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TMI Blog2018 (11) TMI 114X X X X Extracts X X X X X X X X Extracts X X X X ..... dited and they were produced before the Assessing Officer. It is settled law that in absence of any corroborative finding, ad hoc disallowance cannot be upheld. - Decided in favour of assessee Addition on account of undisclosed cash transaction - CIT(A) has assumed that 50% of the seized Annexure A-1 was a duplication - Held that:- Commissioner of Income Tax (A) has not specifically recorded a reason as to how he assumed a figure of 50% to be of duplication, therefore, on this count alone, the department succeeds and we deem it expedient in the interest of justice to restore ground no. 1 to the file of the CIT(A) to be adjudicated de novo after giving due opportunity to the assessee to present its case. - Ground of department’s appeal stands allowed for statistical purposes. Addition on short and excess recoveries by the assessee - Held that:- Commissioner of Income Tax (A) held the debit of the impugned amount as reasonable. On the facts of the case, we find no reason to interfere with the finding of the Ld. Commissioner of Income Tax (A) on the issue as the Ld. Commissioner of Income Tax (A) has adjudicated the issue after duly considering the quantum of turnover of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cluded ₹ 5 crore declared by the assessee during the course of search operation. The assessment was completed u/s 143(3) r/w section 153(1)(b) of the Act on 28.12.2011 at an income of ₹ 14,83,41,420/- after making the following additions/disallowances:- i) Unaccounted cash transactions - ₹ 1,05,04,160/- ii) Difference in cash balance as per books and cash counted physically on the date of search ₹ 13,150/- iii) 1/5th of conveyance expenses disallowed ₹ 22,78,951/- iv) Short and excess recoveries ₹ 1,79,257/- v) 1/5th of vehicle running and maintenance expenses ₹ 17,35,564/- vi) Liquidated damage charges added back - ₹ 5,05,972/- vii) 1/5th of business promotion expenses ₹ 15,74,205/- 2.2 Aggrieved, the assessee approached the Ld. Commissioner of Income Tax (A) challenging these additions and the Ld. Commissioner of Income Tax (A) partly allowed the assessee s appeal by allowing relief/dismissing the grounds raised by the assessee as under:- i) The addition of ₹ 1,05,04,160 on account of undisclosed cash transactions was deleted. ii) The difference in physical cash found during the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case the Ld. CIT(A) was right in deleting the addition of ₹ 1,05,04,160/- made by the AO being the difference of undisclosed cash transactions were recorded in seized documents Annexure A- 1 to A-4 at ₹ 11,00,44,160/- and the amount disclosed on account of these documents was ₹ 9,54,20,000/-? (ii) Whether on the facts and in the circumstances of the case the Ld. CIT(A) was right in deleting the disallowance of a sum of ₹ 1,79,257 claimed to be debited to profit and loss account under the head short and excess recoveries especially when no explanation was offered and no documentary evidences were produced by the assessee? (iii) Whether on the facts and in the circumstances of the case the Ld. CIT(A) has erred in deleting the addition of ₹ 5,05,972/- made by the AO on account of liquidated damage charges ignoring the fact that the expenses were not incurred in the normal course of business and this is in the nature of penalty on the assessee for violating agreement between parties . (iv) That the appellant craves to add, delete or modify any of the grounds of appeal before or at the time of hearing. 3.0 The Ld. AR submitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner of Income Tax (A) and in view of the findings of both the lower authorities, the same should be upheld. 5.0 Coming to the department s appeal, the Ld. CIT DR submitted that the Ld. Commissioner of Income Tax(A) had deleted the addition pertaining to unexplained cash transactions of ₹ 1,05,04,160/- on the ground that there was a duplication of the diaries in seized documents Annexure A-1 to A-4 and it was submitted that the Ld. Commissioner of Income Tax (A) had merely accepted the assessee s claim that there was a duplication in adding the figures whereas the onus was on the assessee to establish beyond doubt that there was a duplication. 5.1 With respect to the department s ground challenging the deletion of disallowance of ₹ 1,79,257/- on account of short and excess recoveries, the Ld. C.I.T. DR submitted that this amount had been deleted by the Ld. Commissioner of Income Tax (A) although the assessee had not offered any plausible explanation on this issue. 5.2 With respect to ground no. 3 of the department s appeal challenging the deletion of addition of ₹ 5,05,972/- on account of liquidated damages, it was submitted that the Ld. Commissioner of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1/5th of the expenses without assigning any reason for such disallowance. We also note that the Assessing Officer has not pointed out any specific defects in the books of accounts/details produced before him with regard to these expenses. It is also undisputed that the books of accounts of the assessee were duly audited and they were produced before the Assessing Officer. It is settled law that in absence of any corroborative finding, ad hoc disallowance cannot be upheld. If the Assessing Officer is not satisfied with the submission of the assessee, then he has to make a disallowance after making specific reference to such documents/vouchers. In the present case before us, no specific identification has been done. Therefore, in view of the facts, it is our considered opinion that the three estimated disallowances as confirmed by the Ld. Commissioner of Income Tax (A) is unsustainable. Accordingly, we allow ground nos. 1, 2 and 3 of the assessee s appeal and direct the Assessing Officer to delete the addition. 7.1 Coming to ground no. 4, since this ground has not been pressed by the assessee, the same is being dismissed as not pressed. 7.2 With regard to ground no. 5, we ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... int out any factual error in the findings of the Ld. Commissioner of Income Tax (A) in this regard. Accordingly, we dismiss ground no. 2 raised by the department. 9.2 Ground no. 3 challenges the action of the Ld. Commissioner of Income Tax (A) in deleting addition of ₹ 5,05,972/- with respect to liquidated damages and it is seen that the Ld. Commissioner of Income Tax (A) has given relief to the assessee after duly considering the fact that these expenses relate to normal course of business and were fully allowable as business expenditure. The Ld. Commissioner of Income Tax (A) has noted that in view of the nature of business being conducted by the assessee on a large scale which entails making supplies to various agencies including government agencies, such claims were bound to arise. We also note that the Assessing Officer has disallowed the entire amount of expenditure claimed as liquidated damages without pointing out any specific instance where such claim was not allowable. This is not legally tenable and even the Ld. CIT DR was unable to point out any legal or factual inaccuracy in the order of the Ld. Commissioner of Income Tax (A). Accordingly, we refuse to interfe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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