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TMI Blog2012 (7) TMI 271X X X X Extracts X X X X X X X X Extracts X X X X ..... s that the amounts were promptly displayed in the books of account - bedrock for making any addition u/s 69C is that there must have been some expenditure incurred by the assessee, the source of which is not disclosed is not proved here - incurring of such expenses by the assessee in cash etc. calling for disallowance cannot be warranted - When the principal companies have reimbursed the expenditure to the tune of `2.29 crore there cannot be any presumption that the assessee must have saved some money out of the same - decided against revenue. - ITA No.3293/Mum/2008, ITA No.3939/Mum/2008, ITA No.3910/Mum/2008 - - - Dated:- 30-5-2012 - Shri R.S.Syal, Shri Vivek Varma, JJ. Revenue by : Shri Aatiq Ahmed Assessee by : S/Shri Nitesh Joshi S.S.Jhunjhuwala O R D E R Per Bench : These four cross appeals by two different but connected assessees relate to assessment year 2005-2006. Since common issues are raised in these appeals, we are, therefore, disposing them off by this consolidate order for the sake of convenience. M/s.Parekh Corporation 2. Ground nos. 1 and 2 of the assessee s appeal are against confirmation of ad hoc disallowance of Rs. 2 lakh out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applied for disallowing some expenses for the assessment year 2004-2005. In our considered opinion the view taken by the learned CIT(A) on this issue does not require any interference because of the fact that the assessee itself admitted before the learned CIT(A), as reproduced above, that certain expenses were not supported by third party vouchers. These grounds are, therefore, not allowed. 5. Ground nos. 3 to 6 are against the confirmation of disallowance of Rs. 5,40,773 being 20% out of cash expenses incurred on behalf of customers. The Revenue s appeal deals with the deletion of disallowance made by the A.O. on account of freight paid amounting to Rs. 49.48 lakh and also the relief of Rs. 1.51 crore allowed by the CIT(A) under the head Other expenses . Facts apropos these grounds are that the assessee is engaged in the business of clearing and forwarding agent and also financing business. During the course of assessment proceedings the assessee was requested to submit copy of ledger account of its principals and details of reimbursement of expenses incurred on their behalf. The assessee filed copies of ledger account of its principal companies. On going through the accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbursed the entire expenditure, still the assessee gained some amount by getting reimbursement for expenses more than what it actually incurred. He illustrated by observing that if the assessee incurred a sum of Rs. 80 for any service rendered on behalf of the client but inflated the same to Rs. 100 for which he gets the 100% reimbursement from his client, the assessee in this way made a profit of Rs. 20 on this transaction. He, therefore, sustained the disallowance at 20% of such cash expenses which resulted into confirmation of addition to the tune of Rs. 27.03 lakh. Both the sides are in appeal against their respective stands. 7. After considering the rival submissions and perusing the relevant material on record it is found as an admitted position that the assessee issued Debit notes to its principal companies for Rs. 5.36 crore towards service charges and commission income to the tune of Rs. 3.07 crore and reimbursement of expenses worth Rs. 2.29 crore. The Assessing Officer deduced the figure of Rs. 5.36 crore from the accounts of the principals appearing in the ledger account of the assessee. This amply proves that the amounts were promptly displayed in the books of accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of expenses which are already finding place in the debit side of the respective expenditure account. By crediting such amount of Rs. .2.29 crore to the respective expenditure accounts, the assessee did not incur any expenditure requiring any disallowance, but indeed reduced the expenditure on getting reimbursement of such expenses from its principal companies. By passing the entries to the tune of Rs. 2.29 crore, the assessee recovered such expenses already incurred thereby leaving neither any profit nor any loss in this regard. The view point of the learned CIT(A) that the assessee must have saved 20% out of such reimbursement is unfounded because it is for the principal companies to verify the actual expenditure incurred by the assessee on their behalf and then make reimbursement of the same. By adopting such a view and sustaining the disallowance at Rs. 27.03 lakh, the ld. CIT(A), in fact, stepped into the shoes of the principals for verifying the correctness of the claim lodged by the assessee towards reimbursement of expenses incurred on their behalf. Obviously this course of action is not permitted. When the principal companies have reimbursed the expenditure to the tune of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levant material on record it is observed that no addition has been made by the Assessing Officer in respect of the said reference made u/s 142A. The assessment order was passed on 27.12.2007. On a pertinent query, the learned AR admitted that till date no addition has been made on this issue. As admittedly no addition was made in this regard by the Assessing Officer in the assessment order, in our considered opinion, the learned CIT(A) was justified in rejecting this ground as not arising out of the assessment order. We uphold the view taken by the learned CIT(A) and dismiss this ground. 15. The only remaining effective ground in the Revenue s appeal reads as follows :- On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the disallowance of Rs.18,70,649 made by the AO as unexplained expenditure u/s 69C of I.T. Act without giving any valid reason for doing so. 16. Briefly stated the facts of this ground are that the assessee had shown addition to fixed assets to the tune of Rs. 18,70,649 as Building improvement at Mahabaleshwar. The A.O. observed that this property belonged to Smt. Sujata Parekh and Shri Sunil Sevantilal Parekh, par ..... X X X X Extracts X X X X X X X X Extracts X X X X
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