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2018 (5) TMI 500 - AT - Income TaxAddition made for salary, wages and bonus - AO treated the entire expenditure as incurred in connection with the agricultural income only - Held that - In the absence of the information we are of the view that all the expenses incurred by the assessee cannot be treated as business expenses. Therefore case the justice shall be served if the disallowance made by the AO is restricted to the reasonable extent. Hence, in the interest of justice & fair play we are inclined to restrict the disallowance of the expenses to the tune of 50% of the expenses claimed by the assessee. We restrict the disallowance to the extent of 50% of the expenditure as discussed above. Accordingly, AO is directed. Thus, the part ground regarding salary, wage & bonus of appeal of assessee is partly allowed. Disallowance of miscellaneous expenditure - CIT- A reduced the disallowances to the extent of 50% of the miscellaneous expenses - Held that - Disallowances made by the AO and subsequently party confirmed by the learned CIT(A) has been made without the application of mind. We also note that the disallowances of the expenses cannot exceed the amount of actual expenses claimed by the assessee. Therefore we are of the view no disallowance on account of Misc. expenditure in the given facts and circumstance is warranted. On questioned to the ld. DR, he failed to bring any satisfactorily reply. No hesitation to reverse the order of authorities below. Accordingly AO is directed. Hence the ground of appeal of the assessee is allowed. Agricultural income - CIT(A) reducing the agricultural income to ₹ 2.40 lakh instead of ₹ 16,68,430/- - Held that - We find from the order of the Ld. CIT(A), it is clear that the assessee has earned agricultural income from its agricultural land but the same was quantified at ₹ 20,000 per acre only. However, on perusal of the order of Ld CIT(A) we note that the basis of ₹ 20,000 per acre has not been substantiated by the Ld CIT(A) on the basis of documentary evidences produced by assessee. The assessee before the CIT-A submitted that some of the buyers of agriculture appeared before the AO and accepted to have purchased the agricultural products from the assessee. But the buyers failed to furnish the books of accounts. However, we find that the submissions made by the assessee have not been adjudicated by the Ld CIT(A) during the appellate proceedings. Addition to be deleted Enhancing the income on account of negative cash balance - Held that - The undisputed fact of the case is that the issue of negative cash balance as observed by the AO during the remand proceedings was not there during the original assessment proceedings. The matter was remanded by the Ld CIT(A) to the AO for his comments on the specific issue but the AO exceeded his jurisdiction by examining the fresh issue which was not subject matter of the remand report. As relying on CIT vs. Indo-Aden Salt Works Company 1958 (10) TMI 29 - Bombay High Court AO cannot take up the fresh issue in the remand proceedings. Thus we are inclined to reverse the order of authorities below. Accordingly, AO is directed. Hence, the ground of appeal of the assessee is allowed. Addition on account liability and provision respectively - Held that - Receipt by the assessee was supported on the basis of assessment order and audited financial statements of CSIPL. The AO has also not disputed the aforesaid facts in his remand report but commented that CSIPL is not traceable at the given address. After considering the facts in totality we are of the view that the addition made by the AO cannot be sustained merely on the ground that the party is not traceable. The Revenue has not brought any defect in the submissions and details filed before the AO during the remand proceedings. Similarly we note that the provision for income tax is arising from the earlier years therefore no addition for the same can be made for the year under consideration. - Decided in favour of assessee Addition on account of secure loan - admission of additional evidence - Held that - The identity, credit worthiness and genuineness of the transactions was established beyond doubt therefore no additions on account of unexplained cash credit as specified under section 68 can be made in the given facts and circumstances.1 We also note that there is no adverse comment by the AO regarding the transactions of loan through banking Channel.CIT-A adjudicated the issue after calling for the remand report from the AO and considering the submission of the assessee made during the remand proceedings. It cannot be said that the ld. CIT(A) has admitted the additional evidence - Decided against revenue
Issues Involved:
1. Disallowance of expenses (Freight, Power & Fuel, Salary, Wages & Bonus, Travelling expenses). 2. Disallowance of miscellaneous expenses. 3. Reduction of agricultural income. 4. Enhancement of profit due to negative cash balance. 5. Deletion of addition on account of liabilities and provisions. 6. Deletion of addition on account of secured loans. Issue-wise Detailed Analysis: 1. Disallowance of Expenses: The assessee challenged the addition made by the Assessing Officer (AO) and confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)] for expenses under Freight, Power & Fuel, Salary, Wages & Bonus, and Travelling expenses. The assessee did not press the addition for Freight, Power & Fuel, and Travelling expenses, leading to their dismissal. The remaining issue was the addition of ?1,98,500 for Salary, Wages & Bonus. The AO disallowed this expense due to lack of supporting evidence, treating it as related to agricultural income, which is exempt. The Tribunal noted that the assessee had other taxable incomes and that a private limited company must incur certain expenses to maintain its status. The Tribunal restricted the disallowance to 50% of the claimed expenses, partly allowing the assessee's appeal. 2. Disallowance of Miscellaneous Expenses: The assessee claimed miscellaneous expenses of ?11,650, but the AO disallowed ?3,05,438 due to lack of evidence. CIT(A) reduced the disallowance to 50% of ?3,05,438. The Tribunal found that the AO's disallowance exceeded the actual claimed expenses and reversed the disallowance, allowing the assessee's appeal. 3. Reduction of Agricultural Income: The assessee declared agricultural income of ?16,68,430, which the AO treated as "income from other sources" due to lack of evidence. CIT(A) accepted ?2,40,000 as agricultural income based on an estimated yield of ?20,000 per acre for 12 acres and treated the balance as undisclosed income. The Tribunal noted that the assessee had shown similar income in prior years and that the husband of one of the directors had declared significant agricultural income from nearby land. The Tribunal reversed the lower authorities' decision and directed the AO to delete the addition, allowing the assessee's appeal. 4. Enhancement of Profit Due to Negative Cash Balance: During remand proceedings, the AO observed a negative cash balance of ?3,78,525 and recommended its addition as unexplained cash credit. CIT(A) confirmed this addition. The Tribunal found that the AO exceeded his jurisdiction by examining a new issue not part of the original assessment or remand proceedings. Citing legal precedents, the Tribunal deleted the addition, allowing the assessee's appeal. 5. Deletion of Addition on Account of Liabilities and Provisions: The AO disallowed liabilities of ?14,90,887 and provisions of ?28,259 due to lack of details. CIT(A) deleted the addition, noting that the liabilities included an opening balance and that the assessee provided sufficient evidence, including confirmation from the creditor. The Tribunal upheld CIT(A)’s decision, dismissing the Revenue's appeal. 6. Deletion of Addition on Account of Secured Loans: The AO disallowed a secured loan of ?65 lakh due to lack of evidence. CIT(A) deleted the addition after the assessee provided bank statements and confirmation from the creditor, despite discrepancies in the creditor’s statements. The Tribunal found that the identity, creditworthiness, and genuineness of the transaction were established, and upheld CIT(A)’s decision, dismissing the Revenue's appeal. Combined Result: The assessee’s appeal was partly allowed, and the Revenue’s appeal was dismissed.
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