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TMI Blog2017 (3) TMI 967X X X X Extracts X X X X X X X X Extracts X X X X ..... re that the assessee in the present case is an individual and is engaged in the business of advertising agency in the name of M/s. Anand Advertising. The assessee, in its books of accounts has shown credit balance in the name of The Statesman Ltd. for Rs. 4,89,147/- whereas the party in response to the notice u/s 133(6) of the Act has confirmed the balance of Rs. 1,70,453/-. As a result, the AO observed the difference of Rs. 3,18,694/- only. On clarification by the AO, the assessee submitted that the difference is arising on account of nonfurnishing of credit notes by the creditors periodically. There is no difference in the amount of purchases shown by the assessee and the corresponding sales shown by the party. However the AO observed that no reconciliation statement was furnished by the assessee. Therefore, the AO disallowed the same which was added to the total income of the assessee. 4. Aggrieved, assessee preferred an appeal before ld. CIT(A). The assessee before ld. CIT(A) submitted that confirmation received from the party u/s 133(6) of the Act has no nexus with the accounts maintained by him. The assessee also submitted that the major difference in the closing balance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld as under:- "By virtue of s. 131 the ITO has sufficient powers to summon any person and to enforce his attendance; AO could take resort to process as laid down in r. 14 of O. XVI of CPC for summoning the witness." The ld AR also submitted that once the purchases has been accepted then the balance shown as outstanding of sundry creditors at the end of the year cannot be treated as bogus liability and consequently no addition can be made. In this regard, the ld AR placed his reliance in the case of JCIT vs Mathura Das Ashok Kumar reported in 101 TTJ 810 wherein it was held as under: "As the purchases have been held to be genuine and accepted as such, the credits that remained outstanding in such account cannot be treated to have remained unexplained. The balance appearing in this account, which included the disputed addition also is the sum total of purchases that remained unpaid at the end of the year. As the genuineness of such purchases has not been disputed, rather the same has been accepted, the credits stand fully explained and no adverse inference is called for, either on facts or in law." The ld AR also submitted that the accounts maintained by the assessee were audi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ves to be brought to tax as it has ceased to exist. However the ld. AR in support of his claim submitted that certain differences are arising due to mismatch in the opening balance, value of purchase and amount of payment as shown by the assessee and the party which ultimately resulting in the closing balance in the books. The assessee in support of his claim has produced the copy of the ledger which is placed on pages 16 to 24 of the paper book. However, we find that the ld CIT(A) has observed that certain credit notes were given by the party which has not been accounted by the assessee. As such the liability shown by the assessee is bogus and therefore liable to be taxed. But on perusal of the order of ld CIT(A), we find that no details of the credit note has been given therein. Moreover, the findings given by the ld CIT(A) does not match with the details furnished by the assessee in the form of reconciliation statement for the impugned difference. We also find that there was no remand report available on this aspect from the AO. It was also observed that the confirmation received u/s 133(6) of the Act was not made available to the assessee for cross examination. In view of abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of Rs. 73,768/- has already been added to his returned income for A.Y. 2007-08 a credit of that sum should be given to him, this claim cannot be accepted at face value. The assessee has not produced details of his ledger account for Financial Year 2006-07 & 2007- 08 to prove that there are no other supervening incidents which could have altered the situation. Further the AR also could not confirm that there was no appeal filed by the assessee for A.Y. 2007-08 or what was its outcome. In view of the above facts the addition of Rs.l,18,760/- is confirmed and the assessee's ground of appeal No.3 is dismissed." Being aggrieved by the order of ld. CIT(A) the assessee is in second appeal on the following grounds of appeal:- " 2. For that the authorities below is not justified sustaining the addition Rs. 1,18,760/- as to the difference of closing balance of ABP (Pvt) Ltd and to the books of the appellant." 9. The ld. AR before us reiterated the submissions as made before the ld. CIT(A) whereas the ld. DR vehemently supported the orders of the authorities below. 10. We have heard the rival contentions, perused the material on record and duly considered the factual matrix of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. We also find that sufficient opportunities were given at the time of the remand stage but the assessee has not made such request for the cross examination. Therefore, we are of the view that the principles of natural Justice have not been violated. However we are in agreement with the argument placed by ld AR before us that the ld CIT(A) has passed the order without referring to remand report. In such a situation we are inclined to limit the disallowances as suggested by the AO in the remand report. Thus, this ground of appeal of assessee is partly allowed. 11. The third issue raised by the assessee in ground no.4 is that the ld. CIT(A) erred in confirming the order of AO by sustaining the addition of Rs. 96,679/- being bogus and non-existing. 12. The AO during the course of assessment proceedings observed that the assessee has shown credit balance of Rs. 96,679/- in the name of Yugdharma whereas the said firm was closed long back as evident from the remark of the postal authorities as "shut down" . Therefore, the AO treated the same as bogus and added to the total income of the assessee. Therefore the AO treated the same as bogus and added the total income of the assessee. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever we find that the AO in the remand report has stated that the assessee has produced the evidence of payment to the said party. The copy of the remand report is placed on pages 29 and 30 of the paper book. The relevant extract of the remand report is reproduced below:- "6. Regarding the dues to M/s Yugadharma as on 31/03/2009, the assessee submitted evidence of payment after 31.03.2009 which shows, the assessee has made payment of Rs. 3900/- on 30.03.2010 and Rs. 8790/- on 18.07.2011 and stated that the amount is paybvle to M/s Yugadharma. The photocopeies of two vouchers are enclosed in Annexure-E." In view of above, we are in agreement with the argument of ld AR that the ld CIT(A) has passed the order without referring to remand report. In such a situation, we are inclined to delete the addition as suggested by the AO in the remand report. Thus this ground of appeal of assessee is allowed. 16. The last issue raised by the assessee in this appeal is that the ld. CIT(A) erred in confirming the order of the AO by sustaining the disallowance of Rs. 60364 on account of no connection with the business. 17. The assessee in the year under consideration has claimed development e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been made to the persons as specified under section 40A(2)(b) of the Act. The relevant extract of the Act reads as under:- 'Sec.40 'A' of the Income Tax Act reads as follows. Expenses or payments not deductible in certain circumstances. 40A. (1) The provisions of this section shall have effect notwithstanding anything to the contrary contained in any other provision of this Act relating to the computation of income under the head "Profits and gains of business or profession". (2)(a) Where the assessee incurs any expenditure in respect of which payment has been or is to be made to any person referred to in clause (b) of this sub-section, and the [Assessing] Officer is of opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods, services or facilities for which the payment is made or the legitimate needs of the business or profession of the assessee or the benefit derived by or accruing to him there from, so much of the expenditure as is so considered by him to be excessive or unreasonable shall not be allowed as a deduction.' In the present case, the disallowance has been made without complying the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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