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TMI Blog2014 (11) TMI 377X X X X Extracts X X X X X X X X Extracts X X X X ..... ween the Bank funds and the amount advanced to related parties – the facts of the issue are not clear – thus, the matter is remitted back to the AO for proper examination and verification – Decided in favour of Revenue. Commission payable – Genuineness of creditors – Held that:- Commission payable was the opening balance as on 1-4-2005 in the assessee's balance-sheet under the head 'sundry creditors' – CIT(A) was rightly of the view that the assessee actually claimed an amount of ₹ 80,000/- as the brokerage – the AO was not correct in disallowing the amount as appearing in the balance sheet against the claim made in the Profit and Loss account – the order of the CIT(A) is upheld – Decided against revenue. - ITA No. 385/Bang/2013 - - - Dated:- 26-9-2014 - N. V. Vasudevan, JM And Jason P. Boaz, AM,JJ. For the Petitioner : Shri L V Bhaskar Reddy, JCIT (DR) For the Respondent : Smt Sheetal Borkar, Adv. ORDER Per: Jason P. Boaz,AM. This appeal by the Revenue is directed against the order of the CIT(A)-I, Bangalore, dated 31-12-2012 for assessment year 2006-07. 2. The facts of the case, briefly, are as under:- 2.1 The assessee, a company engaged i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the case that the disallowance was made as the assessee was unable to substantiate the claim by producing the pay roll register and PF details as required by the AO. 5. The CIT(A) erred in not appreciating that the onus lay on the assessee to substantiate the genuineness of the payments. 6. The CIT(A) erred in deleting the disallowance of the liability of ₹ 2,75,78,763 without appreciating the facts of the case that the assessee could not produce any evidence in support of its claim of liability to Indus Fila. 7. The CIT(A) erred in restricting the disallowance of sundry creditors to ₹ 80,000 as against the disallowance of ₹ 20,54,038 made without appreciating the fact that the assessee could not prove the genuineness of the existence of the outstanding sundry creditors of ₹ 19,56,990 and ₹ 97,048 as on 31-03-2006. 8. The CIT(A) erred in deleting the disallowance of interest of ₹ 32,02,881 without appreciating the fact that even if advances are not made during the year the assessee would be incurring interest on the funds borrowed. 9. The CIT(A) erred in not appreciating that not all of the advances were made in the earlier y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. 6.2 On appeal, the ld.CIT(A) deleted the disallowance by making the following observations: i. The Assessing Officer's action in disallowing 20% of salaries is not based on any evidence. ii. The assessee had furnished details like books of account, audited statements and Form 3CD. iii. The Assessing Officer is not clear what is the amount, which is to be disallowed. iv. The disallowance can be claimed only of the amounts claimed as expenditure in the Profit Loss Account and not the amount shown in the Balance sheet. 6.3.1 We have heard the rival submissions and perused and carefully considered the material on record. As observed by the ld.CIT(A), the assessee has maintained books of account and the audited statements/Form 3CD which were furnished before the Assessing Officer. The Assessing Officer has not rendered any finding of there being any infirmity or irregularity in the claim of expenses towards salaries and wages. Not even a single instance has been pointed out nor has any evidence been brought on record which can point towards any wrong or incorrect claim of expenses by the assessee. In the absence of any evidence or finding to this effec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the normal course of business but were claimed by the assessee to have been made for the purpose of investments. The Assessing Officer observed that, while on the one hand the assessee contends that due to paucity of funds, the group concern M/s.Indus Fila made payments on behalf of the assessee, on the other hand, the assessee advanced moneys to various related parties. In that view of the matter, the Assessing Officer concluded that these advances had been given to related parties for investment purposes and therefore the assessee is entitled to receive interest on these advances. In view of this, matter, the Assessing Officer applied a rational interest of 10.5% (being the average prime lending rate of State Bank of India) to the outstanding advances and added an amount of ₹ 32,02,889/- towards the same. 7.2 On appeal, the ld.CIT(A) accepted the assessee's claim that there is no co-relation between the advances and interestbearing funds and deleted the addition made by the Assessing Officer. 7.3 We have heard both parties and perused and considered the material on record. It is not in dispute that these advances amounting to ₹ 3,31,77,368/- have been giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not correct, restricted the disallowance to ₹ 80,000/-. 8.3.1 We have heard the rival submissions and perused and carefully considered the material on record. The undisputed fact on record, on this issue, is that commission payable amounting to ₹ 20,54,038/- was the opening balance as on 1-4-2005 in the assessee's balance-sheet under the head 'sundry creditors'. According to the ld.CIT(A), out of this, the assessee had only claimed an amount of ₹ 80,000/- as brokerage in the profit and loss account in the year under consideration and therefore the disallowance was restricted to ₹ 80,000/-. The ld.CIT(A) after considering the order of the Assessing Officer and the submissions of the assessee held as under in para 4.3 of the impugned order: 4.3 I have carefully considered the appellant's submissions and the reasons given by the A.O in the assessment order. It is seen from the submissions of the appellant, the appellant, actually claimed an amount of ₹ 80,000/- as the brokerage. Whereas, the A.O adopted the figure of ₹ 20,54,038/- reflected in the balance sheet under the head sundry creditors accordingly disallowed the same. ..... 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