9911796707
TMI Blog2018 (11) TMI 858X X X X Extracts X X X X X X X X Extracts X X X X ..... y recorded in the books of account and through banking channel. AO conducted the enquiry and in response the relevant supporting evidences were filed by these creditors. Thus it is clear that despite receiving the supporting evidence directly from the creditors, the AO has made the addition by citing the reason that the assessee did not produce supporting evidence CIT (A) has examined the evidences available on the assessment record and found that the AO was having all the relevant details and supporting evidence during the assessment proceedings as called for under section 133(6) of the Act. On examination of these details and evidence as submitted by the six creditors, we find that the claim of the assessee was duly supported by the evidence produced by the creditors who having confirmed the transactions and also produced the evidence regarding their creditworthiness as all these creditors filed their returns of income, their ledger account and bank statements showing the transactions of loans given to the assessee.- Decided against revenue Addition by applying the GP rate of earlier year - Held that:- AO has to estimate the income of the assessee by taking a reasonable and prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000/- given to Dr. Pushpendra Garg, the assessee explained that assessee's own interest free funds were sufficient to advance the amount of ₹ 1,00,000/-. Since the assessee did not produce his books of accounts before the AO, accordingly, the AO disallowed the entire claim of interest of ₹ 8,75,543/-. On appeal, the ld. CIT (A) has deleted the addition made by the AO by considering the fact that the amount of ₹ 25,00,000/- given to M/s. More Mobile & Support Pvt. Ltd. was a security deposit by the assessee and shown in the Balance Sheet. Similarly, the amount of ₹ 74,96,320/- was given as an advance for purchase of goods from The Mobile Store Services Ltd. Therefore, the major amount of ₹ 99,96,320/- was considered as given in the normal course of business of the assessee and, therefore, no disallowance is called for in respect of the said amount. The remaining amount of ₹ 1,00,000/- was found to be given from the assessee's own interest free funds. 3. Before us, the ld. D/R has submitted that the AO has given the finding that the assessee has failed to produce the books of accounts as well as other supporting evidence in support of the claim th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee to these three parties. The first amount of ₹ 25,00,000/- was given to M/s. More Mobile & Support Pvt. Ltd. as a security for doing the business with the said company as the assessee is a wholesale trader in mobiles and accessories. The said amount has been shown by the assessee in the Balance Sheet as security deposit and, therefore, once the said amount is paid in connection with the business of the assessee then the disallowance of interest expenditure by the AO is not justified. The business transaction with M/s. More Mobile & Support Pvt. Ltd. is not in dispute as the assessee has shown an outstanding balance of ₹ 6,15,568/- under sundry creditors for trade and, therefore, it is clear that the assessee was having the business with the said company and the security deposit was made for the purpose of business and commercial expediency. The second amount of ₹ 74,96,320/- was given to M/s. The Mobile Store Services Ltd. and shown as Trade advance. The assessee has also shown purchases of ₹ 90,55,296/- from 01.04.2012 to 20.06.2012. Therefore, having regard to the volume of purchases made from the said company, the advance of ₹ 74,96,320/- for pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in arm-chair of businessman or in position of Board of Directors and assume role to decide how much is reasonable expenditure having regard to circumstances of case - Held, yes - Assessee filed its return claim deduction of interest paid on borrowed sums from Bank under section 36(1)(iii) - Assessing Officer finding that assessee had used borrowed funds for giving interest free loans to its subsidiary company and directors, rejected assessee's claim - High Court upheld order of Assessing Officer - It was noted that advance to subsidiary company became imperative as a business expediency in view of undertaking given to financial institutions by assessee to effect that it would provide additional margin to subsidiary company to meet working capital for meeting any cash losses - Insofar as loans to directors were concerned, said loans were granted out of assessee's own surplus funds - Whether in view of aforesaid, impugned order passed by High Court was to be set aside - Held, yes [in favour of assessee] The operative portion of the judgement is also extracted as under- ..In the case of S.A. Builders Ltd. v. CIT (appeals)[2007 (288) ITR 1/158 Taxman 74]. After taking note of and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asonable expenditure having regard to the circvumstances of the case. It further held that no businessman can be compelled to maximize his profit and that the income tax authorities must put themselves in the shoes of the assessee and see how a prudent businessman would act. The authorities must not look at the matter from their own view point but that of a prudent businessman. Under the circumstances as discussed above the legal precedents that it is the assessee's decision to advance moneys on the basis of commercial expediency with or without interest and the fact that the A.O could not prove any adverse nexus between the two parties and the assessee firm., it is opined that the disallowances of interest on proportionate basis to the extent of ₹ 8,75,543/- by the assessing officer was not warranted. The same is accordingly directed to be deleted. This ground of appeal is allowed." In view of the facts and circumstances of the case as well as the above discussion, we do not find any error or illegality in the order of ld. CIT (A) qua this issue. Ground No. 2 is regarding deletion of addition of ₹ 70,50,000/- made under section 68 for unexplained credit on acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s well as confirmations, the ld. CIT (A) has rightly deleted the addition made by the AO. 7. We have considered the rival submissions as well as the relevant material on record. We note that all the six creditors have produced the confirmations, returns of income as well as their relevant record from the books of account to show that the transactions of loans given to the assessee were duly recorded in the books of account and through banking channel. Further, all these creditors are also assessed by the same AO and, therefore, it was not difficult for the AO to examine the genuineness of the transactions and creditworthiness of the creditors. In fact, the AO conducted the enquiry and in response the relevant supporting evidences were filed by these creditors. Thus it is clear that despite receiving the supporting evidence directly from the creditors, the AO has made the addition by citing the reason that the assessee did not produce supporting evidence. The ld. CIT (A) has considered this issue in para 16 & 17 as under :- " I have gone through assessee's submission and AO's findings. As regard Ground No. 6 above regarding addition made on account of unsecured loans u/s 68 by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the other details filed by the assessee's A/R in the course of the assessment proceedings it is also seen that - Sh. Rambabu Gupta proprietor of M/s. Giriraj Trading Company, Sh. Shiv Kumar Gupta Prop. Of Shiv Kumar Trading Co. and M/s. Nisha Gera, Prop. Of Frontier Agencies are assessed with the same assessing officer and they have all confirmed the loans by providing copy of accounts, return of income acknowledgment & covering letter (incase of 1st two parties) etc. e) Similarly, the two parties M/s. Vinayak Enterprises & Divyansh Telelink were lenders who are already mentioned as per 40A(2)(b) note in the assessee's audited accounts are also apparently in the same A.O's jurisdiction so checking their creditworthiness should never have been an issue and also their account copies, interest payments, PAN details were available with the A.O. The loan entries are also appearing in the respective lender's Balance Sheet extracts which the A.O. could have easily cross checked if he had any doubts regarding the same as they were assessed with him. Further M/s. Vinayak Enterprises had an balance of 40,79,578/- as outstanding while the A.O. questions only loan of ₹ 15 lakhs ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd also produced the evidence regarding their creditworthiness as all these creditors filed their returns of income, their ledger account and bank statements showing the transactions of loans given to the assessee. Accordingly in the facts and circumstances of the case, we do not find any error or irregularity in the order of ld. CIT (A) qua this issue. In the Cross Objection the assessee has raised the only issue regarding trading addition made by the AO of ₹ 4,49,453/- was confirmed by the ld. CIT (A). 8. We have heard the ld. A/R as well as the ld. D/R and considered the relevant material on record. The AO rejected the book result of the assessee for want of production of books of accounts. The AO noted that the assessee has declared GP @ 0.92% as against 1.08% in the immediately preceding year. Accordingly, the AO adopted the GP declared by the assessee in the preceding year and made an addition of ₹ 4,49,453/-. The ld. A/R of the assessee has submitted that this is the second year of business of the assessee and there is a substantial increase in the turnover of the assessee, therefore, merely there is a decrease in the GP rate does not warrant any addition. Thus ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
