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TMI Blog2018 (10) TMI 240X X X X Extracts X X X X X X X X Extracts X X X X ..... ut any specific inadmissible expenses incurred by the assessee. In this view of the matter, we set aside the Orders of the authorities below and delete the entire addition. Addition on account of fabrication charges - Held that:- The details of expenses shows that the expenses are essentially incurred on fabrication charges, consumption of indigenous consumable stores, import of components and spare parts and cleaning and forwarding and freight. Thus, for earning income, assessee shall have to incur expenses on fabrication charges. In the absence of any specific defect pointed-out in the maintenance of the books of account, there were no justification for the A.O. to disallow the entire amount of fabrication charges. CIT(A) also verified the details and the books of account and came to the finding that the assessee has maintained proper books of account and that there are no violation of TDS provisions. CIT(A) on proper appreciation of facts and verification of the record and the books of account produced by the assessee, correctly deleted the addition - Addition deleted - Decided against revenue Addition u/s 68 - unexplained cash credit - Held that:- No interference is called for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciation on the same and made the addition of ₹ 1,37,765/-. The Ld. CIT(A) confirmed the addition. 5. After considering the rival submissions, we are of the view that the addition is wholly unjustified. Considering the nature of business of assessee, these expenses are incurred on electrical repair and maintenance, which are in nature and consumable expenses. The assessee has rightly treated the same as revenue expenditure. The A.O. has not pointed-out as to which capital have been generated by the assessee for purchasing tube rods, electrical wires etc. In the absence of any specific finding against the assessee, we set aside the Orders of the authorities below and delete the addition of ₹ 1,37,765/- made by the A.O. Ground No.1 of cross-objection is allowed. 6. On ground No.2, the assessee challenged the addition of ₹ 1,81,937/- on account of car running and telephone expenses. The A.O. directed the assessee to explain as to why car running and telephone expenses be not subjected to disallowance as the quantum of personal expenses under these heads cannot be ascertained as per the audited report. The assessee stated that there is no personal expenses on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of fabrication charges, copy of the cash book, copy of the purchase bills and details of the expenses. Learned Counsel for the Assessee, therefore, submitted that since books of account of the assessee produced before A.O, therefore, no additional evidence has been considered by the Ld. CIT(A). 13. We have considered the rival submissions and do not find any justification to entertain the submissions of the Ld. D.R. The assessee has filed reply before A.O. as referred to above in which several details as per the query of the A.O. were furnished at assessment stage including copy of the cash book. Therefore, all the details were furnished before A.O. including production of the books of account Learned Counsel for the Assessee also contended that no additional evidence was filed before Ld. CIT(A). The Ld. D.R. has not pointed-out as to which of the additional evidence was submitted before Ld. CIT(A) in violation of Rule 46A. Therefore, in the absence of any specific averment on this issue, no interference is called for in the matter. The Ld. D.R. pointed-out from the findings of the Ld. CIT(A) that books of account have been produced before Ld. CIT(A) for the first time for examin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in cash. The reason of exigency for making payments to fabricators in cash was also not provided. The assessee merely stated that fabrication charges has been paid in course of business and were below the threshold limit prescribed for TDS provisions. The A.O, therefore, noted that assessee engaged services of 3600+ fabricators in order to justify its claim of fabrication charges. Even the cash book reveals that expenses have been incurred in cash and are below ₹ 20,000/-. Thus, devised a method not to deduct tax. The A.O. also noted that assessee has also claimed expenses of wages and salary and dyeing expenses. The assessee was asked to produce the monthly trading account and reconcile the same with fabrication charges and wages paid along with electricity charges. The assessee provided details of only one month salary details which clearly implies that no such expenditure as fabrication charges has been incurred by the assessee. The assessee was asked to give details of all the employees with their particulars to whom salary is paid in cash. The assessee instead of providing details so desired, simply filed a statement of wages drawn by 83 workers and that too only for o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th details of wages and salaries. All the details are verifiable. The assessee maintained regular books of account which are duly supported by bills and vouchers and subjected to check. The details of fabrication charges of earlier year were also filed to justify the payment of fabrication charges. 17. Ld. CIT(A) considering the explanation of assessee in the light of material on record, deleted the addition. His findings in pages 13 and 14 of the impugned order are reproduced as under : "Ground No.2: I called books of account of the appellant company like cash book ledger book and vouchers which the AR produced before me with the accountant of the company. I verified the books of accounts and found that books are maintained in computer and printed ledger was produced before me for verification. The appellant company is giving its job works for their woolen and hosiery mills in Ludhiyana (Punjab) and it is assessed in Delhi. The appellant did not produce books of accounts before the AO, for which such a big addition has been made by the A.O. The A.O should have referred the matter to the local A.O at Ludhiana as of appellant legal there is office on to verify the reality of busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... address. PB-160 is the chart of fabrication charges for preceding three years in proportion of sales and average rate of fabrication charges. Learned Counsel for the Assessee submitted that in assessment year under appeal, the average rate of fabrication charges have increased as compared to earlier year. Similarly, the average sale per packet of manufacture and sale also increased substantially as compared to earlier year. Books of account of the assessee have not been rejected. No addition have been made for any TDS violation. PB-10 is P & L A/c and PB-19 is details of expenses which includes fabrication charges. He has submitted that fabrication charges is essential expenses for conduct of the business to earn income. Therefore, entire amount could not have been disallowed by the A.O. He has submitted that entire details were furnished before the authorities below. Therefore, Ld. CIT(A) on proper appreciation of facts and material on record, correctly deleted the addition. 20. We have considered the rival submissions and perused the material available on record. The assessee is engaged in business of manufacture, exporter and trading of hosiery readymade goods. In this nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 1,44,95,000/- made under section 68 of the I.T. Act. The A.O. noted that during the year assessee-company received loan of ₹ 1,44,95,000/- from M/s. Shivam International Limited. The assessee-company was asked to produce copy of the income tax return, copy of the balance-sheet and bank account to justify the genuineness and creditworthiness of the loan. In response to the above, assessee-company has produced the copy of the ITR and the balance-sheet of the lender. On perusal of the balance-sheet of the lender company, it emerges that Share Capital is of ₹ 73.86 lakhs, Reserve and Surplus (-) ₹ 15 lakhs, Long Term borrowings ₹ 2.26 crores, Trade Payables ₹ 2.46 lakhs and the income returned is zero. The A.O, therefore, noted that from these financial statistics, creditworthiness of the lender company, prima facie is crystal clear and require no more comments. The transactions in the bank statement of the lender company shows entries in round and big figures looking like an entry provider. When a company itself is surviving on borrowed funds to run its own business and in losses, how it can afford to lend its finances to some other concern ? The A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer of the lender company i.e ITO Co. Ward 8(2)/NWR/W/038/02 having its office at "D-6, NDSE, Part-I, South Extension, New Delhi-110001" . The office is located in Delhi but A.O is in N.W.R which is suspicion in the jurisdiction. The AO is directed to refer the matter to concerned A.O and pass on the information along with this assessment order and appeal order, for necessary action at the other end of the A.O. Therefore, the addition made by A.O of ₹ 1,44,95,000/- is deleted in the appellant's case and this ground of appeal is allowed." 23. The Ld. D.R. relied upon the Order of the A.O. and submitted that assessee did not prove creditworthiness and genuineness of the transaction. The matter may be remanded to the Ld. CIT(A) for fresh adjudication. 24. On the other hand, Learned Counsel for the Assessee, reiterated the submissions made before the authorities below and referred to PB-167 to 187 which are confirmations by lender company, its ITR and balance-sheet. PB-185 to 187 are the copy of the bank statement of the lender company to prove creditworthiness of the lender company. He has, therefore, submitted that assessee has satisfied conditions of Section 68 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Value Capital Services Pvt. Ltd., (2008) 307 ITR 334 (Del.) in which it was held as under : "Dismissing the appeal, that the additional burden was on the Department to show that even if the share applicants did not have the means to make the investment, the investment made by them actually emanated from the coffers of the assessee so as to enable it to be treated as the undisclosed income of the assessee. No substantial question of law arose." 26. Considering the facts of the case, evidence on record and above decisions, we are of the view that no interference is called for in the matter. The assessee proved the identity of the investor, its creditworthiness and genuineness of the transaction in the matter. Whatever documentary evidences were filed on record, the A.O. did not make any efforts to summon the Investor and no efforts have been made to verify the documents from the Investor. There is no finding that material disclosed was untrustworthy. No evidence has been brought on record, if investment made by the Investor Company actually emanated from the coffers of the assesseecompany so as to enable the total investments to be treated as undisclosed income of the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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