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2020 (1) TMI 1140 - AT - Income TaxUnexplained sundry creditors - HELD THAT - on perusal of confirmations of the creditors placed in the paper book, we observe that the creditors have given confirmation of ₹ 21,42,479.00. Ld D.R. could not disprove the purchases and payment made by the assessee and in the absence of purchase, sales could not have been effected. In view of above, we direct the AO to delete the addition of ₹ 21,42,479/- considering the confirmations filed by the sundry creditors as noted above out of addition of ₹ 21,85,448/- confirmed by the ld CIT(A). We find that Hon ble Allahabad High Court in the case of Panchan Dass Jain 2006 (8) TMI 582 - ALLAHABAD HIGH COURT held that when the purchases and sales as also the trading result disclosed by the assessee have been accepted by the department, no addition can be made. Hence, addition of ₹ 42,969/- (₹ 21,85,448 ₹ 21,42,479) is confirmed. Ground No.1 of appeal is partly allowed. Failure to prove identity, genuineness and creditworthiness of the loan creditors - HELD THAT - On perusal of the details filed in the paper book by the assessee, we observe that the assessee has furnished the Form No.16, Adhar No. in respect of Pervez Jamal which could prove the identity, genuineness of the transaction. Hence, the addition of ₹ 3,00,000/- is directed to be deleted. As regards to loan creditor of Shri Narayan Sahoo, we find that the assessee has filed only bank statement of the assessee in which cash amount of ₹ 5,00,000/- has been received from Shri Narayan Sahoo. Nothing is placed on record to prove the identity and creditworthiness of the loan creditor Shri Narayan Sahoo. In view of above, we confirm the addition of ₹ 5,00,000/- and partly allow Ground No.2 of appeal. Addition u/s 40(a)(ia) - rent paid for show room AND audit fees paid - HELD THAT - . As per the amended provision to section 40(a)(ia) by the Finance Act, 2015 w.e.f. 1.4.2015, the disallowance is restricted to 30% as against 100% made by the Assessing Officer. We find that similar issue had come up for consideration in the case of Om Sri Nilamadhab Builders Pvt Ltd 2019 (11) TMI 1373 - ITAT CUTTACK we direct the AO to restrict the disallowance to 30% as against 100% made under section 40(a)(ia) of the Act. Hence, Ground Nos,.3 4 are partly allowed. Expenses incurred in connection with staff tiffin, fuel, direct labour and direct expenses - HELD THAT - Since no evidence was filed, he made adhoc disallowance. We find that in this case, the assessment has been completed u/s.143(3) of the Act and the books of account are not rejected. We find that the nature of expenses have not been doubted or disbelieved by the Assessing Officer. We observe that the adhoc disallowance has been made on the basis of suspicion alone and no basis has been given by the AO. Hence, we direct the AO to delete the addition made on adhoc basis. Ground No.5 of appeal is allowed. Payment of sales tax and payment of entry tax - Failure to furnish evidence of the payment within the due date of filing of return u/s.139(1) - HELD THAT - Before us also, no details were furnished by the assessee of the payment within the due date of filing of return u/s.139(1) . Hence, we confirm the addition u/s.43B Addition being RTO expenses on the ground that the assessee has not filed the ledger copy of the above expenses and no other evidence has been furnished to support the claim - HELD THAT - The contention of ld counsel for the assessee is that RTO expenses have been accounted in the gross receipts of the assessee, which has not been disputed by ld DR. Hence, we delete the same and allow this ground of appeal of the assessee. Penalty levied under section 271D - contravention to section 269SS - HELD THAT - Both the persons who have given cash loan to the assessee are relatives i.e. one brother and other is nephew. Therefore, the decisions relied upon by ld counsel for the assessee support the case of the assessee. We, therefore, are of the opinion that there existed a reasonable cause for accepting the cash loans. As such, the assessee may be exonerated from the rigour of Section 271D of the Act. Accordingly, we set aside the order of the ld CIT(A) and delete the penalty imposed under section 271D
Issues Involved:
1. Confirmation of sundry creditors. 2. Identity, genuineness, and creditworthiness of loan creditors. 3. Disallowance of rent paid under section 40(a)(ia). 4. Disallowance of audit fees under section 40(a)(ia). 5. Ad hoc disallowance of various expenses. 6. Disallowance of expenses under section 43B. 7. Disallowance of RTO expenses. 8. Penalty under section 271D for violation of section 269SS. Detailed Analysis: 1. Confirmation of Sundry Creditors: The assessee challenged the addition of ?21,85,448 on the grounds that confirmations were submitted. The tribunal noted that confirmations for ?21,42,479 were indeed provided and accepted by the creditors. The tribunal directed the AO to delete the addition of ?21,42,479, confirming only ?42,969 where confirmations were not provided. The tribunal cited the Allahabad High Court decision in CIT vs. Panchan Dass Jain, emphasizing that accepted purchases and sales negate further additions. 2. Identity, Genuineness, and Creditworthiness of Loan Creditors: The assessee contended that the identity, genuineness, and creditworthiness of loan creditors Narayan Sahoo and Pervez Jamal were established through submitted documents. The tribunal found sufficient evidence for Pervez Jamal and directed the deletion of ?3,00,000. However, for Narayan Sahoo, the tribunal found insufficient evidence and confirmed the addition of ?5,00,000. 3. Disallowance of Rent Paid under Section 40(a)(ia): The tribunal agreed with the assessee that the amendment to Section 40(a)(ia) by the Finance Act, 2014, which restricts disallowance to 30%, should apply retrospectively to reduce undue hardship. Consequently, the tribunal directed the AO to restrict the disallowance to 30% of the rent paid, citing the ITAT Cuttack decision in Om Sri Nilamadhab Builders Pvt Ltd. 4. Disallowance of Audit Fees under Section 40(a)(ia): Similarly, the tribunal applied the same reasoning as for the rent paid, directing the AO to restrict the disallowance of audit fees to 30% instead of 100%. 5. Ad Hoc Disallowance of Various Expenses: The tribunal found that the AO made ad hoc disallowances without rejecting the books of account or doubting the nature of expenses. The tribunal directed the AO to delete the ad hoc disallowance of ?4,73,611, emphasizing that such disallowances should not be based on mere suspicion. 6. Disallowance of Expenses under Section 43B: The tribunal confirmed the disallowance of ?23,545 under Section 43B, as the assessee failed to furnish evidence of payment of sales tax and entry tax within the due date of filing the return. 7. Disallowance of RTO Expenses: The tribunal found merit in the assessee's contention that RTO expenses were accounted for in the gross receipts. Since the AO did not dispute this, the tribunal directed the deletion of the addition of ?62,250. 8. Penalty under Section 271D for Violation of Section 269SS: The tribunal considered the genuineness of cash loans accepted from relatives due to business exigency. It noted that the loans were reflected in the assessee's books, demonstrating bona fides. Citing various judicial pronouncements, including the ITAT Cuttack decision in Mamata Patra vs. JCIT, the tribunal found reasonable cause for the assessee's actions and deleted the penalty of ?6,18,840 imposed under Section 271D. Conclusion: The tribunal partly allowed the appeal in ITA No.169/CTK/2018, providing relief on several grounds while confirming some additions. In ITA No.371/CTK/2018, the tribunal allowed the appeal, deleting the penalty under Section 271D.
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