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TMI Blog2017 (12) TMI 1048X X X X Extracts X X X X X X X X Extracts X X X X ..... ss and until it is found that there was remission and/or cessation of liability, that too during the relevant assessment year. SEE Matru Prasad case [2015 (4) TMI 830 - GUJARAT HIGH COURT] Disallowance of claim of pollution control equipment expenses - Held that:- We find that the AO failed to give a single opportunity to the assessee to explain its case on the above issue. A proper hearing must always include a fair opportunity to those who are parties in the controversy for correcting or contradicting anything prejudicial to their view.In view of the above, we set aside the order of the Ld. CIT(A) and restore the matter to the file of the AO to decide the issue afresh Unauthorized occupation penalty - allowance u/s 37 - Held that:- We find from the ledger account that cheque no. 163966 has been paid towards MCGM unauthorized occupation penalty. As this is purely penal in nature, we uphold the order of the Ld. CIT(A) and dismiss the 3rd cross objection raised by the assessee. - ITA No. 1102/MUM/2016 And C.O. No. 235/MUM/2017 - - - Dated:- 29-11-2017 - SHRI D.T. GARASIA (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) For The Revenue : Mr. Saurabh Kumar R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with a delay of 34 days. That being so, we condone the above delay. 4. In the cross objection the assessee has raised that (i) the Ld. CIT(A) failed to appreciate that the case of the assessee did not fall u/s 69C; the assessee had discharged its onus, if any, under the Act; (ii) the Ld. CIT(A) erred in confirming the addition on account of the alleged unexplained expenditure u/s 69C as made by the AO to the extent of ₹ 53,50,738/- being 28.4% of such purchases amounting to ₹ 1,88,40,628/-, (iii) the Ld. CIT(A) erred in dismissing ground no. 3 by the assessee that the AO erred in considering the depreciation rate on Pollution Control Equipment @ 15% instead of 100%, without providing any opportunity of hearing and (iv) the Ld. CIT(A) erred in dismissing ground no. 4 raised by the assessee that the AO erred in considering the nature of penalty paid to BMC as disallowable u/s 37(1) without giving any opportunity of being heard. 5. We begin with the 1st 2nd ground of appeal of the Revenue and the 1st cross objection filed by the assessee. Briefly stated the facts of the case are that the Assessing Officer (AO) found that certain purchases made by the assessee amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zance by the AO, (ii) as held in the decision in Saraswathi Oil Traders vs. CIT 254 ITR 259 (SC), it is the profit element on the total component in dispute which needs to be added to the income of the assessee. As the assessee had shown gross profit rate of 28.4%, the Ld. CIT(A) estimated the profit on the bogus purchases of ₹ 1,88,40,628/- at the same GP rate and estimated the disallowance at ₹ 53,50,738/-. Thereby the Ld. CIT(A) restricted the disallowance to ₹ 53,70,738/- in place of ₹ 1,88,40,628/- made by the AO. 5.2 Before us, the Ld. DR submits that the Ld. CIT(A) has failed to appreciate that the assessee had not produced before the AO any cogent evidence to substantiate the fact that it had taken actual delivery of goods purchased from the parties. He also submits that the Ld. CIT(A) failed to appreciate that the notices u/s 133(6) issued to the parties from whom alleged bills were received were returned undelivered by the postal authorities with the remark not available at this address . Also it is stated by him that the assessee failed to produce the said parties before the AO for examination. 5.3 On the other hand, the Ld. counsel of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the instant case, since the book profit is ₹ 2,29,70,332/- which is more than ₹ 1,50,000/-, the condition as mentioned above shall apply. He further found that the remuneration paid to the partners is an excess of the said criteria. As per him, the details are as under: Name of the Partner As per the above criteria (X% of the balance book profit if it exceeds ₹ 1,50,000/-) Actual Remuneration Paid Excess Ulhas Kadam (X= 10%) Rs.22,82,033/- Rs.34,68,049/- Rs.11,86,016/- Rajesh Kadam (X= 10%) Rs.22,82,033/- Rs.34,68,049/- Rs.11,86,016/- Renjeet Singh Gohit (X=20%) Rs.45,64,066/-) Rs.69,36,099/- 23,72,033/- Total Rs.47,44,065/- Thus the AO made a disallowance of ₹ 47,44,065/- u/s 40b(ii). 6.1 In appeal, the Ld. CIT(A) has observed that as per the partnershi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... editors were existing from the financial year 2008-09 relevant to the assessment year 2009-10 and the assessee has not paid the same till the end of the impugned assessment year. Therefore, he made an addition of ₹ 37,34,907/- u/s 41(1) of the Act. 7.1 In appeal, the Ld. CIT(A) held that (i) the AO has not conducted any inquiry to ascertain the nature of credit of the said creditors, (ii) the AO has not made any attempt to know whether the liabilities against these creditors were paid in the subsequent years or not, (ii) the creditors are not very old. The Ld. CIT(A) relied on the judgment of the Hon ble Gujarat High Court in Matru Prasad C. Pandey 59 taxmann.com 428 (2015) wherein it is held that addition u/s 41(1) cannot be made unless and until it is found that there was remission and/or cessation of liability, that too during the relevant assessment year. As the AO failed to give any cogent reason, the Ld. CIT(A) deleted the addition of ₹ 37,34,907/- made by the AO u/s 41(1). 7.2 Before us, the Ld. DR relies on the order of the AO whereas the Ld. counsel of the assessee supports the order passed by the Ld. CIT(A). 7.3 We have heard the rival submissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tunity of being heard to the assessee. We direct the assessee to file the relevant documents/evidence before the AO. 9.3 Thus the 2nd cross objection of the assessee is allowed for statistical purposes. 10. Finally we come to the 3rd cross objection raised by the assessee. During the course of assessment proceedings, the AO noticed that the assessee has paid ₹ 1,43,000/- to MCGM towards unauthorized occupation penalty. As it was penal in nature, the AO made a disallowance of it u/s 37. 10.1 In appeal, the Ld. CIT(A) upheld the above disallowance of ₹ 1,43,000/- made by the AO. 10.2 Before us, the Ld. counsel submits that it was compensatory in nature, therefore, the same should not be disallowed u/s 37. On the other hand, the Ld. DR supports the order passed by the Ld. CIT(A). 10.3 We have heard the rival submissions and perused the relevant materials on record. We find from the ledger account that cheque no. 163966 has been paid towards MCGM unauthorized occupation penalty. As this is purely penal in nature, we uphold the order of the Ld. CIT(A) and dismiss the 3rd cross objection raised by the assessee. 11. In the result, the cross objection raised b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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