9911796707
TMI Blog2017 (1) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... issue on merits. Write off of bad debts - Held that:- The assessee had claimed that it is due to recession in mining and due to closure of mines , the amount has become bad and irrecoverable , this contentions of the assessee has also remained unsubstantiated as no financials of Surface Tech were brought on record. We have perused the financial statement of the assessee for the year ended 31-03-2012 filed in the paper book before the tribunal (pages 1-10) which shows a healthy financial position of the assessee as the share capital is of 70 lakhs while Reserves and Surplus are to the tune of ₹ 4.06 crores. In our considered view , the order of learned CIT(A) is not sustainable in law and needs to be set aside and matter is to be remanded and restored to the file of the AO for de-novo adjudication of the issue on merits after making necessary enquiries and verifications as he may deem fit in order to decide this issue on merit. Addition u/s 40A - payment in cash during the relevant previous year towards ‘Repairs and Maintenance’ and also towards ‘Salaries and wages’ - Held that:- . The contentions that since the assessees’ cheques were bouncing and hence parties were n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h literally means that the amount is not written off as on 31/03/2013 which is an essential requirement as per section 36(1)(vii). 4. The Ld. CIT(A) has erred in deleting addition on account of cash payment of expenses even when the payments are not covered by exceptions allowed by Rule 6DD relating to ships, and when the assessee has not produced any evidence of commercial exigency. 5. Appellant craves leave to amend or alter any of the grounds of appeal or add to the same, if deemed necessary. 3. The brief facts of the case are that the assessee is engaged in the business of plying of Barges. 4. The first ground of appeal is general in nature and does not require separate adjudication. 5. Ground No. 2 of appeal relates to the additions made u/s.41(1) of the Act by the AO on account of cessation of the liability of ₹ 51,191/ for the impugned assessment year. During the course of assessment proceedings u/s. 143(3) r.w.s. 143(2) of the Act, the AO observed that the books of accounts of the assessee reflected certain creditors which were being carried forward from year to year without any transactions. The assessee was asked by the AO to prove the existence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MI 168 , Mahabir Cold Storage v. CIT 1990(12) TMI (SC) and other judicial precedents. 7. The Ld. CIT(A) allowed the appeal of the assessee by accepting the contentions of the assessee and allowed the appeal, wherein the learned CIT(A) observed that the assessee has contended that it is going through the financial crises and could not make the payments to the trade creditors . Further, the learned CIT(A) observed the contention of the assessee that an amount of ₹ 26,746/- was written back by the assessee as on 31/03/2014 and the balances of ₹ 25,445/- is still payable by the assessee. The Ld. CIT(A) further observed the contention of the assessee that if the amount is appearing as credit entry in the books of accounts of the tax payer , Section 41(1) of the Act cannot be invoked and also observed that the AO has not held that the entries in the books of accounts of the assessee are bogus. The creditors had also not waived their right to get the payment and hence the addition of ₹ 51,191/- was deleted by the ld. CIT(A) vide appellate order dated 14/03/2016 . 8. Aggrieved by the appellate order dated 14/03/2016 passed by the ld.CIT(A), Revenue has filed second ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sis faced by the assessee due to mining recession and closure of the mines in Goa. We have perused the financial statement of the assessee for the year ended 31-03-2012 filed in the paper book before the tribunal (pages 1-10) which shows a healthy financial position of the assessee as the Share Capital is of 70 lakhs while Reserves and Surplus are to the tune of ₹ 4.06 crores. No evidence is placed before us to substantiate that ₹ 26,746/- was written back during the financial year ended 31-03-2014 . The assertions made by the assessee as to write back in the financial year ended 31-03-2014 and existence of liability as on 31-03-2012 requires verification by the AO. The Ld. CIT(A) had accepted the contentions of the assessee without verification and without making any enquiries by him or caused to be made by the AO. Thus, the assertions of the assessee that due to financial crisis faced by the assessee due to mining recession and closure of mining in Goa , these payments of ₹ 51,191/- could not be made and also that ₹ 26,746/- was written back in the financial year ended on 31-03-2014 requires verification and enquiries by the AO. The AO is directed to verif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. Aggrieved by the assessment order dated 19/03/2015 passed by the AO u/s.143(3) of the Act, the assessee filed first appeal before the Ld. CIT(A). The assessee, before the Ld. CIT(A) submitted complete ledger account of the party Surface Tech for the period till 31/03/2015 and submitted that the amount is still outstanding to be receivable and there is only requirement u/s.36(1)(vii) of the Act that the debt must be written off in the books of accounts and there is no requirement to show that debt has become bad. The Ld.CIT(A) accepted the contentions of the assessee on the ground that the assessee has written off the amount of ₹ 10,69,509/- as bad debt in its books of accounts during the previous year under consideration. The assessee relied upon the decision of the ITAT, Ahmadabad Bench in the case of Arvind Products Limited v. DCIT dated 19.02.2016 reported in 2016(2) TMI 628-ITAT, Ahmadabad, wherein the tax-payer submitted in that case that due to heavy cost involved in litigation, the tax-payer did not pursue any legal action against the debtor and made provision for bad debts . The tax- payer had not even written off the debt in its book of accounts. No efforts w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. The invoices for JCB hiring was raised in the previous year relevant to the impugned assessment year and were written off in this previous year itself. The assessee did not furnish any details of the party or any other relevant details before the AO. The AO could not made any necessary enquiry/verifications as no details were submitted by the assessee before the AO. The ld. CIT(A) accepted the contentions of the assessee on the ground that the debt was written off in the books of accounts of the assessee as required under section 36(1)(vii) of the Act, the ld.CIT(A) did not made any enquiry or caused any enquiry to be made by the AO to verify the genuineness and bonafide of the claim of the assessee and the claim of the assessee was accepted as it is by learned CIT(A) without any substantiation . The assessee had claimed that it is due to recession in mining and due to closure of mines , the amount has become bad and irrecoverable , this contentions of the assessee has also remained unsubstantiated as no financials of Surface Tech were brought on record. We have perused the financial statement of the assessee for the year ended 31-03-2012 filed in the paper book before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary wages 9. 31.12.2011 1,00,000/- Paid to Abhishek Engineer Repairs Maintenance 10. 31.12.2011 50,000/- Paid to Khader Khan Salary wages 11. 31.12.2011 85,000/- Paid to Manuel Miranda Salary Wages 12. 31.12.2011 50,000/- Paid to Khadar Khan Salary wages 13. 31.12.2011 35,000/- Paid to Mayur Naik Salary wages 14. 31.12.2011 85000/- Paid to Peter Rodrigues Salary wages 15. 01.01.2012 45,000/- Paid to Edwin Fernandes Salary wages 16. 02.01.2012 75,000/- Paid to Gracious Fernandes Salary and wages 17. 02.01.2012 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Paid to Andrew Xavier Salary and wages 35. 02.02.2012 75,000/- Paid to Joggal Sharma Salary and wages 36. 09.02.2012 38,086/- Paid towards repairs 37. 21.02.2012 42,500/- Paid towards repairs 38. 23.02.2012 50,000/- Paid to Laxman Naik Salary and wages 39. 29.02.2012 1,30,000/- Paid to Yeshwant Pandey Salary and wages 40. 02.03.2012 45,000/- Paid to Sandesh Tari Salary and wages 41. 02.03.2012 45,000/- Paid to Suryakant Mapsekar Salary and wages 42. 02.03.2012 90,000/- Paid to Sameer Shaikh Salary and wages 43. 07.03.2012 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer u/s 40A(3) of the Act as the payments were made in cash, otherwise through account payee cheques as mandatorily required u/s.40(A)(3) of the Act and the case of the assessee was not covered by exceptions to Rule 6DD of Income-tax Rules, 1962, , vide assessment order dated 19/03/2015 passed by AO u/s. 143(3) of the Act. 15. Aggrieved by the assessment order dated 19/03/2015 passed by the AO u/s.143(3)of the Act, the assessee filed first appeal before the ld.CIT(A) and the assessee contented as under: The assessee relied upon the decision of the Hon ble Supreme Court in the case of Attar Singh Gurumukh Singh v. ITO (191 ITR 667). The assessee submitted that the AO has not disputed that the payments are not genuine. The assessee also produced the copies of the vouchers for making payments. It was submitted that the payments were made to the supervisors who in turn have distributed salaries in cash at the site and jetties after banking hours as there is no banking channels available and it is covered by exception to Rule 6DD of Income-tax Rules, 1962. It was submitted that payments to each employee is less than ₹ 20,000/- in each case and many of these empl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facility available. The Ld. CIT(A) restricted the additions/disallowance to 10% made by the AO i.e. to ₹ 2,56,463/- as the assessee has not kept individual employee wise vouchers and the payments remained unproved and accordingly balance additions were ordered by learned CIT(A) to be deleted , vide appellate order dated 14/3/2016 passed by the ld.CIT(A) . 16. Revenue being aggrieved by the appellate orders of the ld.CIT(A) has filed an appeal before us. It was contended by the ld. DR that payments have been made in cash in violation of Section 40 A (3) of the Act and he relied upon the assessment order of the AO. Further it was submitted that detailed explanation has not been submitted by the assessee before the Assessing Officer which contain the details of urgency and contingency for making payment in cash for repair and maintenance. It was further pointed out that payment made to M/s Abhishek Engineers in cash is ₹ 5,00,000/- and not ₹ 3,00,000/-as contented by the assessee as per paper book filed before the tribunal(page 19-23/pb). There are further payments of repairs and maintenance in cash to other parties on which the justification has not been given by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - during the relevant previous year towards Repairs and Maintenance and also towards Salaries and wages , out of which ₹ 5,00,000/- was paid to the Abhishek Engineers in cash for repair and maintenance. The assessee could not produce before the Assessing Officer proper details and justifications for making payment in cash as to urgency and contingency in making payments in cash instead of cheques. The AO observed that the assessee is in the business of plying barges and is not covered by exceptions to Rule 6DD of Income-tax Rules, 1962 as the assessee is not plying ships. Similarly, the employees have bank accounts and there was no urgency to make payments in cash. The Ld. CIT(A) accepted the contention of the assessee that the assessee has made the payments beyond banking hours and there was exigencies for making payment in cash without any verifications and enquiries. It was further accepted by the Ld. CIT(A) that payments were made to supervisors who in turn have made the payments to the workers and individual payments were less than ₹ 20000/- to each worker. These contentions were not verified as no enquiry was made by learned CIT(A) nor enquiry was caused to be ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
