9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (6) TMI 292 - AT - Income TaxDisallowance u/s 40 A (3) - payments in cash exceeding 20, 000/- -HELD THAT - From list of payments made in cash by assessee it is observed that none of the payments have been made to any particular person exceeding 20, 000/- in a day. Payment has been made by assessee on various dates to various people except payment made to Lalji Chauha in the month of March for a sum of 40, 000/- and 38, 714/- that too made on different dates. When there is a failure on part of assessee to adhere to requirements of provision of section 44 (A) (3). This provision is a preventive measure and check on tax evasion and flow of unaccounted money or to check transactions which are not genuine and may be put as camouflage to evade tax by showing false transactions. However in the type of business carried out by assessee cash payments cannot be eliminated totally. Admittedly revenue is not casting any doubt on genuineness of payments in respect of bills and vouchers placed in paper book. Assessee did not file any details regarding work carried on by these people and urgency that arose to make payments in cash. We are therefore inclined to set aside this issue back to Ld.CIT(A) for proper verification. Assessee is directed to file all details/evidences regarding work carried out by these people required to establish actual cash payment and urgency to make payment in cash. - Decided in favour of assessee for statistical purposes. Disallowance u/s 36 (1) (vii) - bad debt written off - no action to recover the debts - HELD THAT - After amendment to section 36 (1) (vii) though assessee is only to write off the debts as irrecoverable in its account in order to claim deduction of bad debts however evidences of claim to be existing like invoices must be filed. Thus in view of evidences filed by assessee we allow debts written off by assessee in respect of Mirra and Mirra Industries Sandeep Industries and Bindal Industries respectfully following decision of TRS Ltd vs CIT 2010 (2) TMI 211 - SUPREME COURT and debts in respect of other parties stand confirmed. Disallowance of sum for using car of company by directors - AO disallowed 1/5th of maintenance expenses and towards depreciation on 12 cars - Ld.CIT(A) restricted disallowance to 20% based upon submissions advanced by assessee - HELD THAT - CIT(A) observed that claim of depreciation was only 10, 67, 828/-and disallowance on maintenance of cars should be restricted to cars actually used by directors sum of 4, 19, 262/-and restrict the disallowance at 20% on depreciation claimed and expenses claimed by assessee on cars which were used by directors. Admittedly assessee is not maintaining any log book to prove non-usage of cars by Directors. We therefore do not find any infirmity in view taken by Ld.CIT(A). Disallowance of foreign tours - allowable business expense u/s 37(1) - HELD THAT - As observed that details filed by assessee before authorities below has not been doubted and no further verification has been carried out by authorities below in order to establish any falsity of submissions made by assessee. The details placed in paper book reveals that Sh. Tyagi director of assessee had admittedly travelled to U.S. during Interwire Trade Exposition. Further since assessee is engaged in manufacturing supply commissioning of wire drawing plant and machinery of various metals and their alloys it cannot be negated that such exhibitions would not be of any use to assessee. As authorities below has on mere surmises made addition without there being any cogent evidence to establish anything contrary to what has been submitted by assessee we are inclined to allow the claim of assessee. Disallowance u/s 41 (1) - old advance for purchase of machinery and same was repaid over years since purchase deal did not fructify - HELD THAT - We do not find any reason to doubt the explanation offered by assessee which is substantiated by account statements placed in paper book unless authorities below produce any evidence to establish that the purchase was bogus. We are therefore not in concurrence with the views of Ld.CIT (A) which is based upon mere surmises and conjunctures. - Decided in favour of assessee Disallowance u/s 40A (2) (b) - HELD THAT - Disallowance under section 40 A (2) has to be charged on reasonableness of expenditure having regard to fair market value of goods/services or facilities for which payment is made. In the facts of present case authorities below has not cited any instances based upon which it can be ascertained that payment made by assessee was excessive and/or unreasonable. Ld.AO has not placed on record any instances of a job work carried out in respect of similar product as that of assessee to be a yardstick to form belief that payment made by assessee was excessive and/or unreasonable. Under such circumstances and after going through detailed evidences filed by assessee in the paper book we are not in agreement with observations of authorities below and addition made deserves to be deleted . Addition of undisclosed closing stock of finished goods - HELD THAT - CIT (A) proceeded on the footing that goods sold were from part of semi-finished goods and that assessee could not file details of goods sold. From documents placed in paper book we are of considered opinion that goods sold are verifiable from excise records and semi-finished goods are verifiable from work in progress which was shown at closing of preceding year. We are of opinion that authorities below without verifying all these details merely on some surmises has made the addition. There is no iota of dispute in respect of documents filed by assessee by authorities below. This is a case where Ld. AO has failed to verify details as per records filed by assessee. We are therefore not inclined to uphold view of Ld. CIT (A) and the addition stands deleted.
Issues Involved:
1. Disallowance under Section 40A(3) of the Income Tax Act, 1961. 2. Disallowance under Section 36(1)(vii) of the Income Tax Act, 1961. 3. Disallowance under Section 32 of the Income Tax Act, 1961. 4. Disallowance under Section 37 of the Income Tax Act, 1961. 5. Addition under Section 41(1) of the Income Tax Act, 1961. 6. Disallowance under Section 40A(2)(b) of the Income Tax Act, 1961. 7. Addition on account of undisclosed closing stock. Detailed Analysis: 1. Disallowance under Section 40A(3): The assessee contested the disallowance of ?3,76,578/- under Section 40A(3), arguing that the payments were made for job works and repairs, and the nature of such payments was not disputed. However, the department contended that cash payments exceeding ?20,000/- a day to a person necessitate disallowance. The Tribunal observed that none of the payments exceeded ?20,000/- in a single day to any person, except for two payments to Lalji Chauha made on different dates. The Tribunal set aside the issue for proper verification by the CIT(A), directing the assessee to provide details and evidence regarding the necessity of cash payments. 2. Disallowance under Section 36(1)(vii): The assessee challenged the disallowance of ?4,34,956/-, stating that reminders were sent to debtors for recovery, and relied on the Supreme Court decision in TRS Ltd vs CIT. The Tribunal noted that evidence was provided for some debtors, but not for others, and the amount in the ‘imprest account’ was unexplained. The Tribunal allowed the claim for certain debtors but confirmed the disallowance for others due to lack of evidence. 3. Disallowance under Section 32: The assessee argued against the disallowance of ?2,80,738/- for car usage by directors, claiming the cars were used for business purposes. The Tribunal noted that the CIT(A) had reasonably restricted the disallowance to 20% for personal use by directors, given the lack of logbooks proving otherwise. The Tribunal upheld the CIT(A)’s decision. 4. Disallowance under Section 37: The assessee disputed the disallowance of ?2,38,148/- for foreign tours, asserting that the expenses were for business purposes and provided evidence of participation in a trade exposition. The Tribunal found no evidence to contradict the assessee’s claim and allowed the expenditure, noting that the authorities had made the addition based on mere surmises. 5. Addition under Section 41(1): The assessee contested the addition of ?10,95,800/-, arguing that the liability was repaid and provided confirmation from Piyush Steels. The Tribunal agreed with the assessee, noting that the entire amount was refunded, and there was no cessation of liability. The Tribunal did not find any evidence from the authorities to prove the transaction was bogus and allowed the appeal. 6. Disallowance under Section 40A(2)(b): The assessee argued against the disallowance of ?28,50,000/- for job work charges paid to a related party, asserting that the charges were reasonable and supported by evidence. The Tribunal noted that the authorities did not provide any instances of similar job work to prove the charges were excessive. The Tribunal found the disallowance unjustified and allowed the appeal. 7. Addition on Account of Undisclosed Closing Stock: The assessee challenged the addition of ?64,02,705/-, arguing that the closing stock was semi-finished goods and provided evidence from excise records. The Tribunal found that the authorities did not verify the details and made the addition based on surmises. The Tribunal deleted the addition, noting that the documents filed by the assessee were undisputed. Conclusion: The appeal filed by the assessee was partly allowed, with certain issues remanded for further verification and others decided in favor of the assessee based on the evidence provided. The Tribunal emphasized the need for proper verification and evidence-based decisions.
|
