TaxTMI 
TaxTMI 
TaxTMI 
2016 (11) TMI 1770
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.... we proceed with narrating the facts for assessment year 2009-10. 3. The facts as culled out from the material on records are as under: Assessee is an individual stated to be engaged as a Contractor doing the works of Earthmoving / Excavation. Assessee electronically filed his return of income for AY 2009-10 on 30.09.2009 declaring total income of Rs. 1,22,47,740/-. The case was taken up for scrutiny and thereafter the assessment was framed by the Assessing Officer (AO) u/s 143(3) of the Income Tax Act, 1961 vide order dt. 12.12.2011 and the total income was determined at Rs. 1,52,46,280/-. Aggrieved by the order of AO, assessee carried the matter before ld. CIT (A), who vide order dt. 15.01.2014 (in appeal No. KOP/544/11-12) granted partial relief to the assessee. Aggrieved by the order of ld. CIT(A), assessee is now in appeal before us and raised the following grounds: "1. On the facts and circumstances of the case and in law the ld. CIT(A) was not justified in confirming the addition made by the A. O. of Rs. 69,670/- on account of non-booking of such expenditure of road tax payment on vehicle purchased when it was submitted that purchase price of the vehicle w....
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....that the assessee had purchased Mahendra Bolero for Rs. 6,37,300/-. He also noticed that the Road Transportation Tax and Registration fee paid for purchase of vehicle was not capitalized. The assessee was therefore asked to show cause and also explain as to whether the Registration Fee and RTO tax was claimed as revenue expenses. The assessee inter-alia submitted that assessee had purchased the vehicle which included the tax and therefore there was no reason for separate capitalization of RTO tax and registration fees. AO concluded that since no RTO tax was reflected separately in the accounts and since only the amount of purchase price of Mahendra Bolero was reflected in the accounts and in the absence of proper explanation, he concluded that RTO tax and registration fee of Rs. 69,670/- for the registration of Bolero was paid by the assessee from his unaccounted income. He accordingly made addition of Rs. 69,670/- u/s 69C of the Act. Aggrieved by the order of the AO, assessee carried the matter before the ld. CIT, who upheld the order of AO by holding as under: "4. During the year the assessee has acquired several assets which included certain vehicles. In respect....
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....Mahendra Bolero during the assessment year. During the course of assessment proceedings, assessee was asked to produce the proof of payment of road tax which the assessee has failed to do. Even before the ld. CIT(A) assessee did not produce any evidence demonstrating the payment of road tax. Even before us ld.AR has only reiterated the submission of the purchase price that is reflected on the books of accounts to be inclusive of road tax but has however not placed any material on record to demonstrate that the price paid for purchase of vehicle was inclusive of road tax. In such a situation, we find that no reason to interfere with the order of ld. CIT(A). Thus, the ground of assessee is dismissed. 10. Ground No. 3 is with respect to disallowance of Rs. 1,49,634/-. 11. During the course of assessment proceedings and on perusing the tax audit report, AO noticed that assessee had shown an aggregate amount of Rs. 1,49,634/- as liability, the details of which are listed at page 7 of the assessment order. He also noted that while computing the income, no disallowance was made even though the assessee was following Cash System of accounting. The assessee was therefore a....
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....fore us ld.AR reiterated the submissions made before AO and ld. CIT (A) and further submitted that the aforesaid sum have been offered to tax in AY 2010-11 and if the same amount is taxed in the year under consideration, it would amount to double taxation of the same amount. He therefore submitted that the addition be deleted. Ld. D.R. On the other hand supported the order of AO and ld. CIT(A). 15. We have heard the rival submissions and perused the material on record. The issue in the present case is with respect to addition made on account of cessation of liability. It is an undisputed fact that assessee is following cash system of accounting. AO has made the addition mainly for the reason that there could not be any liability recorded in the books of accounts when assessee was following cash method of accounting. Before us ld. AR has not controverted the findings of lower authorities but he however submitted that the same amount have been offered to tax in subsequent years. However, before us the ld. AR could not produce any evidence in support of the contention that the amount was taxed in subsequent years. In view of the aforesaid facts, we are of the view that no interferenc....
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....taining the reply, the assessing officer has concluded that except four persons, advances to the other persons were made due to business expediency. Advances made to the four persons totaling to Rs. 2,22,157/-, the assessing officer has found to be not for the purpose of business and since the assessee has been paying interest on loans, interest @ 14% has been computed and added back. 10. In appeal it has been explained that out of these four persons, advance to Mahalaxmi Pani Puravatha was made for irrigation scheme as the assessee is undertaking agriculture and agricultural income is been offered to tax for rate purposes. Mahalaxmi Pani Puravatha is a cooperative society under the Government scheme. As per the assessee, the advance has been made out of his own funds and for the purpose of irrigation facilities. 11. I find that even if the advance is given for nonbusiness purposes but it was for earning agricultural income and given out of capital which also included agricultural income earned over the years, therefore, the interest of Rs. 10,214/- on this advance cannot be disallowed. 12. In respect of Sangram R Patil (HUF), the advance was stated to be given b....
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...., on which the disallowance of interest has been worked out by the AO. We further find that the disallowance has been made on ad-hoc basis and without bringing any material to show that interest bearing funds have been used by the assessee for advancing interest free advances. Considering the totality of the aforesaid facts and relying on the aforesaid decision rendered in the case of Mahanagar Gas (supra), we are of the view that no disallowance of interest is called for in the present case. We therefore direct the deletion of addition. Thus, the ground of assessee is allowed. 21. Next ground is with respect to disallowance of Rs. 3,45,758/-. 22. During the course of assessment proceedings and on perusing the details filed by the assessee, the AO noticed that the assessee was maintaining cash credit account with Karad Urban Bank Limited. He also noticed that there was no inventory of stock or debtors as on 31.03.09 though the outstanding balance on that date in the C.C account was Rs. 3,59,94,276/- . He also noticed that the interest paid to Bank amounting to Rs. 46,82,899/- has been claimed as business expenditure. AO also noticed that during the year assessee h....
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....its of the year. However, this explanation has not been supported by cash flow and balance sheet. Therefore, the reasoning of the assessing officer is found to be correct and the addition made is sustained." 23. Aggrieved by the order of ld. CIT (A) assessee is in appeal before us. 24. Before us the ld. AR reiterated the submissions made before AO and ld. CIT (A) and further submitted that since assessee was having sufficient interest free funds, presumption is that the investments are out of interest free funds and not borrowed funds and for this proposition he relied on the decision of Hon'ble Bombay High Court in the case of CIT Vs. Reliance Utilities and Power Ltd., reported in 313 ITR 340. He further submitted that the AO has presumed that the funds from the Cash Credit Account of the Bank have been utilized for acquisition of assets and that the presumption is not backed by any evidence. He therefore submitted that no addition is called for in the present case. Ld.D.R. on the other hand supported the order of AO and ld. CIT(A). 25. We have heard the rival submissions and perused the material on record. The issue in the present case is with respect to disallowance of inter....
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....ee during the year under consideration visa-vis with expenses incurred and after making a comparison with similar ratio of earlier year proceeded to hold that the total amount of expenses that can be allowed is only to the extent of Rs. 3,09,73,207/- as against the claim of 3,19,92,736/-. He accordingly disallowed the excess of Rs. 10,19,529/- (Rs. 3,19,92,736 - Rs. 3,09,73,207/-). 28. Aggrieved by the order of AO, assessee carried the matter before ld. CIT(A), who upheld the order of AO by holding as under : "19. In the last ground the appellant has contested disallowance of Rs. 10,19,529/- on account of contract payments (machinery expenses). These expenses were Rs. 3,19,92,736/- in the current year as against Rs. 1,59,66,593/- in last year. The percentage of turnover of such expenditure was 16.10% this year as compared to 10.03% last year. Due to substantial increase in the expenditure assessee was asked to explain the reason. It was stated that clients of the assessee are corporate customers who maintain the records related to the quantity of work done at the work site. On that basis bills are raised and the assessee accepted the bills of sub-co....
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....ringing any material on record to demonstrate as to which all the expenses are not allowable, we are of the view that AO was not justified in working out the disallowance of expenditure. We therefore direct its deletion. Thus, the ground of assessee is allowed. 32. In the result, the appeal of the assessee is partly allowed. 33. We now take up assessee's appeal in ITA No. 1071/PN/2014 for A.Y. 2010-11. The grounds raised by the assessee reads as under:- 1) On the facts and circumstances of the case and in law the Ld. D.R. CIT(A) was not justified in confirming the disallowances of Rs. 2,48,975/- made by A. O. invoking S. 36(1)(iii) of the Act. The appellant-assessee is having sufficient Interest free funds at his disposal. In the circumstances it is deemed that the advances are not out of borrowed funds. The disallowance being illegal and without jurisdiction be deleted. 2) On the facts and circumstances of the case and in law the Ld. D.R. CIT(A) was not justified in confirming the disallowance made by A. O. of Rs. 3,88,226/- invoking Sec. 36(1)(ii) r.w.s 40A(2)b) of the Act. The addition be deleted. 3) On the facts and circumstances of the case and in law ....