2025 (2) TMI 1946

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....ared on behalf of assessee when the case was called. On the other hand Ld. DR present in the court is ready with the arguments. Therefore I have decided to proceed with the hearing of the case ex-parte. 3. After having heard Ld DR and after perusal of the record and the orders passed by the revenue authorities, I noticed that as per the facts of the present case during the year under consideration, in the profit and loss account, the assessee had credited sale of trading goods of Rs. 5,26,416/- and purchase of trading goods of Rs. 5,26,415/- was debited and as such, the profit in the business was shown as Rs. 1. 4. However, against the said receipt, the assessee has claimed employees benefit expenses of Rs. 3,61,482/-, other expenses of Rs. 10,86,810/-. But during the assessment proceedings, assessee failed to explain firstly the existence of any business and secondly, how these expenses are related to its business. The assessee has also failed to produce any corroborative evidences to establish genuineness of the expenses claimed in Profit & Loss Account apart from lists of expenses clubbed under various heads. 5. Thus not satisfied the correctness of the books of account....

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....ersons, etc. have not been provided even in the additional evidences filed by the appellant. I also concur with the AO when he states that no expenses on account of freight, loading, unloading are not appeared in the trading account and that the delivery of goods is not ascertainable The AO has also pointed out that no quantitative details of stock traded has been maintained. 8.3. One of the contentions of the appellant is that the books are already audited. 8.4. I have perused the copy of ITR-6 furnished by the appellant. In the ITR-6, in response to the question "Whether the financial statements of the company are drawn up in compliance to the Indian Accounting Standards specified in Annexure to the companies (Indian Accounting Standards) Rules, 2015", the appellant has replied as "No". 8.5. In the case of Kalpesh Synthetics Pvt. Ltd., ITA No. 1785/Mum/2021 dt. 27.04.2022, the Hon'ble ITAT has held that the statement by the tax auditor is not binding in nature Hence, the appellant's contention that the books have to be mandatorily accepted by the AO once they are audited has no merit. 8.6. The AO has pointed out that the expenses were i....

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.... 8.12. Thus, it can be seen that many of the expenses are related to movies, food expenses in premium western food outlets, shopping malls, gas cylinders, etc Considering the totality of facts, I am of the view that the AO was right in opining that the expenses are not wholly and exclusively incurred for the purpose of business. 8.13. In the case of Swadeshi Cotton Mills Ltd., 63 ITR 57, the Hon'ble Apex Court has held as under:- "On behalf of the appellant learned counsel put forward the argument that the amount of Rs 1,11,090 paid to the directors was spent wholly and exclusively for the purpose of the company and was therefore properly claimed as a deduction under section 10(2)(xv) of the Income-tax Act. It was pointed out that the amendment to article 118 was adopted by a special resolution of the shareholders and the amendment was made in accordance with law and the payment cannot be called in question in income tax proceedings. In our opinion, there is no substance in this argument It is true that as between the directors and the company the resolution had a binding effect and the payment had to be legally made. But it is for the Income-tax Officer to ....

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....re wholly and exclusively laid out or expended for the purpose of business, where such expenditure is not expressly covered by any other specific provision of the Act. In order to be eligible for an allowance under section 37, certain conditions are to be fulfilled for deduction of expenditure wholly and exclusively for the purpose of business: (i) The expenditure must not be governed by the provisions of sections 30 to 36 and 80VV. (ii) The expenditure must have been laid out wholly and exclusively for the purpose of business of the assessee (iii) The expenditure must not be personal in nature (iv) The expenditure must not be capital in nature It is well settled that burden of proving the above mentioned ingredients is on the assessee. Before the assessee could become entitled to allowance under section 37, assessee must satisfy the assessing authority the entire purpose for which the amount is spent, though generally assessing authorities are not entitled to go into the reasonableness of the expenditure. They are entitled to be satisfied as to the claim of interest on expending that amount. The mere fact that payment has been made unde....