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TMI Blog2006 (6) TMI 146X X X X Extracts X X X X X X X X Extracts X X X X ..... een made. Thus, we are inclined to affirm the conclusions drawn by the CIT(A) that the impugned addition was unwarranted. Accordingly, on the first ground, the Revenue fails. We notice that in a large number of cases the repayment cheques issued by the assessee have been furnished before the IT authorities. These cheques which are placed at the paper book contain an endorsement of the bankers of the depositors, which clearly evidence the repayment. The aforesaid piece of evidence clearly demonstrates the identity of the deposit holders. Now, insofar as the quantum of individual deposit is concerned, we find that the same ranges from Rs. 5,000 to Rs. 15,000 in an overwhelming majority of cases. Considered in the face of the fact that the deposits have been received in response to the public advertisement, through normal banking channels, repayments are evidenced by bank and most importantly, the absence of any adverse material with the Revenue, we see no reason to treat the deposits as unexplained. Therefore, considering the overall gamut of facts and circumstances of the issue, we are inclined to affirm the conclusion of the CIT(A) in deleting the addition made by the AO. Merely be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c requirements as per IT Act, 1961. (iii) The CIT(A) has erred in law in allowing a relief of Rs. 10,52,231 disallowed by the AO out of foreign travelling expenses without giving any reason whatsoever and without even discussing AO's order in his order. (iv) The CIT(A) has erred in law in giving relief of Rs. 6,64,500 disal1owed by the AO out of entertainment expenses ignoring the mal factual proposition that in absence of evidence possibility of non-business purposes could not be absolutely ruled out." 3. The facts in relation to the first ground are that the assessee company is engaged in the manufacturing of auto components. It filed a return of income declaring an income of Rs. 1,61,62,044, which was accompanied by audited balance sheet and manufacturing and trading account along with necessary annexures, etc. The AO noticed that although the total turnover of the assessee had increased during the year, however, there was a nominal decline of 0.13 per cent in the GP ratio as compared to the preceding year. After considering the explanation of the assessee for such decline, the AO made the addition of Rs. 7,37,750 by increasing the GP ratio by 0.13 per cent. In appeal, the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts in relation to ground No. 2 are that the assessee company had accepted public deposits from various persons. The amount of such deposits raised was Rs. 2.12 crores. On being asked to justify the source of such deposits, the assessee submitted to the AO that the deposits were raised from the public in terms of s. 58A of the Companies Act, 1956; that the deposits were raised by way of advertisement to general public at large in terms of the approval granted by the respective authorities under the Companies Act, 1956. The assessee submitted list of the deposit holders along with their addresses. The assessee also submitted that the deposits have since been repaid fully and also filed the evidence for the same. As an illustrative instance, the assessee tiled deposit application forms in the case of three depositors totalling to Rs. 2,63,000. The AO after considering the explanation of the assessee held that the assessee company had failed to prove the identification, creditworthiness and genuineness of the transaction and he has, therefore, treated a sum of Rs. 2,09,37,000 (i.e., total of Rs. 2,12,00,000 minus Rs. 2,63,000 for which application forms were submitted by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncontroverted material, the CIT(A) has deleted the addition; that the order of the CIT(A) might be brief but certainly is not devoid of the reasoning for deleting the addition. On facts also, it was contended that the material on record clearly indicates that the assessee has been able to demonstrate that the public deposits in question have been received genuinely. That in any case, the assessee has submitted to the AO that if he was not satisfied with the evidence placed before him, it was open to the AO to depute his official for obtaining further evidences, if required, and that the assessee was prepared to bear expenses for conducting such an exercise. For this, our attention has been drawn specifically to communication addressed to the AO, dt.28th Feb., 2001, which is placed in the paper book at p. 2 onwards. 9. We have considered the rival submissions as also the material on record to which our attention has been drawn during the course of the hearing. The undisputed facts are that the assessee is a company incorporated under the Companies Act, 1956. In terms of s. 58A of the Companies Act, 1956, the assessee, under a scheme approved by the RoC, invited deposits from public ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erms of a scheme approved by the authorities under a statute under which the assessee is incorporated, namely, the Companies Act, 1956. The assessee has complied with the various guidelines, instructions, etc. in this regard and there is no adverse observation in this regard on record. Thus, the bona fides of the action of the assessee in inviting public deposits cannot be doubted. Secondly, the entire deposits have been received through normal banking channels. We find that the details of the depositors along with their addresses were very much before the lower authorities. The assessee submitted, as an illustration, copies of three application forms whereby it had received deposits for Rs. 2,63,000 which have been accepted as explained. The fact that the AO was satisfied about the nature and source of the credit on the basis of the application forms in the case of three creditors itself shows an inconsistency in his approach. If according to him, the vetting of the application form was enough to discharge the onus cast on the assessee under s. 68 of the Act, he ought not to have made any addition. It is starkly evident that if the AO was satisfied that the assessee had discharged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. But, no such opportunity has been utilized. Nevertheless, the CIT(A), after having considered the rival submissions has made the decision to delete the addition. While it may show an absence of a detailed discussion on the part of the CIT(A) in concluding the issue, nevertheless, the CIT(A) has, in extenso referred to the submissions of the assessee as also the remand report of the AO in this regard. Therefore, merely because the order of the CIT(A) is brief, cannot be a reason to interpret it as a non-speaking order. In contrast, a non-speaking order is to be understood as one, which shows a lack of application of mind on the part of the authority writing the order. Having noted the manner in which the CIT(A) has proceeded to examine the rival claims, it cannot be said that there is an absence of application of mind on his part. Therefore, the grievance of the Revenue on this count is misplaced. Accordingly, the Revenue fails on this ground. 13. The facts relevant to the third ground are as follows. The AO noticed that the assessee had incurred a sum of Rs. 21,25,814 on foreign travelling undertaken mostly by its directors. The assessee explained that the purpose of the visit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tails of expenditure of Rs. 10.19 lacs claimed by the assessee under the head 'Entertainment expenditure'. The AO observes in the order that a sum of Rs. 5,64,500 was of unexplained nature and not incurred exclusively for business purposes. Hence, the disallowance of Rs. 5,64,500. In appeal, the assessee submitted that the disallowance was made in an ad hoc and arbitrary basis. The CIT(A), after considering the submissions of the assessee has deleted the addition on the ground that it was made without any basis. The Revenue is in appeal before us. 17. Before us, the stand of the learned Departmental Representative is on the basis of observations of the AO made in the assessment order. 18. On the other hand, the learned counsel appearing for the respondent assessee has referred to the paper book pp. 318 to 324 regarding the details of the expenditure in question. He has also referred to p. 6 of the paper book wherein is placed the submission made to the AO. It is further submitted that the expenses were fully vouched and audited. 19. We have considered the rival submissions, and find that the ground preferred by the Revenue is lacking in substance, inasmuch as, the CIT(A) has cor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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