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TMI Blog2013 (10) TMI 865X X X X Extracts X X X X X X X X Extracts X X X X ..... been taken by the appellant - The appellant claim Rs. 2 lacs under the the head misappropriation of cash from the bank account allegedly made by one of its employees – Held that:- After considering the facts of the case as revealed from the copy of FIR that there was misappropriation of fund for Rs. 2 lacs and placed the evidences on record. He has established the misappropriation of fund by the employees – Allowed as expense as various courts have held. - ITA No. 689/Ahd/2010 - - - Dated:- 27-9-2013 - Shri D. K. Tyagi And Shri T. R. Meena,JJ. For the Petitioner : Shri P. P. Jain, A.R. For the Respondent : Shri P. L. Kureel, Sr. D.R. ORDER Per : Shri T. R. Meena, Accountant Member This is an appeal at the behest of the assessee which has emanated from the order of CIT(A)-VIII, Ahmedabad, dated 27.11.2009 for assessment year 2006-07. The effective grounds of appeal are as under: "1. The Ld. CIT(A) has erred in law and on facts in upholding the disallowance of Rs.575000/- as per para 10 of the assessment order being liability pertaining to Software Technology Park of India without properly appreciating the facts of the appellant. 2. The Ld. CIT(A) has err ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al is against upholding the disallowance of Rs.5,75,000/- being liability pertaining to Software Technology Park of India. The A.O. observed that the assessee had claimed payment of Rs.5,75,000/- to the Software Technology Park of India, a Government of India Enterprise on account of bandwidth charges. The A.O. gave reasonable opportunity of being heard on this issue. The assessee filed a copy of order of Arbitral Tribunal. The A.O. observed that in ledger account, the appellant had made entries of purchases of bandwidth from Videsh Sanchar Nigam Ltd.and EXATT Technologies Pvt. Ltd. The assessee company had enclosed a copy of Arbitration award dated 20th July 2006. According to this award, the claim of the assessee company was not only rejected but it was directed to make payment of Rs.5,75,000/- being counter claim made by respondent Software Technology Park of India, Gandhinagar, a Government of India undertaking within one month from the date of award. As per A.O., this liability had been crystallized in A.Y. 07-08 and not in 06-07. Thus, assessee's claim was rejected by the A.O. 3. Being aggrieved by the order of the A.O., the assessee carried the matter before the CIT(A) who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e genuineness of the transaction with Exatt Technologies Pvt. Ltd., the A.O. carried out the exercise of verification by issuing notice u/s. 133(6) of the IT Act on the address given by the appellant. However, that notice returned back to the department with remarks from the postal authority "Left". In view of this, the A.O. directed the appellant to prove the genuineness of such purchase from the parties in response to such query made by the A.O. The appellant file a copy of ledger account maintained in its books of account of that party and claimed that all the payments were made through banking channel only. The A.O., however, did not find the statements of the appellant satisfactory and treated the purchase from that party as non genuine and added the amount of Rs.6,11,590/- to the income of the appellant. The CIT(A) had confirmed the addition by observing as under: "7.4 I have considered the facts and submission of the Ld. A.R. carefully. There is no dispute about the fact that the confirmation account from the purchasing party was not forthcoming during the assessment proceedings even though a notice u/s 133(6) of the Act was also issued by the A.O. on the address provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Rs.9,97,041/-. During assessment proceeding, the A.O. asked the appellant to prove the genuineness to the purchase of consumable goods amounting to Rs.9,97,041/-. He issued show cause notice to the appellant vide letter dated 14th August, 2008 and including there with the details of such expenses as per Annexure 'N' of the letter. These details are mentioned by the A.O. in para 12 of the assessment order. He further noted that the appellant's business activities are to provide I.T. enabled service, BPO service, Broadband, net-work and internet service. He observed that the network and other items used for transmitting the signals were capital in nature. The A.O. also observed that similar issue had come for consideration in A.Y. 2001-02 when such expenses were claimed by the appellant for the first time. These expenses were held by the A.O. in the A.Y. 01-02 is capital in nature and only 20% depreciation on them was allowed. The A.O's. action was upheld by the CIT(A) vide order dated 29.02.2006, wherein he had simply modified the order of A.O. directing to allow depreciation @ 25% applicable to plant and machinery. The A.O. further noted that since the appellant on the verge of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble. The assessee could not produce the parties for verification before the A.O., but some of the entries had been verified by the A.O. from the bank statement as conclusive evidence in itself. As per requirement of the A.O., the appellant had submitted all the details of consumer showing item wise purchase with copy of ledger account and bills of major purchase, which was reproduced by the CIT(A) also in his appellate order. The assessee has reconciled the account in case of M/s. Aegis Infosys Cosmo Traders. The A.O. referred the assessment order for A.Y. 2001-02, there is no relevancy with the assessment for the year 06-07 that was the first year of the assessee company but later find it has been allowed as revenue expenditure. At the outset, ld. Sr. D.R. vehemently relied upon the order of the CIT(A). 11. We have heard the rival contentions and perused the material on record. The ld. A.O. issued notice to the various parties, there was no response from the supplier of consumable item. The assessee was asked to produce the parties for verification during the course of assessment proceeding, which were not produced. Ld. A.R's. argument on this point is similar as before the CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 149. The copy of all bills at page no.151 to 158, which shows that assessee has purchased the plant and machinery from these parties. The appellant also got verified all these payments from the bank account and proved that these expenses are genuine and requested to delete the addition. At the outset, ld. Sr. D.R. again relied upon the order of the CIT(A). After considering the facts of the case, providing the copy of purchase bill of the plant and machinery are not sufficient to prove the genuineness of the addition of assets during the year. The appellant had to prove the mode of payment and which was not verified by both the lower authorities from the bank account that these amounts debited in the bank account actually cleared to these parties as assessee could not produce these parties for verification at the time of assessment order. Therefore, in the interest of justice, this issue is set aside to the A.O. to give one more opportunity to prove this transaction genuine. Accordingly, we set aside this ground of appeal to the A.O. 15. Ground no.5 is against upholding the disallowance of bad debts of Rs.20,812/-. The A.O. observed that assessee had claimed bad debts of Rs.20,81 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the lower authorities. The Hon'ble Gujarat High Court in case of Ambica Mills Limited vs. CIT, (1964) 54 ITR 167 (Guj), held that if the expenditure incurred with a view to earn greater profit is allowable deduction. Therefore, it is allowable expenditure. Accordingly, we reverse the order of the CIT(A). 17. Ground no.7 is against upholding the disallowance of Rs.2,00,000/- on account of misappropriation of cash for which legal action has been taken by the appellant. The appellant claim Rs. 2 lacs under the the head misappropriation of cash from the bank account allegedly made by one of its employees. The A.O. noted that on the complaint made by the appellant with the Police department, they recovered Rs.1,22,000/- from the possession of the accused employee. Since, no certificate from the police department was filed by the appellant before the A.O., he disallowed the claim accordingly. Ld. CIT(A) held that the appellant did not file any certificate from the police department regarding non recoverability of alleged misappropriated amount by its one of the employees. Therefore, under these circumstances, the claim made by the appellant for the relevant period was immatured and has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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