TaxTMI 
TaxTMI 
TaxTMI 
2016 (7) TMI 1048
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....se of assessment proceedings ld. Assessing Officer while examining the sundry creditors outstanding as on 31.3.2008 observed that in a few cases no confirmation and necessary details were furnished to prove the genuineness of the outstanding amount and in some cases the closing balances were not fully verifiable with the confirmations received from the parties. Ld. AO observed that travelling expenses were booked for foreign trip without placing necessary supporting, excess remuneration paid to Mrs. Urvashi Desai and unverifiable commission expenses paid to Mr. Girish Desai. Accordingly, assessment was framed at an assessed income of Rs. 68,08,167/- after making following additions :- i) Addition u/s 41(1) for unverifiable Sundry creditors - Rs..7,82,725/- ii) Addition u/s 41(1) for unreconciled Balances of sundry creditors- Rs.7,12,219/- iii) Unexplained foreign travel expenses- Rs.1,98,758/- iv) Excessive remuneration paid to Mrs. Urvashi Desai - Rs.12,00,000/- v) Unexplained commission expenses Paid to Mr. Girish Desai - Rs.6,42,738/- Rs.35,36,440/- 3. Aggrieved, assessee went in appeal befor....
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....to reconcile the difference. Although appellant in the ground of appeal had mentioned the figure of addition under sec. 41(1) at Rs. 16,93,702/-, actual addition u/s 41(1) comes to Rs. 14,94,944 only. Accordingly, addition is deleted to the extent of Rs. 3,90,395/- and is confirmed to the extent of Rs. 11,04,549/-. 4. Now assessee is in appeal before the Tribunal. Ground No.1 The assessment order passed by Assessing Officer u/s 143(3) of IT Act & partly confirmed by first appellate authority is bad in law and deserves to be uncalled for. This ground is general in nature, hence needs no adjudication. 5. Ground No. 2. The Assessing Officer as well as first appellate authority has erred in law & on facts in making & confirming respectively addition of Rs. 11,04,549/- u/s 41(1) of IT Act & same deserves to be deleted. 6. The ld. AR submitted that during the course of assessment proceedings total addition made u/s 41(1) of the Act stood at Rs. 14,94,944/- out of which Rs. 7,82,725/- were related to three parties, closing balances of which remained unverifiable and the remaining amount of Rs. 7,12,219/- relating to six parties of which there were difference in the closing balance....
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....rading liability by way of remission or cessation thereof, the amount obtained by such person or the value of benefit accruing to him shall be deemed to be profits and gains of business or profession and accordingly chargeable to income-tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not; or (b) the successor in business has obtained, whether in cash or in any other manner whatsoever, any amount in respect of which loss or expenditure was incurred by the first-mentioned person or some benefit in respect of the trading liability referred to in clause (a) by way of remission or cessation thereof, the amount obtained by the successor in business or the value of benefit accruing to the successor in business shall be deemed to be profits and gains of the business or profession, and accordingly chargeable to income-tax as the income of that previous year. [Explanation 1.-For the purposes of this sub-section, the expression "loss or expenditure or some benefit in respect of any such trading liability by way of remission or cessation thereof" shall include the remissi....
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....ined in the Page 5 of 6 O/TAXAP/588/2013 ORDER statute being fulfilled. Additionally, such cessation or remission has to be during the previous year relevant to the assessment year under consideration. In the present case, both elements are missing. There was nothing on record to suggest there was remission or cessation of liability that too during the previous year relevant to the assessment year 2007-08 which was the year under consideration. It is undoubtedly a curious case. Even the liability itself seems under serious doubt. The Assessing Officer undertook the exercise to verify the records of the so called creditors. Many of them were not found at all in the given address. Some of them stated that they had no dealing with the assessee. In one or two cases, the response was that they had no dealing with the assessee nor did they know him. Of course, these inquiries were made ex parte and in that view of the matter, the assessee would be allowed to contest such findings. Nevertheless, even if such facts were established through bi-parte inquiries, the liability as it stands perhaps holds that there was no cessation or remission of liability and that therefore, the amount in que....
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....ore, delete this addition of Rs. 11,04,549/- made u/s 41(1) of the Act. This ground is allowed. 14. Ground no.3 The Assessing Officer as well as first appellate authority has erred in law & on facts in making & confirming respectively addition of travelling expenses of Rs. 1,98,758/- & same deserves to be deleted. 15. During the course of assessment proceedings ld. Assessing Officer observed that sum of Rs. 1,98,758/- has been booked as foreign travel expenditure for the trip of a person from management to Dubai but he was not convinced with the reply about the basis of this foreign trip and disallowed the same at the time of framing assessment order. In appeal before ld. CIT(A) this addition was confirmed by ld. CIT(A) by observing as under :- 3.2 I have considered the matter. Onus was on the appellant to prove that the expense on foreign travel was incurred wholly and exclusively for its business. Appellant could not file any evidence of whatsoever kind to prove that the visit to Dubai to meet one party was for the purpose of business. A business visit could be to meet just one party or the business deal may not materialize even after the meeting, however, evidence that the m....
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.... Assessing Officer should not have embarked upon the expenditure just because it is a foreign travel expenditure , as a prudent business man has always to look for better and prosperous market to successfully run its business in the highly competitive market and in this process one has to take up call to find best business opportunity. There may be a situation where a businessman does not have a confirmed source of getting an order business deal but just in order to feel the international market visits are made to explore business opportunities so as to sell the goods in the overseas market or to make purchase, at reduced rates if the domestic rates are higher. In these circumstances and looking to the fact about the turnover and the income offered in and no major defect found in the books of account, no disallowance was called for on the part of the Assessing Officer towards the foreign travel expenditure at Rs. 1,98,758/-. We delete the same. This ground of the assessee is allowed. 20. Ground No.4 The assessing officer as well as first appellate authority has erred in law & on facts in making & confirming respectively addition of remuneration expenses of Rs. 12,00,000/- to Smt.....
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....d to appreciate that Mrs. Urvashi Desai is coming in the tax bracket of maximum marginal rate and has shown total income at Rs. 17,88,231/- out of which most of the portion was taxable @ 30% which means that there has been not much of loss to the Revenue and nor there has been special benefit to the assessee firm for claiming such excessive expenditure and, therefore, no addition is called for by way of disallowance of the expenditure of the remuneration paid to Mrs. Urvashi Desai. 24. Ld. DR supported the orders of lower authorities. 25. We have heard the rival contentions and perused the material on record. Through this ground assessee is aggrieved with the action of ld. CIT(A) for confirming disallowance of remuneration expenditure of Rs. 12 las to Mrs. Urvashi Desai by invoking the provisions of section 40A(2) of the Act. From going through the submissions of ld. AR we observe that Mrs. Urvashi Desai is B.E. (Chemical) passed in 1973 and has worked with various companies 1973 onwards and thereafter she is providing technical information/assistance in design and drawing of machinery and improvements pertaining to contracted plastic products. 26. We further observe that there ....
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....ng Officer has allowed the claim of Rs. 50,000/- per month and has not put forth any working or supporting evidences for the unreasonability of the excessive expenses in regard to the claim. We further observe that ld. Assessing Officer has been unable to prove that whether the assessee has derived any benefit by claiming this expenditure in the given situation when both the assessee and the specified person (Mrs. Urvashi Desai) are coming in the higher tax bracket. 28. In these circumstances, we are of the view that expertise of the professional gets perfected and polished day by day out of his/her experience throughout its professional career and the worth of this experience gets appreciated more and more so much so that he/she cannot be put at par with the fresh professional having same degree but no experience. This experience and expertise makes a professional desirable for being paid higher remuneration/fees and the same situation is there in the case of assessee in which higher amount of remuneration is being paid to a B.E. (Chemical), Mrs. Urvashi Desai having experience more than 33 years, and therefore, in absence of any specific working no disallowance was called for by....