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TMI Blog2018 (11) TMI 339X X X X Extracts X X X X X X X X Extracts X X X X ..... s accounted for cash and we uphold the order of the CIT(A) in deleting the above said addition by holding that the cash deposited in the bank is fully accounted for and the addition made by the AO is ex-facie bad - Decided in favour of assessee Addition on account of bogus purchase of fixed assets - Held that:- assessee is imparting education for various courses being run by it. For imparting education and running these courses the assessee has to have the fixed assets. The assessee in fact has purchased these fixed assets. It is not the case of the AO that assessee has not purchased these fixed assets. The AO is looking into the commercial expediency of the assessee. AO cannot examine the business, wisdom and the commercial expediency of the assessee. The assessee having purchased the fixed assets for the purpose of its business, no adverse view can be taken. We further note that the AO despite assessee claiming only depreciation on such fixed assets, has added back the entire amount. This clearly shows the arbitrariness on the part of the AO. The Ld. CIT(A) has considered the facts in the right perspective and has rightly deleted the addition - Decided in favour of assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plained administrative expenses - Held that:- The assessee having incurred the expenditure, the AO cannot question the wisdom of the Assessee. The observation of the AO regarding classroom activity is also incorrect. AO has ignored the fact which has been rightly recorded by the CIT(A) that this classroom expenses relate to payment made to Reliance Webstore through which apparently E-learning classes were conducted. As gone through the details of the various expenses placed in the PB. Pg. 413-456. These details include details of salaries paid to employees with the services rendered, details of the travelling expenses incurred, details of the professional charges etc. After examination of these details, all these expenditure are related to the business activity of the assessee and it cannot be said that these expenditure have not been incurred. CIT(A) was right in deleting the additions- Decided in favour of assessee - ITA No. 3699/DEL/2015, C.O. NO. 385/DEL/2015 (IN ITA NO. 3699/DEL/2015) - - - Dated:- 31-10-2018 - SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER For the Appellant : Sh. Ved Jain, Adv. Sh. Ashish Goel, CA For the Respondent : Sm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27 of while disposing ground no. 2 3. 3. The brief facts of the case are that assessee is a company engaged in the business of imparting education, conducting coaching classes of different courses, infrastructure consultancy, etc. Assesee filed its return of income on 5.8.2011 declaring an income of ₹ 21,84,630/-. The said return was selected for scrutiny and assessment under Section 143(3) of the Income Tax Act, 1961 (in short Act ) was completed vide order dated 09.1.2014 at an income of ₹ 5,11,92,406/- by making various additions and disallowances. Against the assessment order, the assessee appealed before the Ld. CIT(A), who vide his impugned order dated 25.3.2015 deleted all the additions and disallowances except one where he gave a partial relief. Aggrieved with the order of the Ld. CIT(A), the Revenue is in appeal before the Tribunal and Assessee has filed the Cross Objection. The grounds raised by the Revenue in its appeal are as under: 4. Ground no. 1 in the Revenue s appeal and Ground no. 1 in the cross objection of the assessee are common and the same is being taken up together. As per the assessment order the assessee has received a sum of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntire amount. Accordingly, Ground no. 1 of Revenue s appeal is dismissed and Ground no. 1 of the Cross objection of the Assessee is allowed. 6. Ground no. 2 in Revenue s appeal is regarding deletion of addition of ₹ 66,32,788/- made by AO on account of unexplained cash received from students and trainees. As per the assessment order, the AO asked the assessee to explain the cash deposit made in the various bank accounts held by the assessee. The assessee submitted its reply that the same were made from the fees received from students and trainees. The AO however held that the contention of the assessee that it has provided classroom courses and training cannot be accepted and accordingly he made the above addition in the hands of the assessee as its undisclosed income. The Ld. CIT(A) has deleted the addition holding that the same is fully accounted for and routed through regular books of accounts and hence the addition made by AO is ex-facie bad. On the other hand, Ld. DR placed reliance on the order of the AO and submitted that Ld. CIT(A) was not justified in deleting the above additions. In reply, the Ld. AR submitted that assessee company is engaged in imparting educati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The ld. CIT(A) has deleted the addition holding that addition cannot be sustained specially where mere perceived necessity is no ground to make the addition for genuine and fully verifiable expenses of depreciation and addition to fixed assets. The Ld. DR before us placed reliance on the order passed by the AO. The Ld. AR in reply, placed reliance on the order of the Ld. CIT(A). It was submitted by the Ld. AR, that assessee has purchased computers and furniture which was necessary for its business. The assessee has been maintaining regular books of account which have been duly audited and have not been rejected by the AO. Further, the AO has not pointed out any discrepancy in the details of the fixed assets along with the bills to the AO. The addition has been made on flimsy grounds. 9. We have heard both the parties and perused the records, especially the impugned order. After perusing the order of the AO, it is apparent that the AO has made the addition by going in to the issue of necessity of the assessee company for purchasing such fixed assets for running of its business. The AO, in fact, is challenging the wisdom of the assessee in buying the fixed assets. As per the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Section 37 of the Act. We are of the view that the Ld. CIT(A) was justified in deleting the addition made by the AO. The assessee has submitted the complete details and the observations of the AO that assessee has not submitted the supporting evidence is factually incorrect. The assessee has actually incurred these expenditures and the same are duly accounted for in the books of accounts. The assessee is imparting education and training. The expenditure incurred is for publicizing such education and training courses being run by the assessee. Thus, the expenditure is directly related to the business of the assessee and the ld. CIT(A) has rightly deleted the addition. We uphold the order of the Ld. CIT(A) on this issue and Revenue s Ground no. 4 is dismissed. 12. Ground no. 5 in Revenue s appeal is regarding deletion of addition of ₹ 1,53,80,453/- made by the AO on account of loan repaid by the assessee during the year. The Ld. DR placed reliance on the order of the AO in support of its contention whereas the Ld. AR placed reliance on the order passed by the CIT(A). It was submitted by the Ld. AR that the assessee has submitted the complete details in respect of each tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 14,17,000 Total ₹ 2,44,46,453 ₹ 1,53,80,453/- NIL ₹ 54,51,000/- 13.2 In respect of the first party namely M/s Dolphin Space System, the assessee has received a sum of ₹ 23,58,400/- and paid back the same amount during the year. The documents filed before the AO in respect of this creditor is placed in PB. Pg. 266-287 which include confirmation, copy of ledger account, copy of bank statement and copy of audited financials. This is a proprietorship concern of one of the director Mr. Ashish Aggarwal. As per the profit and loss account it has made a sale of ₹ 4,98,28,165/-. It has filed the income tax return declaring a taxable income of ₹ 10,19,401/- which include profit from this concern of ₹ 8,87,582/-. This concern has got loan from banks and other financial institutions which include NSIC Ltd. The payment has been made from its regular bank account maintained with Vijaya Bank. It has a running account being a sister concern with assessee as is evident from the copy of account placed at PB. Pg. 267. 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has paid back ₹ 5,89,000/- with the result that there is a closing credit balance of ₹ 36,25,000/-. Interestingly the AO has made addition of ₹ 5,89,000/- only being the amount paid back by the assessee during the year. The documents filed in respect of this account before the AO are placed at PB. Pg. 389 410 which include confirmation, copy of ledger account, bank statement, ITR and audited financials. This is also a running account as per the copy of account placed at PB. Pg. 390. This company has a gross income from operation of ₹ 2,14,64,220/- and assessment of this company has also been completed by the same AO vide order dated 28th January, 2014 and no adverse inference has been drawn in respect of the transaction entered into by the assessee with this company. All the payments are through regular bank account and there is nothing abnormal in the bank statement and the transaction entered into by the assessee. 13.6 The fifth case is that of Mr. Ashish Aggarwal, Director of assessee company. The assessee company has received a sum of ₹ 7,64,453/0 and paid back ₹ 7,64,453/-. The documents filed before the AO in respect of this account ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny adverse inference. He has indulged into surmises. The CIT(A) has rightly deleted the addition and accordingly we uphold the order of the CIT(A) deleting the addition. In the result the ground no 5 is dismissed. 14. Ground no. 6 is regarding deletion of addition of ₹ 5,62,725/- made by the AO in respect of the credit appearing in the name of Piron Design Pvt. Ltd. It was submitted by the Ld. DR that the Ld. CIT(A) has gone wrong in deleting this addition ignoring the observation of the AO in the assessment order. The Ld. AR in reply supported the order of the Ld. CIT(A). It was submitted that the addition has been made by the AO without appreciating the facts and in most arbitrary manner. During the year under consideration the assessee has purchased furniture and fixtures amounting to ₹ 5,62,725/- from Piron Design Pvt. Ltd. as per the ledger account and copy of the invoice at PB. Pg. 402 412. AO has wrongly assumed that it is a cash credit. The balance standing ₹ 5,62,725/- is against the genuine and bonafide supply of the furniture. Piron Design Pvt. Ltd. is a group company and the transaction has been entered into ordinary course of business and duly ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. AR thus contended that Ld. CIT(A) s order need to be upheld. 17. We have heard both the parties and perused the records, especially the order of the Ld. CIT(A). We find that the AO has made the above addition by holding that at the time of the survey no evidence of any business activity other than e-training was found. On this basis he has held that assessee has raised bogus invoices against the expenditure. On the issue of the rent and electricity expenses the AO has observed that assessee has not submitted the lease / rent agreement. On the issue of telephone expenses the AO has observed that the assessee has failed to explain to the need for maintaining 30 telephone connections. The Ld. CIT(A) has deleted the addition holding that all these expenses are incurred for the purpose of business and allowable under Section 37(1) of the Act. on going through the facts and evidences on record, we note that assessee is in the business of imparting education and training. As per the details of the receipts placed at PB. Pg. 91,assessee has received fees for ACCA classes, BSE and Piron IFRS certification course, CIMA, CPA classes, CPA distant learning program, IFRS classes, IFRS E- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any adverse inference. Similarly on the issue of telephone expenses, the observation made by the AO that there is no need for maintaining 30 telephone connections is untenable. The assessee having incurred the expenditure, the AO cannot question the wisdom of the Assessee. The observation of the AO regarding classroom activity is also incorrect. The AO has ignored the fact which has been rightly recorded by the CIT(A) that this classroom expenses relate to payment made to Reliance Webstore through which apparently E-learning classes were conducted. We have also gone through the details of the various expenses placed in the PB. Pg. 413-456. These details include details of salaries paid to employees with the services rendered, details of the travelling expenses incurred, details of the professional charges etc. After examination of these details, we are of the view that all these expenditure are related to the business activity of the assessee and it cannot be said that these expenditure have not been incurred. Accordingly, we hold that the CIT(A) was right in deleting the additions and therefore, we uphold the order of the CIT(A). This Ground no. 7 of the Revenue s appeal is dismis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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