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TMI Blog2016 (1) TMI 772X X X X Extracts X X X X X X X X Extracts X X X X ..... see vide the impugned order. It is this order which has been challenged by the Revenue in this appeal on the following grounds : "1. Whether the CIT(A) is justified in admitting the additional evidences filed by the assessee at appellate stage in spite of the fact that assessee does not fulfill the mandatory conditions of rule 46A. 2. Whether the CIT(A) has erred in the facts and circumstances of the case in holding that the case of assessee is not a case where new firm had been constituted or had taken over any old firm and carry forward and set off brought forward losses/unabsorbed depreciation. 3. Whether in the facts and circumstances of case the CIT(A) is justified in deleting the addition of Rs. 3,00,000/- made on account of disallowance of expenses claimed for representing the case of assessee in block assessment proceedings. 4. Whether the CIT(A) is justified in the facts and circumstances of the case in allowing relief of Rs. 24,379/- out of the addition of Rs. 57,212/-. 5. Whether in the facts and circumstances of case the CIT(A) is justified in deleting the addition of Rs. 16,04,832/- holding that the expense claimed was not towards penalty. 6. Whether i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. 6. Coming to ground No.2, it is borne out on record that the assessee is a partnership firm and deed of partnership was executed on 02.07.1999 which was reconstituted on 22.11.1999 and again on 02.04.2007 and the changes were made only in the profit sharing ratio. The firm was running in losses which were being carry forwarded year to year. As per computation of income, the assessee had shown business loss of Rs. 80,54,133/- and has claimed set off of this loss against income of Rs. 1,48,80,947/- shown from house property. The remaining house property income of Rs. 68,26,815/- was also set off by adjusting the brought forward unabsorbed depreciation of the same amount and thus has shown nil income in the return. On 02.04.2007, the firm was reconstituted as a going concern concept, which has taken over the business of old firm also named as M/s. Deepsons Southend constituted under the deed of partnership dated 22.11.1999. The Assessing Officer observed that the profit sharing ratio in the new partnership deed executed on 02.04.2007 is different from the profit sharing ratio of the earlier firm having the same name and there is a new source of income in the hands of the new firm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and set off so much of the loss proportionate to the share of a retired or deceased partner which exceeds his share of profits. In the instant case, the reconstitution of the firm is not made as a result of retirement of any partner or death of any partner. As a matter of fact, the reconstitution of the partnership was made only as a result of changes in the profit sharing ratio amongst the partners. Therefore, in our considered opinion, the ld. CIT(A) has rightly allowed carry forward losses to be set off, as claimed by the assessee. Accordingly, this ground of appeal of the Revenue also deserves to be dismissed. 8. In ground No. 3, the Revenue has challenged the deletion of disallowance of Rs. 3,00,000/- made by the AO u/s. 37(1) of the Act. In the assessment proceedings, the AO noticed that the assessee had paid a sum of Rs. 3,00,000/- to M/s. S.R. Kapoor & Company for appearing in block assessment proceedings. The AO observed that since no block assessment order was passed in the case of assessee firm, the expenses booked by the assessee might have related to the block assessment completed in the case of the partner or in the case of other concern of the group. He, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts relating to this ground of appeal are that during the assessment proceedings, the AO noticed that the assessee had debited expenses of Rs. 3,95,353/- towards repair of the building, out of which the expenses attributable to property income were shown at Rs. 1,80,000/- and remaining expenses of Rs. 2,15,353/- were claimed against business income. The AO, however, considering the fact that out of the total five floors of the building, three floors have been let out during the year and remaining two were used by assessee firm, apportioned these expenses in the ratio of 60:40 and allowed Rs. 1,58,141/- against business income as against Rs. 2,15,353/- shown by the assessee. Accordingly, the AO added the difference of Rs. 57,212/- to the total income of the assessee, inasmuch as he disallowed expenses of Rs. 2,37,212/- as attributable towards property income as against Rs. 1,80,000/- shown by the assessee under this head. The ld. CIT(A) after considering the explanation of the assessee and the statement of repairs and maintenance furnished by assessee, observed that the actual expenses in respect of the repair and maintenance of building were Rs. 3,54,271/- and remaining expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to the assessee's business premises. He further observed that the payments were made based on laws of the Government and in connection with the business. The bills or receipts of the payments nowhere show that the alleged payments were in the nature of penalty. He, therefore, deleted the disallowance. 14. Having considered the rival submissions on the issue, we find that the ld. CIT(A) has rightly allowed these expenditure. We do not find any error in the finding of CIT(A) that the impugned expenditure were incurred by the assessee irrespective of the fact the same were paid by his sister concern. The bills raised were in the name of assessee and in the ledger account of assessee, the sister concern is shown as creditor. The expenditures were in the nature of annual commercial use charges, registration charges and regularization charges etc. The documentary evidences furnished by the assessee nowhere depict the nature of payment to be that of penalty in contravention of any law. In fact these payments were made in compensation to protect the asset which was being used for assessee's business for so many years. No good ground is made out on behalf of the Revenue to hold that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tire record available before us. In the assessment order, the AO has disallowed the interest expenditure of Rs. 60,79,928/- paid to the bank and expenditure incurred on bank charges of Rs. 53,374/- on the ground that these expenditure were not made for the purpose of business. In this context, we think it appropriate to reproduce the balance sheet and trading, Profit & Loss account of three financial years, i.e., 2006-07, 2007-08 and 2008-09 as under : The trading, profit and loss account of the assessee is as under : From the above details, it is clear that the assessee's turnover is continuously going down. The closing stock is also decreasing in the year 2006-07 and there is minor increase in the year 2007-08 and 2008-09. The financial results of the business activities undertaken by the assessee are very poor. The assessee has credited rental income in the profit and loss account, therefore, it is resulting into profit in the F.Y. 2008-09. From the examination of balance sheet, incorporated in the assessment order and the appellate order, we find that the assessee has taken loan from Punjab National Bank, which are continuously decreasing. This shows that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letters of the creditors, which were the covering letters of the creditor for sending the DDs of the above amount. The above letters not being in the nature of confirmation of creditors giving details of nature of transaction, the AO required the assessee to file the original confirmation of the creditor of advancing loan to the assessee alongwith bank statement, IT return, PAN etc. However, by the time the original confirmation was alleged to have been placed before the AO, the assessment order is said to have been passed. The Assessee, therefore, sent these documents by speed post to the AO and also furnished the same before the ld. CIT(A) alongwith application for admitting additional evidences, which stood admitted after giving proper opportunity to the AO. The AO also furnished remand report on the issue after enquiry. The AO disallowed the claim of assessee as the creditworthiness of creditor and genuineness of the transaction stood unproved before him. The ld. CIT(A) considering the evidences furnished deleted the addition holding that the lender was the old creditor of the assessee and all the ingredients of section 68 stood satisfied. 19. We have considered the rival subm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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