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TMI Blog2016 (12) TMI 748X X X X Extracts X X X X X X X X Extracts X X X X ..... play. We find that as per rule 8D (iii) amount of ₹ 3,53,002/- has been calculated and looking to the size and variety of investments, we find that the disallowance has been reasonably sustained by ld. CIT(A). We uphold the same. Accordingly, this ground of assessee is dismissed. Addition made u/s. 41(1) - Held that:- One last opportunity may be given to assessee and we restore this limited issue to the file of Assessing Officer for verifying unpaid liability of Pal Peogeot Limited ₹ 5,49,929/- and Oriental Transport Co. ₹ 4,93,486/-. Further we direct the assessee also to show all necessary evidences and documents to prove that there exists a dispute to the extent of impugned amount of ₹ 10,33,414. In case assessee is unable to prove the dispute both these parties in the past then the impugned amount of ₹ 10,33,414/- will be sustained as an addition u/s. 41(1) of the Act. Accordingly, this ground is allowed for statistical purposes. Assessing Officer erred in rejecting the books of account and estimate the profit. - ITA Nos. 983 and 1065/Ahd/2013 - - - Dated:- 11-11-2016 - R.P. Tolani, Judicial Member and Manish Borad, Accountant Member ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. CIT(A) has grievously erred in law and on facts in upholding the addition u/s. 41(1) at ₹ 10,33,414/-. 4.2 The Ld. CIT(A) has erred in upholding that the provisions of sec. 41(1) were attracted to the outstanding balances of creditors, though the liability had not ceased nor written back in this year. 5. The Ld. CIT(A) has erred in law and on facts in upholding disallowance of ₹ 60,000/- made u/s. 40(a)(ia) by AO. It is prayed that the disallowance/additions as confirmed by CIT(A) may please be deleted or 6. Ground No. 1 is of general nature, which needs no adjudication. 7. Ground No. 2 wherein assessee has challenged the order of ld. CIT(A) for upholding the disallowance u/s. 14A at ₹ 3,53,002/-. 8. Ld. AR submitted that disallowance of ₹ 12,58,430/- was made by Assessing Officer u/s. 14A in addition to ₹ 25,000/- disallowed by the assessee suo motu being expenditure towards earning exempt income. Ld. CIT(A) deleted a portion of disallowance of interest expenditure at ₹ 2,67,87/- by taking a view that assessee has earned net interest income during the year i.e. interest received was over and above the interest pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Trade Apartment Ltd. in ITA No. 1277/Kol/2011 for Asst. Year 2008-09 pronounced on 30th March 2012 wherein it has been held:- 3. We have heard the rival contentions, perused the material on record and duly considered factual matrix of the case as also the applicable legal position. 4. As learned CIT(A) has rightly observed, once there is no net interest expenditure, as is the case before us - upon setting off interest credited to profit and loss account, no part of interest debited can be disallowed as attributable to earning tax free dividend. The CIT(A) was thus quite justified in deleting the interest disallowance. We have also noted that entire expenses incurred by the assessee have been offered for disallowance, and once that happen, nothing remains for further disallowance u/s. 14A. The disallowance under section 14A can come into play only out of expenses claimed for deduction and expenses have been claimed for deduction, there cannot be any disallowance either. The conclusions arrived at by the CIT(A) are, therefore, correct and admit no interference by us. We, approve and confirm the order of the CIT(A). Respectfully following the above decision we are in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Peogeot Ltd. and ₹ 4,93,486/- in respect of Oriental Transport Co. submitting that there was a dispute with these parties and assessee may have to pay these outstanding balances in future. However, no supporting evidence was furnished therein. 13. When the issue came up before ld. CIT(A) it was observed by him that out of the impugned disallowance u/s. 41(1) of the Act of ₹ 22,44,109/- a sum of ₹ 12,10,695/- related to five parties who were either paid off/written back as income and accordingly deleted the same leaving behind the sustained disallowance u/s. 41(1) of the Act towards two creditors - Pal Peogeot Limited ₹ 5,49,929/- and Oriental Transport Co. ₹ 4,93,486/-. Ld. CIT(A) partly allowed this ground by observing as follows:- 5.3. I have gone through the contention of the AO and submission made by the appellant. Before me the appellant submitted that out of the total addition made by the AO for outstanding balances of creditors, some of them have been paid and some of them have been written back in the subsequent years. Remaining creditors are pending because of disputes with them. The representative of the appellant has shown me the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Written back on 31/03/2011 2. Malin Associates 11,14,547.00 Payment made on 24/11/2010 3. Master Enterprise 6,969 Written back on 1-4-2009 4. Pal Peugeot Ltd. 5,39,928.96 There is dispute with parties and will be resolved within one or two months. '- 5. Universal Engg, Mfg. Industry 11,505 Written back as on 31 -OS- 2010 6. Chinubhai Kalidas Bros 20,695 (Dr.) It was debit balance which is adjusted on 1-4-2009 against the credit balance of the same party. 7. Orient Transport 4,93,486 00 There is dispute with 18. On the basis of above information provided to ld. CIT(A) by assessee ld. CIT(A) deleted the addition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence. During the course of hearing before us, ld. AR requested to provide one more opportunity to prove the genuineness of the unpaid liability of ₹ 10,33,414/- payable to two parties. Before us ld. DR raised no objection against the request made by ld. AR. We are, therefore, of the view in the given facts and circumstances of the case one last opportunity may be given to assessee and we restore this limited issue to the file of Assessing Officer for verifying unpaid liability of Pal Peogeot Limited ₹ 5,49,929/- and Oriental Transport Co. ₹ 4,93,486/-. Further we direct the assessee also to show all necessary evidences and documents to prove that there exists a dispute to the extent of impugned amount of ₹ 10,33,414. In case assessee is unable to prove the dispute both these parties in the past then the impugned amount of ₹ 10,33,414/- will be sustained as an addition u/s. 41(1) of the Act. Accordingly, this ground is allowed for statistical purposes. 19. Ground No. 5 not pressed, hence it is dismissed as not pressed. 20. Now we take up Revenues appeal in ITA No. 1065/Ahd/2013 1. The Ld. CIT(A) has erred in law and on facts in restrictin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer took basis of last two years average whereas in normal course of assessment proceedings three years average is taken as a bench mark to compare the current years G.P. and N.P. rate consistency. We find that below GP rate and NP rate for last three years as compared to Asst. Year 2009-10 for which Revenue is under appeal:- PARTICULARS Gross Profit % Net Profit % 2006-07 15.85% 5.93% 2007-08 16.8% 8.87% 2008-09 23.14% 13.84% Avg. Net Profit % 18.60% 9.55% . For the year under consideration (ie. A.Y. 2009-10) 22.78% 12.15% From the above table it can be seen that average n.p. for last three years is 9.53% whereas in the year under appeal it is 12.15% which is higher than the average. Similarly we also observe that the reduction in sales and raw material consumed is also at par so much so that sales were reduced by 24 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er consideration shown by appellant is 12.15%. For making the comparison, basis of one year is not justified. Therefore, comparison made by the AO is not correct. Further the AO has made the comparison of value of sales with item of raw material which may produce absurd result. In view of the above, I hold that AO is not justified in making the addition of NP on the basis that it is lower than immediately previous year as the same is without any concrete basis. Therefore, the AO is directed to delete the addition of ₹ 21,30,870/-. This ground of appeal is allowed. We are, therefore, of the view that figures and explanation submitted by assessee before lower authorities has fairly overshadowed the reasons recorded by Assessing Officer for rejecting the books of account. In such situation, we are of the view that ld. Assessing Officer erred in rejecting the books of account and estimate the profit. Accordingly, we find no reason to interfere with the order of ld. CIT(A). This ground of Revenue is dismissed. 28. Ground No. 2 reads as under:- 2. The Ld. CIT(A) has erred in law and on facts in deleting the addition made on account of profession fees amounting to ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal has held the same as revenue expenditure being expenses incurred in order to safeguard its right to carry on the business. I am inclined to accept the argument of the appellant that professional fees paid to advocate for safeguarding the asset and not for purchasing the assets should be allowed as revenue expenditure. The court case has nothing to do with purchase of the asset. In case of insurance premium paid for safeguarding assets against the future loss is allowable as business expenditure. Similarly, professional fees paid for safeguarding title to the asset should also be allowed as business Expenditure. Hon'ble Bangalore Tribunal in case of ITC Ltd. (supra) on identical facts has allowed expenditure as revenue expenditure. Following the same, I direct the AO to delete the disallowance of professional fees of ₹ 2.00 Lac and allow the same as revenue expenditure. This ground of appeal is allowed. We are, therefore, of the view that the amount of ₹ 2,00,000/- paid is not paid towards purchase of any asset but revenue expenditure in the normal course of business for safeguarding the interest of assessee relating to dispute over the land at Vatva. We, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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