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2015 (12) TMI 765 - AT - Income TaxAddition on account of cash shortage resulting from the excess expenditure incurred - Held that - Assessing Officer made specific defects in the cash book. The assessee could not be controverted the finding of the Assessing Officer and had not placed any evidence regarding shortage of cash before the lower authorities as well as before us. Therefore, we uphold the order of the ld CIT(A). - Decided against assessee. Disallowance U/s 40A(3) - Held that - The assessee has paid salary in excess to ₹ 20,000/- and violated the provisions of Section 40A(3) of the Act but it is also revealed that these payments were pertained to salary for the months of May to August. The genuineness of the payments has not been doubted. The employees were insisted upon cash payments only, therefore, to maintain the good relation with them, the company paid cash salary for various months. The Hon ble Rajasthan High Court in the case of Harshila Chorida Vs. ITO ( 2006 (11) TMI 117 - RAJASTHAN HIGH COURT ) has held that exceptional condition mentioned in Rule 6DD are not exclusive. This was the business expdiencies of the company to pay in cash, therefore, we do not find that these payments are covered U/s 40A(3) of the Act. Accordingly, the addition confirmed by the ld CIT(A) is deleted. - Decided in favour of assessee. Addition on account of expenditure incurred on repair and maintenance treating the same as capital expenditure - Held that - the assessee has fabricated the evidence at the time of photo copying. Original vouchers were not produced before the ld CIT(A). The genuineness of the expenses has been doubted by the lower authority, therefore, we confirm the order of the ld CIT(A) on this ground - Decided against assessee. Addition on account of cessation of liability U/s 41(1) - Held that - burden is on the revenue to prove that the assessee has taken deduction in earlier year and there is a write-off bilateral. In assessee s case, even unilateral written off has not been claimed by the company. The other creditors were advance received from the customer to the tune of ₹ 9,41,354/-, which was paid of in later years. The AR of the assessee filed relevant evidences for repayment in subsequent year, which proved that the assessee s liability was in existence. The revenue has not brought on record any adversary evidence to establish that liability was not inexistence or not paid in the subsequent year. The assessee has shown ₹ 3.60 lacs as security deposit out of this ₹ 2.10 lacs were added by the Assessing Officer in A.Y. 1996-97, which has been deleted by the ld CIT(A). No appeal had been filed by the revenue before the ITAT, therefore, issue is settled. Further remaining amount, the assessee filed confirmation and the ld Assessing Officer had not made any inquiry and established the case that liability is not inexistence. After careful consideration of all the facts and circumstances of the case and written submissions made by the ld AR on Section 41(1) of the Act, we do not find any reason to confirm the order of the ld CIT(A). - Decided in favour of assessee. Disallowance of ESI contribution made U/s 36(1)(x) read with Section 2(24)(10) - Held that - The ld AR has submitted that the said amount of ESI has been paid before due date of return to the fund. In view of the facts and circumstances, we delete the addition made by the Assessing Officer and confirmed by the ld CIT(A). Accordingly, this ground of the assessee s appeal is allowed. - Decided in favour of assessee.
Issues Involved:
1. Jurisdiction and validity of assessment order. 2. Addition on account of cash shortage. 3. Disallowance of repair and maintenance expenses. 4. Disallowance under Section 40A(3) of the Income Tax Act. 5. Treatment of repair and maintenance expenses as capital expenditure. 6. Addition on account of cessation of liability under Section 41(1). 7. Disallowance of ESI contribution. 8. Charging of interest under Sections 234B and 234C. Issue-wise Detailed Analysis: 1. Jurisdiction and Validity of Assessment Order: The assessee did not press this ground; hence, it was dismissed as not pressed. 2. Addition on Account of Cash Shortage: The assessee, engaged in manufacturing pharmaceuticals, filed a return showing a loss. During scrutiny, the Assessing Officer (AO) found cash shortages on specific dates, which the assessee attributed to clerical errors by the accountant. The AO, however, did not accept these explanations and added Rs. 62,328 as undisclosed income. The CIT(A) confirmed this addition, citing lack of corroborative evidence from the assessee. The Tribunal upheld the CIT(A)'s order, dismissing the assessee's appeal. 3. Disallowance of Repair and Maintenance Expenses: The AO disallowed Rs. 30,000 claimed for video camera repairs, as the camera was owned by the director, not the assessee. The CIT(A) enhanced the disallowance to Rs. 32,725, treating the expenditure as capital in nature but allowed depreciation. The assessee did not press this issue before the Tribunal, leading to its dismissal. 4. Disallowance Under Section 40A(3): The AO disallowed Rs. 2,88,000 for salary payments made in cash, violating Section 40A(3). The CIT(A) partly allowed the appeal, reducing the disallowance to Rs. 2,26,805, considering the addition for cash shortage. The Tribunal found the payments genuine and necessitated by business expediencies, thus deleting the disallowance. 5. Treatment of Repair and Maintenance Expenses as Capital Expenditure: The AO capitalized Rs. 55,939 spent on installing a new cooler and duct, allowing depreciation and adding Rs. 51,744 as income. The CIT(A) confirmed this, noting inconsistent explanations from the assessee and lack of vouchers. The Tribunal upheld the CIT(A)'s order, citing doubts on the genuineness of expenses. 6. Addition on Account of Cessation of Liability Under Section 41(1): The AO added Rs. 31,06,354 as income, treating old outstanding liabilities as ceased. The CIT(A) confirmed this, noting the liabilities were outstanding for over 12-13 years with no intent to repay. The Tribunal, however, found no evidence of cessation or remission of liabilities and noted repayments in subsequent years, thus deleting the addition. 7. Disallowance of ESI Contribution: The AO disallowed Rs. 1,519 for late payment of employee ESI contributions. The CIT(A) upheld this, differentiating between employer and employee contributions under Section 36(1)(x). The Tribunal, referencing various case laws, deleted the disallowance, noting the payments were made before the return filing due date. 8. Charging of Interest Under Sections 234B and 234C: The issue of interest under Sections 234B and 234C was deemed consequential, to be decided based on the outcomes of the other grounds. Conclusion: The Tribunal partly allowed the assessee's appeal, deleting the additions under Sections 40A(3) and 41(1), and the disallowance of ESI contributions, while upholding the other disallowances and additions.
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