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2015 (2) TMI 985 - AT - Income TaxDeduction u/s.37(1) - CIT(A) allowed 50% of the claim - Held that - From the written submission filed before the CIT(A), we find the assessee has stated that the business of the assessee is that of liaisoning, maintaining good relationship with politicians, Govt. authorities and also clients. The assessee has to make payments to mediators for further liaisoning with various authorities and politicians to obtain various permissions and sanctions from Govt. departments. Therefore, he has made substantial payments towards clearance expenses, service charges, commission and brokerage expenses to the mediators. Therefore, the assessee is not expected to know their addresses and such persons are not likely to communicate their correct addresses. The assessee has paid such payments to mediators. We find the Ld. CIT(A) completely ignored the above submissions and allowed 50% of the expenses on the ground that payments have been made by banking channels and disallowance of such expenses will increase the profit percentage from liaisoning work. When the assessee has failed to discharge the onus cast on him by bringing sufficient evidence to prove that such expenditure is incurred wholly and exclusively for business purpose and the very nature of such expenses as stated by the assessee before the Ld. CIT(A) is against public policy, therefore, such expenses in our opinion cannot be allowed. Further, the Assessing Officer had also given a finding that the money has come back to the assessee indirectly. Under these circumstances, we are unable to uphold the order of the CIT(A) and the same is set-aside and the order of the Assessing Officer is restored. - Decided in favour of revenue. Amount in the form of 'advance' - whether not 'income' of the assessee? - Held that - From the letter addressed by Nitro Tiles Ltd. to the assessee on 23-01-2007, we find Nitco Tiles Ltd. has given assessee an amount of ₹ 50,00,000/- as advance payment against the purchase of the property at Khandivali. Similarly we find Nitco Tiles Ltd., vide letter dated 01-04-2009 has confirmed the debit balance of the assessee in its books at ₹ 52,97,171/- as on 31-03-2009. All these details were very much available with the AO but he has not considered all these things. Since Nitco Tiles Ltd. has paid an amount of ₹ 50 lakhs as advance to the assessee for proposed purchase of land belonging to one Shri S.S. Patil and since the deal could not be materialised due to certain clearances, therefore, the assessee in our opinion has rightly shown the amount as advance in its books and the Ld.CIT(A) was justified in treating the same as advance and not revenue in nature. - Decided against revenue. Unaccounted expenditure - AO disallowed an amount of ₹ 8,65,924/- on adhoc basis being 50% of such expenses - .CIT(A) restricted such disallowance to ₹ 11,550/- and deleted the balance amount of ₹ 8,54,379/- - Held that - No infirmity in the order of the CIT(A). Admittedly, the books of accounts of the assessee are audited and no adverse comments have been reported by the auditors. Since the assessee is engaged in the business of liaisoning and consultancy, expenses such as hotel expenses, travelling expenses, etc. are routine expenses and are required to be incurred. Similarly, the assessee has incurred an amount of ₹ 13,08,300/- as salary which in our opinion is commensurate with the business of the assessee. The assessee has filed sample copies of salary vouchers which were available before the AO. However, he is silent on the same. Similarly, we find from the paper book the details of various expenses filed before the AO. Under these circumstances, we do not find any infirmity in the order of the CIT(A) restricting the disallowance to ₹ 11,550/- being personal in nature as against ₹ 8,65,924/- made by the AO. - Decided against revenue. Unsecured loan - CIT(A) deleted the addition - Held that - AO made addition of ₹ 25 lakhs being unsecured loan obtained from S.D. Corporation on the ground that assessee did not file any confirmation letter for such loan. We find the assessee filed such confirmation letter before Ld.CIT(A) and requested him for admission of the same as additional evidence under rule 46A of the I.T. Rules. Although such confirmation letter was forwarded to the AO by the Ld.CIT(A) for his comments in the form of a remand report, we find the AO did not bother to comply with the direction of the Ld.CIT(A). Further, there is no dispute to the fact that the amount has been received by cheque. We find the assessee during the impugned assessment year has received consultancy charges of ₹ 40,15,332/- from S.D. Corporation Pvt. Ltd., and the same has been credited to the P&L account of the assessee. Further, S.D. Corporation Pvt. Ltd. has deducted TDS from such payment. Therefore, when the commission received from S.D. Corporation is treated as genuine by the AO without any further query, therefore, its identity is very much proved. Although the confirmation letter filed by S.D. Corporation Pvt. Ltd. was forwarded to the AO by the Ld.CIT(A), we find the AO remained silent. This otherwise indicates that the AO has no grievance - Decided against revenue. Unexplained cash credit - CIT(A) deleted the addition - Held that -Although the assessee has given general statement for explaining the source of such deposits, however, we find the assessee has not given any confirmation from the said parties nor proved their source to extend such huge payments. Under these circumstances, we are unable to accept the order of the CIT(A) on this issue deleting the addition made by the AO. However, considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue back to the file of the AO with a direction to give one more opportunity to the assessee to substantiate with evidence to his satisfaction regarding the source of such deposits and capacity of the payers. We hold and direct accordingly. - Decided in favour of revenue for statistical purposes.
Issues Involved:
1. Deductibility of expenses claimed under Section 37(1) of the Income Tax Act. 2. Treatment of an amount received as an advance versus income. 3. Disallowance of various expenses claimed by the assessee. 4. Addition of unsecured loans as unexplained cash credits. 5. Addition of cash deposits as unexplained cash credits. Issue-wise Detailed Analysis: 1. Deductibility of Expenses Claimed Under Section 37(1): The primary issue was whether the expenses amounting to Rs. 26,25,000/- claimed by the assessee under Section 37(1) were genuine and incurred wholly and exclusively for business purposes. The AO disallowed these expenses, citing that payments were made to five individuals who had minimal bank balances and that the cheques issued were subsequently transferred back to the assessee as loans. The CIT(A) partially allowed the expenses, estimating the net profit at 50% of the gross receipts, resulting in an addition of Rs. 13,45,642/-. However, the Tribunal found that the assessee failed to prove the genuineness of the expenses and restored the AO's order, disallowing the entire amount of Rs. 26,25,000/-. 2. Treatment of an Amount Received as an Advance Versus Income: The AO treated an amount of Rs. 52,97,171/- received from Nitco Tiles Ltd. as business income, arguing that TDS had been deducted on the amount. The assessee contended that the amount was an advance for a property deal that could not be completed due to regulatory issues. The CIT(A) accepted the assessee's argument, noting that the amount was shown as a liability in the balance sheet and no services were rendered for the receipt. The Tribunal upheld the CIT(A)'s decision, treating the amount as an advance and not income. 3. Disallowance of Various Expenses Claimed by the Assessee: For the assessment year 2008-09, the AO disallowed 50% of the expenses amounting to Rs. 17,31,849/-, citing lack of proper vouchers and potential personal use. The CIT(A) restricted the disallowance to Rs. 11,550/-, considering the expenses reasonable and necessary for the business. The Tribunal upheld the CIT(A)'s decision, noting that the books of accounts were audited and the expenses were commensurate with the business activities. 4. Addition of Unsecured Loans as Unexplained Cash Credits: The AO added Rs. 25 lakhs received as an unsecured loan from S.D. Corporation, citing lack of confirmation. The assessee later provided the confirmation letter to the CIT(A), who admitted it as additional evidence and deleted the addition. The Tribunal upheld the CIT(A)'s decision, noting that the amount was received by cheque and the confirmation letter established the genuineness of the transaction. 5. Addition of Cash Deposits as Unexplained Cash Credits: The AO added Rs. 11,57,000/- as unexplained cash deposits. The CIT(A) deleted the addition, stating that the deposits were recorded in the books of account. However, the Tribunal found that the assessee did not provide sufficient evidence to substantiate the source of the deposits and restored the issue to the AO for a fresh examination, giving the assessee another opportunity to prove the source and capacity of the payers. Conclusion: The Tribunal's judgment comprehensively addressed each issue, providing detailed reasoning for upholding or overturning the decisions of the CIT(A) and AO. The judgment emphasized the importance of substantiating claims with proper evidence and maintaining transparency in financial transactions.
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