2017 (9) TMI 310

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....onfirmation of non-granting business losses amounting to Rs. 34,34,738/- as made by the AO on the ground that the expenses were not incurred in connection of business activity relating to Hydro Electric Power Project and were capital in nature. 3. The facts of the case are that during the course of assessment proceedings, the AO found that the assessee has incurred some expenses which were charged to profit and loss account and there was no reasonable relation between these expenses and business activity carried out by the assessee. In response to the show cause notice, the assessee vides latter dated 13.1.2014 submitted details. The reply filed by the assessee rejected by the AO by observing and holding as under: "5.6 If the proposition....

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....ion relied upon by the appellant has similar facts. It is also a settled principle of law that for claiming any expenditure it is the primary responsibility of the appellant to prove that the expenditure in question is wholly and exclusively for the purpose of the business of the appellant. In the instant case such responsibility further increased because there are no corresponding business receipts. In fact the nominal business receipts shown by appellant from purchase & sale of fabric also does not appear genuine as the sale bill is of earlier date than purchase bill. Under such facts and circumstances the claim of the appellant that all the expenses incurred by it were in respect of business activity are not supported by any convincing d....

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....e activities shown by the assessee does not appear genuine as the sales bills were dated prior to the purchase bills. We also after hearing either sides and after examining the record, are in agreement with the conclusion drawn by the ld.FAA that the sales and purchase were shown in order to claim expenses which are not incurred wholly and exclusively for the purposes of business. At the most the said expenses could be capitalized. Accordingly, we affirm the order of the ld.CIT(A) on this issue. Ground No.1 taken by the assessee is dismissed. 6. The second ground taken by the assessee is with regard to the disallowance of interest expenditure by the ld. CIT(A) as made by the AO on the ground that the loan was not used wholly and exclusivel....

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....rental income was found' incorrect. Similarly the appellant could also not file any convincing documentary evidence which could prove that the loan in question, which was advanced to the Director, was utilized wholly and exclusively for genuine business activity. Under these circumstances, the claim of the appellant was correctly disallowed" 8. We have heard the rival contentions and perused the material placed before us including the impugned orders on the issue. At the time of hearing the ld. AR filed statements and contentions and details of amount of loan raised and further advancing the loans to its director shri R H Shroff which was finally returned by the Director of the company as the said loan was not used for the business pu....