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TMI Blog2010 (2) TMI 803X X X X Extracts X X X X X X X X Extracts X X X X ..... ired to provide demonstrative evidence that the debt written off has in fact become bad and that if the assessee is writing off the debts as irrecoverable in his account in the previous year, it is sufficient compliance to the deduction under section 36(1)(vii) of the Act. Accordingly, ld. CIT(A) deleted the disallowance in this regard. 6. We have heard both the counsels and perused the records. We find that the issue involved is covered in favour of the assessee by the order of the Hon'ble Jurisdictional High court in the case of CIT vs. Autometers Ltd. 292 ITR 345, wherein it was held that the requirement of assessee to prove that the debt has become bad debt is dispensed with by 1989 amendment in section 36(1)(vii) and thereafter all the assessee has to do is to write off a bad debt as irrecoverable in its accounts. Respectfully following the aforesaid precedent, we uphold the order of the ld. CIT(A) and decide the issue in favour of the assessee. 7. The next issue raised is that ld. CIT(A) erred in deleting the disallowance of Rs.548236/- made on account entertainment expenses for A.Y. 2001-02 and Rs.646625/- for A.Y. 2002-03. 7.1 The assessee had incurr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure claimed under this head. The disallowance works out to Rs.5,42,236/- (50% of Rs.10,96,472/-)." 7.2 Before the Ld. CIT'A assessee inter-alia claimed that as regards the expenditure incurred for entertaining the guests and clients in hotels and restaurants, the bills for the same were duly produced before the AO. In some cases the guests and clients were entertained by the directors and executives at their residence, which were evidenced by self prepared vouchers. It is submitted that such expenditure cannot be evidenced otherwise than by self created vouchers by the directors etc. 7.3 The CIT(A) deleted the disallowance on the ground that the assessee had claimed the expenditure in a bonafide manner and since the AO had not disputed the factum of the expenditure as such, hence there was no basis for the AO to make a partial disallowance on the basis of estimation and surmises. 7.4 Against this order the revenue is in appeal before us.7.5 We have heard both the counsels and perused the records. We find that on this issue the AO has made out a case that there are a large number of entries in general ledger and almost in all cases barring a few, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther the same was laid out wholly or exclusively for the purpose of business. However, at the same time we also find that AO instead of identifying such expenditure, has proceeded to make estimated disallowance in this regard. In this regard, we draw support from the Apex Court decision in the case of Kapurchand Shrimal vs. CIT, 131 ITR 451 wherein it was held that the appellate authority has jurisdiction as well as the duty to correct the errors in the proceedings under appeal. 7.7 Under the circumstances, we remit this issue to the files of the AO to consider the issue afresh and identify such expenditure as discussed above and make the disallowance as per law. Needless to add that the assessee should be given adequate opportunity of being heard. 8. The next issue raised is that the ld. CIT(A) in deleting the disallowance of Rs.1,87,175/- made on account of inland travel expenses for A.Y. 2001-02 and Rs.13,30,527/- for A.Y. 2002-03. 8.1 On this issue AO noted that in most of the case there is no evidence at all of incurring of expenditure including by way of copy of ticket, ticket no., hotel bill or any other form of supporting vouchers. In almost all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... towards boarding expenses depending on the place of stay as fixed DA. In our opinion the above system is quite prevalent and is not an unusual phenomenon. The question of any external voucher in such cases does not arise. As regards copy of tickets and ticket number, they can be considered only lapses of internal control and do not lead to the conclusion that the claim of travel expenditure is bogus. Moreover the disallowance by the AO is only on adhoc basis without any mention of any specific discrepancy. The fact that the expenditure has actually been incurred is also not denied. Hence it has been rightly held by the ld. CIT(A) that the disallowance are not sustainable. Hence we uphold the order of the ld. CIT(A) on this issue. 9. The next issue raised is that the ld. CIT(A) erred in disallowance of Rs.307500/- for A.Y. 2001-02 on account of interest on loan diverted to Directors as interest free advance loans (Rs.262500 for A.Y. 2002-03). 9.1 The facts on the issue are summarized as under:- At the end of previous year relevant to the assessment year in question, the interest free loans given to directors were shown at Rs.19,50,000/- in the books of accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; 9.4 On the other hand the assessee contended that by reference to several case laws that (a) Where no disallowance of interest was made for the earlier years, it was not open to the revenue to seek to disallow interest with respect to opening balances; (b) where an assessee maintains a composite account where all receipts of business are banked and all outgoings are debited, the interest free advances/ non-business expenses should be presumed to have come out of the profits, where the profit for the year exceeds the interest free advances/ non-business expenses; (c) in the absence of one to one nexus between the borrowed funds and money advanced for non-business purposes, the interest free advances should be presumed to have come out of owned funds in the form of share capital and reserve and (d) it is settled position of law that it is not open to revenue how the businessman needs to conduct the business. 9.5 We have carefully considered the submission and perused the records. The decision in the case of Abhishek Industries cited above by the revenue was in connection with interest free advances to sister concern and the decision was rendered prior to the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Goetz (India) Ltd. vs. CIT 284 ITR 323. 10.5 We have heard both the counsels and perused the records. We find that in the above said decision the Hon'ble Apex Court had clarified that the decision referred in that case shall not restrict the powers of the Tribunal to admit and adjudicate the claim of the assessee. In our considered opinion the claim of the assessee was genuine. Article 265 of the Constitution of India states that no tax can be collected except by authority of law. CBDT Circular No.114 XL-35 of 1955 dated 11.4.1955 states that officer of the department must not take advantage of the ignorance of an assessee as to his rights. Hon'ble Apex Court in the case of CIT vs. Mr. P. Firm in 56 ITR 67 wherein the Bench comprised three of their Lordships had expounded that if a particular income is not taxable under IT Act, it cannot be taxed on the basis of estoppel of any other equitable doctrine. If a particular income is not exigible to tax, AO has no power to impose tax on the said income. In the background of the aforesaid discussion, we find that assessee's claim in this regard is justified. 10.6 As regards the merit of the issue, we find that identical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit under section 115JB, even though the same was uncertainty liability. 11.1 Before us on this issue ld. counsel of the assessee has fairly agreed that the above issue is now covered against the assessee in view of the insertion of clause (i) in Explanation given below sub-section (2) of section 115JB of the Act by the Finance Act (No.2), Act, 2009 with retrospective effect from 1.4.2001. In terms of the said new inserted clause (i) with retrospective effect amount set aside as provision for diminution in the value of any asset is not allowable as deduction while computing book profits. However, ld. counsel contended that the direction may kindly be given for allowance of deduction while computing book profit in the year of actual write off of a bad debt. 11.2 We have carefully considered the submissions. Admittedly the issue now stands covered against the assessee by the aforesaid amendment. As regards the claim that the relevant deduction may be allowed while computing book profit in the year of actual write off, we find that the claim of the assessee is a cogent one. AO shall deal with the same, as per law, at the appropriate time. 12. Another ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oring the tax determined u/s 143(1) of the Act. Prior to the amendment, the interest u/s 234B of the Act was levied with reference to the tax assessed u/s 143(1) of the Act and if no such intimation has been passed, the tax assessed u/s 143(3) would be taken and since in the assessee's case, the returned income was accepted in the intimation u/s 143(1) of the Act, no interest is required to be charged. Reliance in this regard is placed on the decision of Lucknow Bench of Tribunal in the case of Shadi Ram and sons vs. DCIT 92 ITD 22, wherein it was held that the interest under section 234B of the Act has to be calculated on tax on income determined under section 143(1) of the Act even in a case where subsequently a regular assessment is made. Considering the above ld. CIT(A) observed that AO has not commented anything on the assesses submissions. Ld. CIT(A) held that AO silence proves that he has no objection in this regard. Hence he directed the AO to delete the interest u/s 234B amounting to Rs.214502/-. 12.2 Against this revenue is in appeal before us. 12.3 We have heard both the counsels and perused the records. Principally we find ourselves in ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) in section 43B of the Act. The amount of Rs.3,50,916/- was allowed by the AO in assessment year 2001-02 in view of the decision of Supreme Court in the case of Bharat Earth Movers Limited vs. CIT : 245 ITR 428. The CIT(A) observed that the addition of Rs.8,31,468/- amounts to double additions made by the assessee, since the same has already been disallowed by the AO in assessment year 2001-02, therefore the same needs to be allowed in the assessment year 2002-03. As regards the amount of Rs.3,50,916/-, it was observed that the same was otherwise allowable and was erroneously added back by the assessee, hence relief must be granted. In that view of the matter, the CIT(A) deleted the addition made by the assessee. 13.2 Against this order the revenue is in appeal before us. 13.3 We have heard both the counsels and perused the records. We find that ld. CIT(A) has granted the relief on the assessee's claim that the amount of Rs.1197384/- was already disallowed in earlier years and hence this year there is a double disallowance. We find that this pertains to factual examination of past records. In our considered opinion AO should have an opportunity to g ..... X X X X Extracts X X X X X X X X Extracts X X X X
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