TaxTMI 
TaxTMI 
2016 (5) TMI 463
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....-tax (A)-XIV, Ahmedabad has erred in law and on facts in deleting the disallowance of Rs. 18,90,321/- made by the Assessing Officer invoking provisions of Section 36(1)(iii) on account of interest expenses. 4) The Ld. Commissioner of Income-tax (A)-XIV, Ahmedabad has erred in law and on facts in deleting the addition of Rs. 6,30,546/- made by the Assessing Officer on account of unproved creditors. 5) The Ld. Commissioner of Income-tax (A)-XIV, Ahmedabad has erred in law and on facts in deleting the disallowance of Rs. 2,71,032/- made by the Assessing Officer, out of total packing material and stores expenses. 6) The Ld. Commissioner of Income-tax (A)-XIV, Ahmedabad has erred in law and on facts in deleting the disallowance of Rs. 64,103/- made by the Assessing Officer, out of tractor expenses. 7) The Ld. Commissioner of Income-tax (A)-XIV, Ahmedabad has erred in law and on facts in deleting the disallowance of Rs. 1,26,662/- made by the Assessing Officer, out of provisions for expenses like staffs salary & bonus, travelling exp., telephone exp., electricity charges, audit fees and stationary bills etc.. 8). On the facts and in the circum....
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....7,840/- as unexplained cash credit u/s 68 of the Act and added it to the total income of the assessee. 7. Assessee went in appeal before ld. CIT(A) who deleted the addition of Rs. 1,57,840/- by observing as under :- The first ground raised by the appellant is regarding unsecured loans in the name of Mr. Hemal Nanavati. It is submitted by the appellant that the appellant has already placed on record of the Assessing Officer a confirmation letter dated 16th November, 2009. The account of said person is not a new account in the previous year. In fact there is opening balance of Rs. 1,59,000/- as on 1st April, 2006 in the books of account of the assessee company in the name of the said person. Further, on 25th May, 2006, the assessee has received a sum of Rs. 1,57,839/- by account payee cheque No. 801506 drawn on Bank of India, Shahibaug Branch, Ahmedabad. Thus, the total credit balance in the name of party at the end of the previous year remained to be Rs. 3,16,840/-. With regard to the Assessing Officer having collected details by issuing a letter and local enquiry through his Inspector, but before taking adverse view the Assessing Officer has neither issued a show cause ....
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....ce as discussed in this order of the learned CIT(A), confirming the findings of the learned CIT(A) in his order. On further appeal by the Revenue, the High Court affirmed the views of the Tribunal and dismissed the Revenue's appeal." (iii) CIT V/s Smt. Sushiladevi Khadarai (2009) 319 ITR 413 (Bom) "Held; dismissing the Department's appeal that (i) admittedly all these fresh loans were taken by account payee cheques; and (ii) records indicated that there was no cash payment in the account of the borrower to the issue of such cheques. After analyzing the entire evidence, regarding grant of these loans, there was a concurrent finding of facts of CIT(A) as well as the Tribunal that the loans were genuine loans.The details of payments were also furnished. There was also finding that the amount of interest was paid by assessee on such genuine loans. The addition respect of cash credit and interest were not valid." (iv) Divine Leasing & Finance Limited (2008) 299 ITR 268 (Delhi HC) "As regards creditworthiness in a matter of subscription towards share application, more may not be expected from the assessee. The burden of proof that is expected a....
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....f the year remained at Rs. 3,16,940/-. Assessing Officer made addition of only Rs. 1,57,840/- which was the amount received during the year by assessee as unsecured loan from Hemal Nanavati. We further observe that during the course of assessment proceeding assessee vide his letter dated 30.10.2009 itself had submitted that Hemal Nanavati has left Ahmedabad and confirmation from him is not available and thereafter on 16.11.2009 confirmation letter was placed on record but there was no proof of identity by way of copy of PAN, driving license/passport nor any copy of bank account of Hemal Nanavati was furnished to demonstrate the creditworthiness of Hemal Nanavati. Assessee has also not furnished copy of income-tax return and financial statement of Hemal Nanavati. Assessee therefore, failed to produce the person as well as all the related documents to prove the identity, creditworthiness of Hemal Nanavati and the only basis taken by assessee was that the amount has been received by account payee cheque. Due to lack of copy of bank statement and copy of identity it is difficult to accept the contention of assessee about the identity, creditworthiness and genuineness of the unsecured l....
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....07,381/- by observing as under :- 7.4 I have gone through the submissions^ of the appellant and have gone through the relevant material available on the record. I find that the claim of the assessee for commission is quite genuine since the payments have been made by account payee cheques after deducting tax at source and appellant has submitted requisite quarterly returns in Form No. 26Q and has also issued TDS certificates in Form No. 16A to respective deductees. The Commission payment claimed in the name of aforesaid parties is wholly and exclusively for the purpose of business and payments are genuine having regard to the aforesaid facts made available on record of the Assessing Officer. Therefore, the disallowance of Rs. 2,07,381/- 13. Being aggrieved, Revenue is now in appeal before the Tribunal. 14. Ld. DR relied on the order of Assessing Officer whereas ld. AR supported the order of ld. CIT(A). 15. We have heard the rival contentions and perused the material on record. From perusal of the record, we understand that assessee has submitted various details on 20th October, 2009 as well as on 13.11.2009 stating the details of calculation of commission which wa....
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....balance as on 31st March, 2007 was Rs. 2, 14, 00,018/-. On the other hand as per the schedule 11 to the Tax Audit Report( out of sundry creditors for the goods) the opening credit balance as on 31/3/2006 was of Rs. 1,66,94,884/- and closing balance as on 31/3/2007 was Rs. 1,88,20,938/-. Thus the net difference works put at Rs. 25,79,080/-(debit) (Dr Rs. 2,14,00,018/- - Cr Rs. 1,88,20,938/-) and not Rs. 2,14,00,018/-taken as base for calculating the notional disallowance. Therefore the Assessing Officer has proceeded on the wrong facts. By any stretch of imagination the A.O. could not make disallowance of interest beyond this net debit balance of Rs. 25,79,080/- Besides M/s. Aabhar Holdings Pvt. Limited is a group/associated concern, as evident from the Assessing Officer's order vide para 4.3(1) on page ~ 5 of the order. The Assessing Officer has not brought any material on record to contradict the arguments of the appellant. The advances made to M/s. Aabhar Holdings Pvt. Limited were for goods and the goods having already been received, the account of the party was reflected in sundry creditors for goods. That being the position, the advances which were made to M/s. Aabhar Hold....
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....en to Aabhar Holdings Pvt. Ltd. at Rs. 2,14,00,018/- and has indirectly tried to reduce the profit by claiming interest expenses against sales and from perusal of record, we find that ld. Assessing Officer has not gone through the facts of the case properly because in the audited financial statement produced before us we find that Aabhar Holding Pvt. Ltd. which is a group co. of assessee is appearing on both sides of balance sheet and assessee has separately shown transactions in this account in order to facilitate the proper accounting of the transactions. As on the year end on 31.3.2007 debit balance of Rs. 2,14,00,018/- is appearing in the name of Aabhar Holding Pvt. Ltd. under the head of loan & advances and in the list of sundry creditors name of Aabhar Holding Pvt. Ltd. is appearing for the credit balance of Rs. 1,88,20,938/-. We have gone through the ledger account of Aabhar Holding Pvt. Ltd. and we observe that in the ledger account appearing in the sundry creditor list, assessee has entered into various transactions of sale of cloth and similarly various transactions of bleached cloth purchases are appearing which is enough to show that there has been regular business deal....
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....ppeal by assessee before first appellate authority the addition of Rs. 6,30,546/- was deleted by ld. CIT(A) by observing as under :- 9.3 I have considered the submission of the appellant and having regard to the material available on record, I find that the addition made on account of sundry creditors for Rs. 6,30,546/- is without any substance. Further the new credit during the year is of Rs. 28,500/-+Rs.62,960/- +Rs.l,239/-= Rs. 92,699/- only and the opening balance of earlier years is of Rs. 5,37,847/-(Rs.6,30,546/- -Rs 92,699/~.) The credits during the year are for commission except for vehicle sales and as per Ground No. 2 above the addition of commission are fully deleted by me. The A.O. should have excluded the opening balance of earlier years as indicated above for making additions. The Assessing Officer has neither brought cogent evidence on record to disprove the explanation of the appellant nor has the Learned Assessing Officer applied his mind before making such huge addition. As such I feel no hesitation in holding that the said disallowance was totally unjustified and this ground of appeal is allowed accordingly and the addition of Rs. 6,30,545/- is deleted. ....
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.... completely missing in the case of assessee. We are therefore, of the view that to the extent of Rs. 5,57,293/- addition was rightly made by Assessing Officer. As far as difference of the remaining amount of addition of Rs. 73,253/- (Rs. 6,30,546/- (-) Rs. 5,57,293/-), we confirm the decision of ld. CIT(A) as these amounts must have been paid off in the following years. Accordingly we sustain the addition of Rs. 5,57,293/- out of Rs. 6,30,293/- in relation to sundry creditors which have not been proved by the assessee. This ground of Revenue is partly allowed. 31. Ground no.5 The Ld. Commissioner of Income-tax (A)-XIV, Ahmedabad has erred in law and on facts in deleting the disallowance of Rs. 2,71,032/- made by the Assessing Officer, out of total packing material and stores expenses. 32. During assessment proceedings, assessee claimed expenses of Rs. 7,12,662/- on account of consumption packing material and stores whereas in the preceding year it was claimed at Rs. 4,01,482/- and sales of the assessee have marginally decreased from Rs. 9,98,29,584/- to Rs. 9,84,21,650/- in the year under appeal. Assessing Officer was not convinced about the consumption of packing ma....
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.... hoc disallowance by taking a view on the basis of his own surmises and conjectures and completely ignoring the documentary evidences and audited financial statements. We are therefore, of the view that ld. CIT(A) has rightly deleted the disallowance and we uphold the same. This ground of Revenue is dismissed. 36. Ground No.6 The Ld. Commissioner of Income-tax (A)-XIV, Ahmedabad has erred in law and on facts in deleting the disallowance of Rs. 64,103/- made by the Assessing Officer, out of tractor expenses. 37. During the course of assessment proceedings Assessing Officer found that assessee had claimed tractor expenses at Rs. 1,38,768/-. In the preceding year the same was Rs. 67,875/-. As the expenses are increased substantially though the sales were reduced, therefore by order sheet dated 31.8.2009 assessee was requested to justify the same with supporting evidences. In response assessee failed to furnish anything in this regard. We observe that Assessing Officer has disallowed the tractor expenses at Rs. 64,103/- similar to the disallowance in respect of consumption of packing material and stores. Comparing the preceding year expenses of Rs. 67,875/- to the expens....
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.... appellant and having regard to the relevant material placed on record of the Assessing Officer. The complete details are available in P.B. page No. 248 & 249 r. w. P.B. page No. 277 which are in the nature of salary, tractor Expenses, telephone expenses, electricity expenses, audit fees & vehicle and stationery expenses. The provision of unpaid expenses is for the month of March, 2007 out of which Rs. 1,69,662/- is paid in the subsequent month i.e. April, 2007 and the remaining amount is shown outstanding. The method of accounting followed by the appellant is mercantile system of accounting and therefore the action of A.O. in allowing only Rs. 1,69.662/- paid in subsequent month out of total provision of Rs. 2,96,177/- and thereby making disallowance for the balance amount of Rs. 1,26,662/- is against the consistently followed mercantile system of accounting by the appellant as under mercantile system any expense paid or payable is eligible for deduction if it is not a payment specifically covered u/s 43B of the Act. It is seen that the provisions for expenses is not for any statutory liability u/s 43B and are therefore allowable under the mercantile method of accounting. I find t....