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2015 (8) TMI 419 - AT - Income TaxAddition u/s.68 - Held that - As perused the letter of confirmation dated 26/03/2003 purportedly issued by Narendra Holding Pvt.Ltd. However, the said letter describes the payment through banking channel but has not mentioned the names of the 3rd parties in whose account such amount has been credited. Moreover, the assessee has also not placed any material on record suggesting that those payments were made to 3rd parties on account of calls in arrears and share premium as there is no mention of the names, addresses, etc. of the parties to whom the assessee was liable to pay calls in arrears and share premium. In the absence of such material evidences which were required to be placed on record by the assessee in support of its claim of expenditure, we do not see any reason to interfere with the orders of the authorities below, the same are hereby confirmed. Decided against assessee. Disallowance u/s 40A(2)(b) - Held that - It is settled position of law that the provisions of section 40A(2)(b) of the Act can be invoked in the event where assessee incurs any expenditure in respect of which payment has been paid or is to be made to any person referred to in clause (b) of section 40A(2) and the Assessing Officer is of the opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods, services or facilities for which the payment is made or the legitimate needs of the business or profession of the assessee or the benefit derived by or accruing to him therefrom, so much of the expenditure as is so considered by him to be excessive or unreasonable shall not be allowed as a deduction. Therefore, the AO has first to determine the reasonableness or excessiveness having regard to the fair market value of the services rendered. In the case in hand, the AO has made disallowance on the basis that no verifiable record was placed before the AO which could indicate the fact that Director, namely Shri Mehool N.Bhuva imparted any technical services to the assessee-company. The AO was of the opinion that mere holding of qualification does not lead to inference that he has indeed rendered any services. There is no dispute with regard to the fact that the issue in question is identical as was raised in the AY 1997-98.Therefore, taking a consistent view, we hereby direct the AO to delete the disallowance - Decided in favour of assessee. Validity of the reopening of the assessment u/s.147 - Held that - There is no illegality in the reopening of the assessment since the AO in original assessment proceedings has not examined this issue and no enquiry was made. Therefore, we see no reason to interfere on this issue and assessee s this ground of appeal is rejected. - Decided against assessee. Disallowance of employees contribution towards PF/ESIC - Held that - There is no dispute with regard to the fact that the Hon ble Jurisdictional High Court in the case of CIT vs. Gujarat State Road Transport Corporation reported at (2014 (1) TMI 502 - GUJARAT HIGH COURT ) has decided this issue in favour of the Revenue. Disallowance of employer s contribution towards PF/ESIC - Held that - . We find that the disallowance is made on the basis that the PF/ESIC contribution was not deposited even before the due date of payment but contention of the assessee is that the same was deposited before due date of filing of return. This fact is not controverted by the ld.DR and, therefore this ground of appeal is allowed. - Decided in favour of the assessee. Disallowance of sundry balances - Held that - As decided in TRF Ltd. vs. CIT reported at (2010 (2) TMI 211 - SUPREME COURT ) after 1st April, 1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. However, in the present case, the AO has not examined whether the debt has, in fact, been written off in accounts of the assessee. When bad debt occurs, the bad debt account is debited and the customer s account is credited, thus, closing the account of the customer. In the case of companies, the provision is deducted from sundry debtors. As stated above, the AO has not examined whether, in fact, the bad debt or part thereof is written off in the accounts of the assessee. This exercise has not been undertaken by the AO. Hence, the matter is remitted to the AO for de novo consideration of the above-mentioned aspect only and that too only to the extent of the write off. - Decided in favour of assessee.
Issues Involved:
1. Disallowance of Rs. 5,000 under Section 40A(3) of the Income Tax Act, 1961. 2. Addition of Rs. 64,00,000 under Section 68 of the Income Tax Act, 1961. 3. Disallowance of Rs. 30,00,000 as excessive remuneration under Section 40A(2)(b) of the Income Tax Act, 1961. 4. Validity of reopening the assessment under Section 147 of the Income Tax Act, 1961. 5. Disallowance of employee's contribution towards PF/ESIC of Rs. 15,37,391 under Section 36(i)(va) of the Income Tax Act, 1961. 6. Disallowance of employer's contribution towards PF/ESIC of Rs. 16,02,019 under Section 43B of the Income Tax Act, 1961. 7. Charging of interest under Section 234D of the Income Tax Act, 1961. 8. Withdrawal of interest under Section 244A of the Income Tax Act, 1961. 9. Disallowance of sundry balances of Rs. 23,14,032 written off as irrecoverable and business loss. Issue-wise Detailed Analysis: 1. Disallowance of Rs. 5,000 under Section 40A(3) of the Income Tax Act, 1961: The assessee did not press this ground due to the smallness of the amount involved. Consequently, the ground was dismissed as not pressed. 2. Addition of Rs. 64,00,000 under Section 68 of the Income Tax Act, 1961: The assessee argued that the confirmation letter from Narendra Holding Pvt. Ltd. was sufficient to discharge the initial onus. However, the Tribunal noted that the letter did not specify the names of the third parties to whom payments were made, and no material evidence was provided to support the claim. Therefore, the Tribunal upheld the addition made by the authorities. 3. Disallowance of Rs. 30,00,000 as excessive remuneration under Section 40A(2)(b) of the Income Tax Act, 1961: The Tribunal observed that the issue was identical to the one raised in AY 1997-98, where the Tribunal had confirmed the deletion of the disallowance. The Tribunal noted that there was no change in the facts and circumstances for the present year and directed the AO to delete the disallowance. 4. Validity of reopening the assessment under Section 147 of the Income Tax Act, 1961: The Tribunal found no illegality in the reopening of the assessment since the AO had not examined the issue in the original assessment proceedings. Therefore, the Tribunal upheld the validity of the reopening. 5. Disallowance of employee's contribution towards PF/ESIC of Rs. 15,37,391 under Section 36(i)(va) of the Income Tax Act, 1961: The Tribunal noted that the issue was decided against the assessee by the Hon'ble Gujarat High Court in CIT vs. Gujarat State Road Transport Corporation. Consequently, the Tribunal upheld the disallowance. 6. Disallowance of employer's contribution towards PF/ESIC of Rs. 16,02,019 under Section 43B of the Income Tax Act, 1961: The Tribunal found that the PF/ESIC contribution was deposited before the due date of filing the return. Therefore, the Tribunal allowed this ground of appeal and directed the AO to delete the disallowance. 7. Charging of interest under Section 234D of the Income Tax Act, 1961: No submissions were made on behalf of the assessee for this ground. Hence, the Tribunal dismissed this ground for want of submission. 8. Withdrawal of interest under Section 244A of the Income Tax Act, 1961: Similar to the previous ground, no submissions were made on behalf of the assessee. Therefore, the Tribunal dismissed this ground for want of submission. 9. Disallowance of sundry balances of Rs. 23,14,032 written off as irrecoverable and business loss: The Tribunal noted that the Hon'ble Supreme Court in TRF Ltd. vs. CIT held that it is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. The Tribunal found that the authorities below did not examine whether the debt was written off in the accounts. Consequently, the Tribunal allowed the grounds raised by the assessee and directed the AO to delete the disallowance. Summary of Results: 1. Assessee's appeal in ITA No. 4518/Ahd/2003 for AY 2000-01 is partly allowed. 2. Assessee's appeal in ITA No. 1407/Ahd/2007 for AY 2000-01 is partly allowed. 3. Assessee's appeal in ITA No. 2282/Ahd/2012 for AY 2006-07 is allowed. Order Pronouncement: The order was pronounced in the Court on Friday, the 7th day of August, 2015 at Ahmedabad.
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