Officer was not justified in making addition on account of difference between stock loss claimed and insurance claim made by assessee as above. The addition of Rs. 1,88,412/- made on this count is, accordingly, hereby deleted. 11. Grounds No.7 & 8 relate to the disallowance of Rs. 11,76,487/- on account of disallowance of rent expenses. It has been observed by the Assessing Officer that it is seen that the assessee has debited Rent Expense Rs. 16,82,....
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....rly, loss claimed by assessee on account of lower claim received from insurance company has been fully analyzed by Ld. CIT(A). In respect of last addition on account of rent paid, the Ld. CIT(A) has held that payments against rent were made through account payee cheques and taxes wherever applicable were deducted and he further held that various depots for which rents were paid, were duly registered with VATA department. Before us, Ld. D.R. was not able to controvert any of the findings of Ld. CIT(A). We find that Ld. CIT(A) has passed a well reasoned and speaking order in which we do not find any infirmity. 7. In view of above, appeal filed by Revenue is dismissed. 8. Order pronounced in the open court on 31st March, 2015. ============= Document 1 Date 22.05.2007 Expense Assessee's contention Rs. 26,442/- cash paid to Kalinga international Vide submission dt. 13.12.10 Assessee submitted that the expense pertains to seven different Bills on different dates. 06.07.2007 Rs. 22,000/- cash paid to Sharma Transport on 05.10.2007 account of Van hire Rs. 40,000/- paid to kamlesh Bansal Vide submission dt.13....