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2016 (2) TMI 500 - AT - Income TaxReference to Districts Valuation Officer (DVO) - addition on LTCG - Held that - The ratio of the judgement CIT Vs Nelopher I. Singh (2008 (8) TMI 165 - DELHI HIGH COURT) is that when there is nothing on record to prove that assessee received a consideration from the sale of said property more than what is shown in the sale documents, the actual sale consideration recorded in the sale documents cannot be substituted by the value of the property arrived at by the DVO. Moreover, when Ld. CIT(A) has himself held in para 8 of the impugned order that neither the DVO nor the A.O. allowed any opportunity of being heard to the assessee before relying upon the report of DVO and thereby violated the rules of natural justice, he has committed error in deleting the addition on account of LTCG on land at ₹ 2,35,97,760/- and STCG on building at ₹ 60,16,039/-. So, we are of the considered view that the matter is required to be restored to Ld. CIT(A) to decide afresh after providing adequate opportunity of being heard to the parties Disallowance deduction on account of loss on sale of investment / asset - Held that - Shri Vinay Gupta has failed to prove the source of investment of ₹ 5,00,000/-in the shares of M/s. Moriic India Ltd. As none has appeared on behalf of M/s. Vgyapan Bureau despite issuance of summon u/s 131 of the Act, to prove the contention of the assessee. he assessee s contention to have sold 3,00,000 shares of its subsidiary company at loss to generate liquidity of ₹ 5,00,000/- is incomprehensible for the reason that after 15 years of investment he has sold shares at loss just to generate liquidity of ₹ 5,00,000/- particularly when he had already generated funds to the tune of ₹ 4,50,00,000/- on account of sale of property earlier than sale of shares and the assessee has even furnished no explanation when called upon to explain as to why the sale of shares of M/s. Moriic India Pvt. Ltd. be not treated as sham transaction. Therefore, the amount of ₹ 5,00,000/- credited in the books of accounts of Vinay Kumar Gupta on 29.10.2005, who has debited equal amount of payment to the assessee by reflecting the same in his books of accounts on 02.11.2005 and resultantly a sham transaction - Decided in favour of revenue Disallowance of claim of assessee qua bad debts - addition on the ground that the assessee has failed to prove that the return of debts had actually become bad and even list of parties whose debts were written off, has not been provided despite numerous opportunities deleted by CIT(A) - Held that - In the instant case, assessee has written off bad debts to the tune of ₹ 90,97,536/- as irrecoverable in the accounts books for the Assessment Year 2005-06 and in these circumstances, assessee has no need to further prove that the debt has become bad and it is not necessary for the assessee to establish that the debt has actually become irrecoverable. The judgement of TRF Ltd. (2010 (2) TMI 211 - SUPREME COURT ) is squarely applicable to the facts and circumstances of this case. Hence, we are of the considered view that there is no scope to interfere into the findings returned by Ld. CIT(A) in deleting the addition on account of disallowance of bad debts. - Decided against revenue Addition u/s 41(1) on account of cessation of liability - Held that - The issue to be decided by the Tribunal is squarely covered by the judgement cited at Sugauli Sugar Works Ltd. (1999 (2) TMI 5 - SUPREME Court ) because merely by virtue of fact that a debt become time barred the right of the creditor will not come to an end nor the liability will cease and in these circumstances, Section 41 (1) of the Act is not attracted. So, when the liability qua the amount which is still standing in the balance sheet of the assessee, which fact has not been disputed by the A.O., the same cannot be said to have ceased. So, we are of the considered view that there is no scope to interfere in the findings returned by Ld. CIT(A). - Decided against revenue Addition of deduction of VRS expenses for the financial year 2000-01 u/s 35DDA - disallowance on the ground that the aforesaid section came into effect w.e.f. 01.04.2001 without any retrospective effect - Held that - he addition has been made merely on the basis of wrong interpretation of the provisions contained u/s 35DDA of the Act. Any deduction claimed for the financial year 2000-01 u/s 35DDA is to be considered for assessment year 200 1-02, when undisputedly, section 35DDA become the statute w.e.f. 01.04.2001, the assessee is certainly entitled to get the benefit for the same. Moreover, A.O. himself had allowed VRS payment in the earlier year, and the deduction claimed in the year under consideration is only a consequential relief for the 5th year. So, even otherwise, Section 35DDA does not preclude the assessing authority to consider the VRS payment as revenue expenditure. - Decided against revenue Disallowance on account of late payment of PF contribution - Held that It is the settled principle of law that the expenditure are allowable u/s 43B of the Act, even if deposited late, but before the date of filing of return of income. In the instant case, the assessee has deposited the amount late by 5 days but before the filing of return for the relevant period. So, we find no ground to interfere into the findings returned by Ld. CIT(A) on this issue deleting the addition - Decided against the Revenue Addition on account of communication expense and vehicle running and maintenance expenses - Held that - A.O. has merely disallowed 1/4th of the total expenditure on account of communication expenditure on the basis of letter written by the assessee, but has failed to make out any element of personal nature by applying his mind in the said expenditure particularly in case of a company. When expenses have been made by a company, a juristic person, the question of disallowance of the amount on the ground that the same were of personal nature, does not arise. Addition on account of communication expenditure and vehicle running and maintenance expenses by considering the same of personal nature in case of assessee company, is not permissible as there is no element of personal nature in the communication expenses incurred by the assessee company - Decided against the Revenue Addition on account of staff welfare expenses and on account of conveyance expenses - Held that - When the A.O. has accepted the books of accounts of the assessee and all such expenditure have been explained in the books of accounts as business expenditure, it is not permissible for the A.O. to proceed at his will by making the addition on the ground of whims and fancies. Moreover, the issue as to the admissibility of staff welfare expenses for the assessment years 1998-99 and 2001-02 has already been decided by the Coordinate Bench of ITAT for A.Y. 1988-89 and 2001-02, in favour of the assessee. So, we find no ground to interfere into the findings returned by Ld. CIT(A) on this issue also - Decided against the Revenue
Issues Involved:
1. Reference to Valuation Officer under Section 142A vs. Section 55A of the Income Tax Act, 1961. 2. Deletion of additions on account of long-term and short-term capital gains. 3. Allowance of long-term capital loss. 4. Deletion of addition on account of bad debts written off. 5. Deletion of addition on account of cessation of liabilities under Section 41(1). 6. Deletion of addition on account of Voluntary Retirement Scheme (VRS) expenses. 7. Deletion of addition on account of late deposit of employees' contribution towards Provident Fund (PF). 8. Deletion of addition on account of communication and vehicle maintenance expenses. 9. Deletion of addition on account of staff welfare and conveyance expenses. Detailed Analysis: 1. Reference to Valuation Officer under Section 142A vs. Section 55A of the Income Tax Act, 1961: The Revenue argued that the Assessing Officer (AO) made a reference to the Valuation Officer for determining the investment in immovable property under Section 142A, not Section 55A, which was an obfuscation of the true facts. The Tribunal observed that the AO was not empowered to refer the matter to the District Valuation Officer (DVO) under Section 55A for the valuation of the capital asset as on 01.04.1981. The DVO's valuation was arbitrary, lacking evidence, and the AO violated natural justice by not allowing the assessee an opportunity to be heard. The Tribunal restored the matter to the CIT(A) for a fresh decision. 2. Deletion of Additions on Account of Long-Term and Short-Term Capital Gains: The Tribunal noted that the land was purchased in 1976, and the assessee had the option to value it based on the fair market value as of 01.04.1981. The DVO fixed the rates arbitrarily without evidence. The CIT(A) erred in deleting the addition without providing an opportunity to the assessee. The matter was restored to the CIT(A) for a fresh decision. 3. Allowance of Long-Term Capital Loss: The AO disallowed the deduction of Rs. 76,84,124 on account of loss on the sale of investment, terming the transaction as sham. The Tribunal found that the AO's decision was based on cogent reasons, while the CIT(A) deleted the addition based on conjectures and surmises. The Tribunal determined this ground in favor of the Revenue, concluding that the transaction was indeed a sham. 4. Deletion of Addition on Account of Bad Debts Written Off: The AO disallowed the claim of bad debts of Rs. 90,97,536, arguing that the assessee failed to prove the debts had become bad. The Tribunal referred to the Supreme Court judgment in TRF Ltd. vs. CIT, stating that it is sufficient if the bad debt is written off as irrecoverable in the accounts. The Tribunal upheld the CIT(A)'s decision to delete the addition, determining this ground against the Revenue. 5. Deletion of Addition on Account of Cessation of Liabilities under Section 41(1): The AO added Rs. 15,55,893 on account of cessation of liability, arguing that the assessee failed to prove the liability subsisted. The Tribunal cited the Supreme Court judgment in Sugauli Sugar Works Pvt. Ltd., which held that a mere entry in the books does not extinguish the debt. The Tribunal upheld the CIT(A)'s decision, determining this ground against the Revenue. 6. Deletion of Addition on Account of VRS Expenses: The AO disallowed the deduction of VRS expenses of Rs. 10,02,735, arguing that Section 35DDA was effective from 01.04.2001 without retrospective effect. The Tribunal found that the AO's addition was based on a wrong interpretation of Section 35DDA. The Tribunal upheld the CIT(A)'s decision, determining this ground against the Revenue. 7. Deletion of Addition on Account of Late Deposit of Employees' Contribution towards PF: The AO disallowed Rs. 1,53,373 for late deposit of PF contribution. The Tribunal noted that the amount was deposited before the filing of the return, making it allowable under Section 43B. The Tribunal upheld the CIT(A)'s decision, determining this ground against the Revenue. 8. Deletion of Addition on Account of Communication and Vehicle Maintenance Expenses: The AO disallowed 1/4th of the communication and vehicle maintenance expenses based on the assessee's letter. The Tribunal found that the AO failed to establish any personal element in the expenses, especially for a company. The Tribunal upheld the CIT(A)'s decision, determining this ground against the Revenue. 9. Deletion of Addition on Account of Staff Welfare and Conveyance Expenses: The AO disallowed portions of staff welfare and conveyance expenses based on estimation and alleged submissions by the assessee. The Tribunal found that the AO accepted the books of accounts and the expenses were explained as business expenditures. The Tribunal upheld the CIT(A)'s decision, determining this ground against the Revenue. Conclusion: The appeal filed by the Revenue was partly allowed for statistical purposes. The Tribunal restored the matters concerning grounds No.1 and 2 to the CIT(A) for a fresh decision, allowed the appeal on ground No.3, and dismissed the appeal on grounds No.4, 5, 6, 7, 8, and 9.
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