9911796707
TMI Blog2013 (8) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... e and there might have been agreement in existence, still it would be open to the Assessing Officer to take into consideration various factors which would go to show whether the payment was made as required by the section 37 of the Act or not. It is required to be noted that as such the Assessing Officer after taking into consideration the relevant factors came to the conclusion that the payment was not made wholly or exclusively for the purpose of the business of the assessee and therefore, the Assessing Officer rightly disallowed the aforesaid deduction which has been rightly restored by the ITAT - Decided against assessee. - Tax Appeal No. 705 of 2012 - - - Dated:- 2-7-2013 - M. R. Shah And Sonia Gokani,JJ. For the Appellant : Mr. Tushar P. Hemani, Advocate, Ms. Vaibhavi K. Parikh For the Respondent : Mr. Pranav G. Desai, Advocate ORDER (Per : Honourable Mr. Justice M. R. Shah) 1.00. Present appeal has been preferred by the appellant assessee challenging the impugned judgement and order passed by the Income Tax Appellate Tribunal, Rajkot (hereinafter referred to as ITAT ) in ITA No.445/Rjt/2011, by which the tribunal has allowed the said appeal pref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed the order and set aside the order of Assessing Officer with respect to rejection of the books of accounts, considering the explanation before the CIT(A), which was never furnished by the assessee before the Assessing Officer, by the impugned judgement and order, the tribunal has allowed the said appeal and remanded the matter back to the Assessing Officer. So far as the order passed by the CIT(A) deleting addition of Rs.7,46,965/- as well as Rs.30,48,715/- made by the Assessing Officer under section 40(a)(2)(b) of the Act, ITAT has allowed the said appeal qua the aforesaid two amounts and has set aside the order passed by the CIT(A). Feeling aggrieved by and dissatisfied with the impugned judgement and order passed by the ITAT, Rajkot, the assessee has preferred present appeal with the following proposed questions of law : (i) Whether, in the facts and circumstances of the case the Income Tax Appellate Tribunal was right in law in adjudicating upon the aspect of rejecting the books of accounts of the appellant under Section 145 of the Act without there being any ground raised before it in the appeal memo? (ii) Whether in the facts and circumstances of the case the Income T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 145(3) of the ITAT and consequently addition of Rs.1,07,39,574/- by way of estimation of gross profit is concerned, as the matter is remanded to the Assessing Officer and sufficient opportunity will be given to the assessee to make submissions and submit explanation, we do not think it proper to interfere with the impugned order of remand by the ITAT with respect to the aforesaid issue. However, suffice it to say that despite the sufficient opportunity given to the assessee to explain the discrepancies in the books of accounts as well as stock, the assessee failed to availed the opportunity and furnish the explanation before the Assessing Officer. Thereafter before the CIT(A) for the first time the assessee furnished the explanation which came to be considered by the CIT(A) and considering the said explanation, CIT(A) held that sufficient explanation has been furnished by the assessee and therefore, the Assessing Officer erred in rejecting the books of accounts. Considering the fact that the assessee did not furnish explanation before the Assessing Officer and furnished explanation before the CIT(A) for the first time and the Assessing Officer was not given opportunity to cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amount of Gift Gift made on Period upto March 2008 Interest @ 16% Bhavik J.Shah Rs.20,00,000 19/06/07 285 days Rs.2,49,863 Tejas R. Shah Rs.20,00,000 19/06/07 285 days Rs.2,49,863 Jignesh Shah Rs.20,00,000 16/06/07 285 days Rs.2,47,239 Total Rs. 7,46,965 5.00. The same came to be deleted by CIT(A) and in appeal ITAT reversed the order of CIT(A) and confirmed the addition made by the Assessing Officer. While restoring order passed by Assessing Officer, ITAT in the impugned order has observed and held as under : 17. We have heard both the parties. Observations made the assessment order indicate that Rs.60,00,000/- were diverted by the assessee from his business in favour of three persons namely, Shri Bhavik J. Shah, Shri Tejas R. Shah and Shri Jignesh R. Shah allegedly by way of gift. After the so-called gift, the assessee got back the same money from all the aforesaid three persons on which the assessee chose to pay interest @ 16% which aggregated to Rs.7,46,965/-. None of the aforesaid persons could have got ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessee within the meaning of section 40(A)(2) (b) of the Act is concerned, it is required to be noted that as such the aforesaid persons are found to be nephews of the assessee and the finding that money was first diverted by the assessee from his business as a gift to the aforesaid three persons and thereafter the same money was given to the assessee at the rate of 16% per annum and on which the assessee claimed benefit under section 40(A)(2)(b) of the Act and the entire series of transactions were illusory, colourable and not genuinely for the purpose of the business. It is rightly held that there is no borrowing of capital and therefore, requirement of section 36(1)(iii) is not fulfilled and therefore, the ITAT has rightly restored disallowance by the Assessing Officer. No interference of this Court is called for. 6.00. Now, so far as the issue with respect to disallowance of Rs.30,48,715/- of salary payment under section 40(A)(2)(b) of the Act is concerned, it is required to be noted that both, Assessing Officer as well as ITAT have specifically observed and held that the assessee has devised a colourful mechanism to avoid tax liability in the hands of his proprieta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the taxing authorities to examine this matter. Expenditure is to be allowed only if it is incurred wholly and exclusively for the purposes of business and for no other purpose or with no other motive. In order to be allowable u/s. 37(1), the expenditure must therefore satisfy the test of commercial expediency. Commercial expediency has to be form the point of view of an assessee who knows best how his business has to be run but such a point of view has to be reasonable point of view which is free from taint of excessiveness, collusiveness or colourable discretion. 28. Turning to the facts of the present case, Shri Bhavik J. Shah was paid salary amounting to Rs.14,04,924/- in the year under appeal as against Rs.1,80,000/- in the immediately preceding year, Shri Tejas R. Shah paid salary amounting to Rs.14,04,924/- in the year under appeal as against Rs.1,80,000/- in the immediately preceding year while Shri Jignesh R. Shah was paid salary amounting to Rs.7,78,867/- in the year under appeal as against Rs.1,80,000 in the immediately preceding year. Perusal of Part-B of Annexure to the Tax Audit Report for the year under appeal shows that the gross turnover of the assessee in the yea ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
