TaxTMI 
TaxTMI 
2023 (4) TMI 366
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....d style of M/s. Leaf Filling Station and dealing in petrol products situated at Bareili. Assessee filed its return of income on 30.09.2012, reporting total income of Rs.1,02,45,450/-. Case of the assessee was selected for scrutiny. Statutory notices were issued and served on the assessee for which part compliance was made, as noted by the Ld. AO. In the course of assessment proceeding, assessee was directed to get its accounts audited u/s. 142(2A) of the Act. On compliance to the said order, M/s. D. S. Sinha & Co., Chartered Accountant submitted their special audit report conducted u/s. 142(2A) of the Act, in Form no. 6B of the Income Tax Rules, 1912. In the course of assessment, Ld. AO after considering the submissions of the assessee made the following additions/disallowances: Sl. No. Nature of Addition Amount 1. Addition u/s. 68 on account of unexplained share capital Rs.7,54,500.00 2. Disallowance of directors remunerations. Rs.7,20,000.00 3. Disallowance u/s. 40A(3) Rs. 1,02,000,00 4. Disallowance of prior period expenses Rs.5,84,704.00 5. Disallowance of bank interest Rs.29,54,329.00 6. Disallowance of amount paid on....
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....the assessee for the said transaction. However, the transaction of share capital is duly recorded in the books of account, both of the assessee and the share subscribing companies, verifiable from the audited financial statements of both. It was also submitted that amended provision of section 68 of the Act in respect of furnishing explanation for source of source are effective from AY 2013-14 and is not applicable in the present year under consideration i.e. AY 2012-13. 5.3 On going through the material placed on record and the factual matrix of the case, we find that assessee has discharged its initial onus casted u/s. 68 of the Act, by furnishing necessary details and documents to prove the identity, creditworthiness of the shareholder and genuineness of the transaction. 5.3.1 We find support from the judgment of Hon'ble High Court of Calcutta in the case of Exiomp Resources (India) Ltd. Vs. CIT (2005) 275 ITR 87 (Cal) wherein it was held as follows: "It is incumbent upon the Assessing Authority to examine the explanation of the creditor and arrive at a conclusion as to whether the explanation was satisfactory. The conclusion arrived by the Assessing Authority is ....
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....rson itself has invested the said money or some other person has made investment in the name of that person. The burden then shifts on to the department to establish that such investment has come from the assessee company itself. " 5.4. We, therefore, respectfully following the judgments referred hereinabove by the Hon'ble Courts and also considering the facts and circumstances of the case, are of considered view that assessee has sufficiently explained the identity and creditworthiness of the share subscriber it being a sister concern and the genuineness of the transaction for which nothing contrary has been brought on record by the Revenue. We do not find any merit in the finding of Ld. CIT(A). We accordingly, allow ground no. 1 taken by the assessee and direct to delete the addition so made of Rs.7,74,500/-. Accordingly, ground no. 1 is allowed. 6. Ground no. 2 is in respect of addition of Rs.7,20,000/- on account of directors' remuneration being treated as excessive u/s. 40A(2) of the Act. In this respect, Ld. AO had made a disallowance of Rs.14,40,000/- out of which Ld. CIT(A) gave a partial relief and sustained disallowance of Rs.7,20,000/- and the assessee is in appeal....
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....nessman concern or the board of directors. Accordingly, we are inclined to find favour with the submission of the Ld. Counsel and direct to delete the disallowance made in this respect of Rs.7,20,000/-. Accordingly, ground no. 2 is allowed. 7. Ground no. 3 is in respect of addition of Rs.1,02,000/- by invoking section 40A(3) of the Act. In this respect, it is submitted that assessee made reimbursement of expenses incurred by the two advocates on behalf of the assessee, who were residing at Kanpur and Bareily. At the request of these consultants, assessee made the payments by depositing cash in their respective bank accounts through HDFC Bank, CBS system. The expenses so paid are solely for the purpose of business of the assessee, which are duly recorded in the books of accounts. Ld. Counsel further submitted that identity of the two persons is not doubted by the Ld. AO who are advocates by profession. Also, the source of cash has not been disputed and the payment has been made by way of deposit into their respective bank accounts. These expenses have not been held to be bogus by the Ld. AO. Ld. Counsel thus contended that the said payments are genuine and were necessitated for i....
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....) (12) TMI 664 - ITAT, Mumbai). Considering the over all factual matrix of the claim of the assessee as submitted by the Ld. Counsel, we are inclined to direct for deletion of the addition made by the authorities below. Accordingly, ground no. 4 is allowed. 9. Ground no. 5 relates to addition of Rs.29,54,329/- u/s. 36(1)(iii) of the Act. In this respect Ld. Counsel submitted that this disallowance has been made without establishing that borrowed fund were utilised in making interest free advances. Ld. Counsel submitted that interest free advances were given out of own funds, details of which were furnished before the Ld. AO. Ld. Counsel also submitted that advances to the directors of the company were not advances but were made under imprest to meet the cost of purchase of material and expenditure for the assessee. It was submitted that when these advances are given to directors for the said purpose, accounts of the directors are debited and corresponding entries are made in cash book. When the directors give details of expenditure incurred by them, corresponding entries are made by crediting cash in the name of the directors and debiting corresponding expenditure. Ld. Counsel r....