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TMI Blog2016 (8) TMI 1276X X X X Extracts X X X X X X X X Extracts X X X X ..... e expenses on the ground that Smt. Meena Bhasin is not a working director but this is not permissible because a director though not a working director has substantial interest in the working and profit of the company, so CIT (A) has rightly deleted the addition made by the AO. Disallowance of depreciation on new car - AO has merely disallowed the depreciation on the ground that car in question has been registered with registering authority on 08.04.2004 - Held that:- When assessee has duly proved that the delivery of the car was taken on 29.03.2004 as per purchase invoice and gate-pass issued by Suhrit Hyundai, the depreciation has been rightly claimed as registration of the vehicle will relate back to the date of actual delivery of the car i.e. 29.03.2004 in question by the assessee company. Likewise, the CIT (A) has rightly directed the AO to allow depreciation on insurance premium capitalized in respect of new car because the same was proved to put to use w.e.f. 29.03.2004. Disallowance of 1/5th of the car maintenance expenses - car in question was used by the directors, their family members, relative and friends for personal use - Held that:- We are of the considered view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by CIT (A) during appellate proceedings but he has not preferred to raise any objection to the application for additional evidence. Moreover, the documents entertained by CIT (A) in additional evidence were merely to substantiate the affidavit already filed by Smt. Meena Bhasin and was not ordinarily requiring verification. So, finding no illegality or infirmity in the findings returned by ld. CIT (A) Depreciation claim on photocopy machine and finance charges - AO disallowed the claim on the sole ground that the assessee has failed to get the purchase bill verified during the assessment proceedings - Held that:- As during appellate proceedings, assessee proved that photocopier machine was purchased in installment for ₹ 1,11,000/- and purchase bill thereof has been filed with CIT (A). So, the CIT (A) has rightly allowed the depreciation on photocopy machine and finance charges, which needs no interference Disallowance of the staff welfare expenses - Held that:- CIT (A) allowed the staff welfare expenses on the ground that in the last year, expenses under this head were ₹ 74,980/- and in view of the nature of assessee’s business, disallowance made by the AO is unr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be ruled out. When the names of the aforesaid six employees are appearing in PF and ESI record prepared in the due course of official duties by the concerned department, the salary bill cannot be treated as bogus. So, the CIT (A) has rightly deleted the addition Addition on purchase of electrical goods - assessee has failed to produce Shri Veer Sen Chopra to prove job charges etc. by treating the same as bogus expenses - Held that:- CIT (A) on the basis of facts and documentary evidence found the expenditure genuine being the annual maintenance charges paid vide bill duly placed before the AO by the assessee. So finding no ground to interfere. Addition of interest and finance charges - when the assessee has himself given interest free advances the funds cannot be treated to have availed for business purpose - CIT-A allowed claim - Held that:- CIT (A) deleted the addition of ₹ 3,00,000/- on the ground that when the interest free advances given by the assessee company to is ex-directors and relatives are old one and are to the tune of ₹ 19,76,000/-. The assessee company has also got interest free loans/advances from its directors and relatives to the tune of & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses u/s 40(A)(3) - Held that:- AO chooses to invoke provisions contained u/s 40(A)(3) clubbed the cash purchases of gold made in a single day which is not permissible when the record of gold register is maintained on a regular basis wherein each cash purchase of gold through purchase voucher, weight-wise has been entered. So, in the given circumstances, the CIT (A) has rightly deleted the addition made by the AO. Addition on account of non-furnishing of books of account, relevant documents and stock inventory - CIT-A allowed claim - Held that:- e CIT (A) has after examining the matter threadbare came to the conclusion that the books of account and requisite documents have been produced before AO and photocopies of the sale vouchers, cash book, ledger and bank book were also filed and as such, the allegation of non-producing the books of account is without any basis. When the AO has not disputed the account books the CIT (A) has rightly deleted the addition. So, we find no ground to interfere with the findings returned by the ld. CIT (A) Disallowing the remuneration alleged to have been paid to Ms. Sonika Bhasin, one of the Directors of the assessee company - Held that:- There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the Sale of assets amounting to ₹ 5166/- in the Block of asset ignoring that said loss claimed as revenue loss is capital in nature as also admitted by Assessee. 2 . L'd CIT(A) has erred in law and in facts and circumstances of the case in deleting the disallowance of traveling expenses amounting to ₹ 24210/-as no documentary evidence was filed by assessee during the asstt. proceedings to prove that the said expenses were for purpose of business . 3. L'd CIT(A) has erred in law and in facts and circumstances of the case in deleting the disallowance of depreciation on new car amounting to ₹ 38742 made by A.O without appreciating the fact that the date of registration of the said car was 8/4/2004 i.e after closing of previous year. 4. L'd CIT(A) has erred in law and in facts and circumstances of the case in directing AO to allow depreciation on insurance premium capitalised in respect of new car as assessee company failed to prove that the car was put to use in the previous year under consideration. 5. L d CIT(A) has erred in law and in facts and circumstances of the case in deleting the disallowance of ₹ 7395l-made by AO on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unproved, 15. L'd CIT(A) has erred in law and in facts and circumstances of the case in deleting the reasonable 1/3rd disallowance made by A.O Out of Staff Welfare expenses to the tune of ₹ 24903/-. 16. L'd CIT(A) has erred in law and in facts and circumstances of the case in deleting the disallowance of ₹ 118726/- made by A.O Out of Electricity expenses pertaining to electricity meter installed at premise No.2300, Subzi Mandi without taking into account the fact that the there is no mention of such address in the return of income, Audit report, bill issued, letter head of the assessee or any other documents . 17. L'd CIT(A) has erred in law and in facts and circumstances of the case in deleting the addition amounting to ₹ 122000/- made by A.O on account of Legal charges. 18. L d CIT(A) has erred in law and in facts and circumstances of the case in deleting the addition amounting to ₹ 263025/-made b A.O on account of bogus Salary expenses. 19. L'd CIT(A) has erred in law and in facts and circumstances of the case in deleting the addition amounting to ₹ 43,895/- made by A.O on account of repairs and maintenance. 20. L&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,000/- as Cash Advance under section 68 of the Income-tax Act, 1961. 4. That the learned Commissioner of Income-tax (Appeals) has erred in holding addition of ₹ 36,000/- as unexplained expenditure under section 69 of the Income-tax Act, 1961. 4. Briefly stated the facts of this case are : assessee filed the return of income at ₹ 36,70,360/- on 29.10.2004. Shri T.S. Kakkar, CA/AR of the assessee put in appearance during scrutiny proceedings and filed necessary details. Assessee is into the business of sale and purchase of gold and diamond jewellery. A survey operation was conducted under section 133A of the Incometax Act, 1961 (for short the Act ) on 31.10.2003 leading to the recovery of unaccounted excess stock and in this regard, assessee surrendered a sum of ₹ 30,18,369/- and admitted to declare it as an additional income for assessment year 2004-05. Excess unaccounted cash of ₹ 5,00,030/- was also recovered which the assessee agreed to declare as additional income for AY 2004-05. 5. From the P L account, it is noticed that a sum of ₹ 5,166/- has been debited on account of loss on sale of asset which the assessee has failed to explain and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 2,50,000/- to the assessee company. On perusal of the bank statement of Mrs. Meena Bhasin, it is noticed that prior to lending amount of ₹ 2,50,000/- to the assessee company, a cash equivalent to the said entry i.e. ₹ 2,50,000/- was deposited in her bank account. It was stated that the said amount was deposited in the bank after selling a car but the assessee has failed to submit registration certificate of the said car. Consequently, the AO made an addition of ₹ 2,50,000/- being an unexplained credit. 12. AO further noticed from the copy of account of Shri Ankush Bhasin in the books of assessee company that a sum of ₹ 7,50,000/- was given to the assessee company by Shri Ankush Bhasin. AO also noticed another credit entry of ₹ 90,000/- on 16.03.2004 given by Shri Ankush Bhasin to the assessee company. On failure of the assessee company to furnish bank statement of Shri Ankush Bhasin along with documentary evidence AO made an addition of ₹ 8,40,000/- to the income of the assessee. 13. AO noticed from the copy of account of Shri Jagdish Lal Bhasin in the books of the assessee that the amount of ₹ 5,00,000/-, ₹ 30,000/- and Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO disallowed the electricity expenses to the tune of ₹ 1,18,726/- pertaining to the meter no.970024 installed at 2300, Subzi Mandi. 19. Assessee debited a sum of ₹ 1,22,000/- to P L account on account of legal charges but no such expenses were claimed in the preceding assessment year and accordingly, details were called. AO noticed that on 31.03.2006, entire liability of ₹ 1,22,000/- was outstanding. So, the said unascertained and unaccrued provision was made on the penultimate date of accounting to reduce the additional income declared. AO came to the conclusion that it was a case where an expense of ₹ 1,22,000/- has been claimed but corresponding tax on the income is to be paid even after lapse of about 33 months from the date of provision and thereby disallowed the same. 20. During the year under assessment, the AO disallowed the amount of ₹ 2,63,025/- on account of bogus salary expenses on the ground that name of six persons, namely, Bijender Singh and others are not appearing in the list during the survey proceedings. 21. Assessee claimed an amount of ₹ 71,619/- on account of repair and maintenance. In the immediate preceding ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowed the amount of ₹ 2,11,994/- on account of cash purchases made by the assessee during the period 01.11.2003 to 31.03.2004 regarding gold by invoking the provisions contained u/s 40A (3) to the tune of ₹ 71,994/- and further disallowed the amount on prorata basis to the tune of ₹ 1,40,000/- on failure of the assessee to produce purchase voucher from 01.04.2003 to 30.10.2003 and made a total disallowance of ₹ 2,11,994/- 27. AO made an addition of ₹ 10,00,000/- to the income of the assessee on account of trading addition on failure of the assessee to explain as to how the unaccounted cash of ₹ 5,00,000/- was generated having been found during the survey proceedings. Assessee has also failed to get the cash purchases verified as names of the seller were not even mentioned 28. Assessee carried the matter before the ld. CIT (A) who has dismissed the appeal. Feeling aggrieved, the revenue has come up before the Tribunal by challenging the impugned order passed by the ld. CIT (A) by way of filing the present appeal. 29. We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... car because the same was proved to put to use w.e.f. 29.03.2004. We find no ground to interfere in the findings returned by the ld. CTI (A) and consequently, grounds no.3 4 are determined against the revenue. GROUND NO.5 33. AO has disallowed 1/5th of the car maintenance expenses on the ground that car in question was used by the directors, their family members, relative and friends for personal use. But we are of the considered view that no such maintenance expenses can be disallowed on account of personal use of director and family members. Moreover, AO has not brought on record any evidence to prove the element of personal use of the car particularly when the same has been purchased in the name of the company and stated to have been used for the company by the assessee. So, finding no illegality and perversity in the finding returned by the ld. CIT (A), ground no.5 is also determined against the revenue. GROUND NOS.6 7 34. AO disallowed the amount of ₹ 11,000/- and ₹ 2,500/- in respect of fee paid in respect of preparation and filing of incometax return and in respect of sales-tax fee respectively which has been allowed by the CIT (A). We ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Incometax Rules, 1962 deleted the addition on the ground that from the evidences in the form of delivery receipt and cash receipt which corroborates the affidavit already filed by Smt. Meena Bhasin, the amount of ₹ 2,50,000/- in her current account stands explained. The contention of the ld. AR that since AO has not been given an opportunity to file reply to the application for additional evidence under Rule 46A of the Income-tax Rules, 1962, the matter should be remitted to the AO is not tenable because the AO was given sufficient time by CIT (A) during appellate proceedings but he has not preferred to raise any objection to the application for additional evidence. Moreover, the documents entertained by CIT (A) in additional evidence were merely to substantiate the affidavit already filed by Smt. Meena Bhasin and was not ordinarily requiring verification. So, finding no illegality or infirmity in the findings returned by ld. CIT (A), ground no.9 is also determined against the revenue. GROUND NOS.10, 11 12 37. CIT (A) deleted an addition of ₹ 8,40,000/- made by the AO u/s 68 of the Act by entertaining application for additional evidence. AO had noticed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al evidence entertained by the CIT (A), the matter is required to be restored back to the AO for verification. The contention raised by ld. DR for the revenue that the AO must have been provided with an opportunity to controvert the additional evidence entertained by the CIT (A) during appellate proceedings is not tenable because documents taken in additional evidence by the CIT (A) are prima facie tenable and all the transactions have been routed through bank and moreover AO was provided with enough opportunity to controvert the application for additional evidence who has not preferred to avail of the opportunity. So, ground nos.10, 11, and 112 are determined against the revenue. GROUND NOS.13 14 42. Ld. CIT (A) deleted the disallowance of ₹ 13,875/- and ₹ 12,356/- disallowed by the AO being the depreciation claimed by the assessee on photocopy machine and finance charges respectively. AO disallowed the depreciation and fianc charges on the sole ground that the assessee has failed to get the purchase bill verified during the assessment proceedings. However, during appellate proceedings, assessee proved that photocopier machine was purchased in installment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany has been consistently following the mercantile method of accounting making a provision for legal charges to attend the post survey proceedings for the year under consideration are valid one. When the AO himself has not disputed the fact that legal charges in such proceedings are required to be paid the same cannot be disallowed on the basis of conjectures and surmises that the same are on higher side. Moreover, when provision has been made under the mercantile method of accounting for legal charges as held by CIT (A) the disallowance made by the AO is not sustainable. Hence, we find no ground to interfere with the findings returned by the ld. CIT (A), so ground no.17 is determined against the revenue. GROUND NO.18 46. Ld. CIT (A) deleted the addition of ₹ 2,63,025/- made by the AO on account of bogus salary expenses. AO made this addition on the ground that salary expenses for six persons were claimed whose names were not appearing in the list of employees furnished by the assessee during assessment proceedings nor the assessee company furnished the photocopies of appointment letter of those employees. However, CIT (A) deleted the addition after perusal of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e find no ground to interfere in the findings returned by ld. CIT (A), hence ground no.20 is determined against the revenue. GROUND NO.21 50. Ld. CIT (A) directed the AO to allow the revised depreciation as per the Companies Act to the tune of ₹ 1,43,315/- involving an amount of ₹ 25,911/-. AO declined the revised depreciation on the sole ground that the revised chart is not signed by the Authorized Representative. However, in the given circumstances, the CIT (A) has rightly allowed the claim of the assessee on the ground that in the given circumstances, AO was required to ask the AR to sign the revised depreciation chart, which is otherwise not disputed by the AO during the assessment proceedings. So again, we find no ground to interfere into the findings returned by the ld. CIT (A). Ground No.21 is determined against the revenue. GROUND NO.22 51. Ld. CIT (A) deleted the addition of ₹ 60,000/- made by the AO on account of sale of car. AO has made the addition merely on the ground that there is over writing in the books of account. However, CIT (A) after perusing the cash receipt and delivery receipt of the sale of the car for ₹ 1,00,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade on a single day which were less than ₹ 20,000/- each in order to invoke the provision of section 40(A)(3). This is contrary to the record of gold register kept on a regular basis where each cash purchase of gold through serialed purchase voucher weight wise has been entered. Thus, clubbing of these purchases is arbitrary and is based on surmises. The addition therefore is deleted. 55. AO chooses to invoke provisions contained u/s 40(A)(3) clubbed the cash purchases of gold made in a single day which is not permissible when the record of gold register is maintained on a regular basis wherein each cash purchase of gold through purchase voucher, weight-wise has been entered. So, in the given circumstances, the CIT (A) has rightly deleted the addition made by the AO. So, ground no.25 is determined against the revenue. GROUND NO.26 56. AO has made an ad hoc addition of ₹ 10,00,000/- on account of non-furnishing of books of account, relevant documents and stock inventory, which has been deleted by the CIT (A) by making following observations :- A.O.'s observation and assessee's submission have been gone through. As regards the allegation of non- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,20,000/- made by the AO by disallowing the remuneration alleged to have been paid to Ms. Sonika Bhasin, one of the Directors of the assessee company by returning following findings :- The rival position has been carefully considered. It is noted that there is contradiction in the statement of Shri Rawat, accountant of the firm as recorded by the A.O. and his subsequent affidavit filed before him. The lady director has not been produced for examination for whatever reason advanced by the company. The services rendered by the lady remain unsubstantiated and therefore, A.O. was justified in disallowing the remuneration of ₹ 120,000/- paid to her. The addition is, therefore, upheld. 60. Bare perusal of the findings returned by AO as well as CIT (A) goes to prove that there are inherent contradiction in the statement of Mr. Rawat, Accountant of the firm with his subsequent affidavit filed during assessment proceedings which has failed to substantiate the services rendered by Sonika Bhasin, the addition made by AO has been rightly affirmed by ld. CIT (A). Even otherwise, Sonika Bhasin, director of a company having turnover of ₹ 2.64 crores is not proved to have assig ..... X X X X Extracts X X X X X X X X Extracts X X X X
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