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TMI Blog2019 (6) TMI 292X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee did not file any details regarding work carried on by these people and urgency that arose to make payments in cash. We are therefore inclined to set aside this issue back to Ld.CIT(A) for proper verification. Assessee is directed to file all details/evidences regarding work carried out by these people required to establish actual cash payment and urgency to make payment in cash. - Decided in favour of assessee for statistical purposes. Disallowance u/s 36 (1) (vii) - bad debt written off - no action to recover the debts - HELD THAT:- After amendment to section 36 (1) (vii), though assessee is only to write off the debts as irrecoverable in its account in order to claim deduction of bad debts, however, evidences of claim to be existing like invoices must be filed. Thus in view of evidences filed by assessee, we allow debts written off by assessee in respect of Mirra and Mirra Industries, Sandeep Industries and Bindal Industries respectfully following decision of TRS Ltd vs CIT [ 2010 (2) TMI 211 - SUPREME COURT] and debts in respect of other parties stand confirmed. Disallowance of sum for using car of company by directors - AO disallowed 1/5th of maintenance expenses and tow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and/or unreasonable. Ld.AO has not placed on record any instances of a job work carried out in respect of similar product as that of assessee to be a yardstick to form belief that payment made by assessee was excessive and/or unreasonable. Under such circumstances and after going through detailed evidences filed by assessee in the paper book, we are not in agreement with observations of authorities below and addition made deserves to be deleted . Addition of undisclosed closing stock of finished goods - HELD THAT:- CIT (A) proceeded on the footing that goods sold were from part of semi-finished goods and that assessee could not file details of goods sold. From documents placed in paper book, we are of considered opinion that goods sold are verifiable from excise records and semi-finished goods are verifiable from work in progress which was shown at closing of preceding year. We are of opinion that authorities below without verifying all these details merely on some surmises has made the addition. There is no iota of dispute in respect of documents filed by assessee by authorities below. This is a case where Ld. AO has failed to verify details as per records filed by assessee. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad depreciation and maintenance of car and further erred in sustaining the disallowance to the extent of ₹ 2,80,738/- which is bad in law and against the facts and circumstances of the case. 7. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not deleting the disallowance of ₹ 6,44,148/- fully made by Ld. AO on account of foreign tours and further erred in sustaining the disallowance to the extent of ₹ 2,38,148/- and that too without any basis, material and evidences available on record. 8. That in any case and in any view of the matter, action of Ld. CIT(A) in not deleting the action of Ld. AO in not deleting the disallowance of ₹ 6,44,148/- fully made by Ld. AO on account of foreign tours and further erred in sustaining the disallowance to the extent of ₹ 2,38,148/- which is bad in law and against the facts and circumstances of the case. 9. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making addition of ₹ 10.95.800 - u/s 41(1) of the Income Tax Act, 1961 and that too by recording incorr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brief are as under. Assessee filed its return of income on 29/09/10 at ₹ 2,25,35,030/-. Case was selected for scrutiny and subsequently notice under section 143 (2) and 142 (1) of the Income Tax Act, 1961 along with questionnaire was issued to assessee. In response to statutory notices, representative of assessee appeared before Ld. AO and filed requisite details. 2.1. Ld.AO observed that assessee is primarily engaged in manufacturing, supply, commissioning of wire drawing plant and machinery of various metals and their alloys. It was observed that company is manufacturing capital goods of different types and proportions. 2.2. After going through details and replies filed by assessee in response to questionnaires, Ld. AO made following additions and completed assessment: Sl. No. Particulars of additions made Amount - Rs. i. Disallowance of Rs 3,76,578 u/s 40A(3) as discussed 3,76,578 ii. Disallowance of ₹ 4,34,956/- u/s 36(1)(vii) as discussed 4,34,956 iii. Disallowance of ₹ 7,00,000/- u/s 32 as discussed 7,00,000 iv. Disallowance of ₹ 6,44,148/- u/s 37 as discussed 6,44,148 v. Disallowance of ₹ 4,04,538/- u/s 37 as discu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on part of assessee to adhere to requirements of provision of section 44 (A) (3) of the Act. This provision is a preventive measure and check on tax evasion and flow of unaccounted money, or to check transactions, which are not genuine and may be put as camouflage to evade tax by showing false transactions. 5.4. However, in the type of business carried out by assessee, cash payments, cannot be eliminated totally. Admittedly revenue is not casting any doubt on genuineness of payments in respect of bills and vouchers placed in paper book. 5.5. It is also observed that assessee did not file any details regarding work carried on by these people and urgency that arose to make payments in cash. 5.6. We are therefore inclined to set aside this issue back to Ld.CIT(A) for proper verification. Assessee is directed to file all details/evidences regarding work carried out by these people required to establish actual cash payment and urgency to make payment in cash. Ld. CIT(A) is directed to verify details vis-a-vis cash in hands of assessee for year under consideration in order to ascertain correctness as per law. In the event assessee files requisite details/evidences to establish job wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firmed. 7.4. Accordingly these grounds raised by assessee stands partly allowed. 8. Ground No. 5-6 is in respect of disallowance of sum of ₹ 2,80,738/-, for using car of company by directors. 8.1. Ld.Counsel submitted that cars were used by assessee for its business purposes and expenses incurred thereon cannot be disallowed on account of depreciation and maintenance thereon. 8.2. On the contrary Ld. DR submitted that Ld. CIT (A) has made a proportionate disallowance of only 20% which is a reasonable attribution for usage of cars by the directors personally. 8.3. We have perused submissions advanced by both sides in light of records placed before us. 8.4. It is observed that assessee had claimed a sum of ₹ 25.30 lakhs towards maintenance expenses and a sum of ₹ 9,67,297/- towards depreciation on 12 cars and Ld. AO disallowed 1/5th of these expenses. On appeal before Ld.CIT(A), Ld.CIT(A) restricted disallowance to 20%, based upon submissions advanced by assessee. Ld.CIT(A) observed that claim of depreciation was only ₹ 10,67,828/-and disallowance on maintenance of cars should be restricted to cars actually used by directors, sum of ₹ 4,19,262/-and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid by Piyush Steels was refunded back. He submitted that details of payment refunded has been placed at page 139-143 of paper book. Further placing reliance upon page 241 of paper book, Ld. Counsel submitted that confirmation issued by Piyush Steels dated 22/02/2014, shows outstanding balance payable by assessee as on 01/04/09. 10.2. He submitted that section 41 (1) cannot be applied to the facts of present case as there is no situation of liability in the hands of assessee. 10.3. Ld.DR submitted that Ld.Counsel in his written submissions has submitted that all the amount was refunded back and therefore there is no question of limitation of liability and closing balance as on year ended on March, 2010 was also repaid in next year through banking channels. He submitted that Ld.CIT (A) rightly observed that assessee has not filed any details regarding transaction between assessee and Piyush Steels to be genuine. 10.4. Ld.DR placed reliance upon observations of Ld.CIT (A). 11. We have perused submissions advanced by both sides in light of records placed before us. 11.1. It is the contention of assessee that advance from Piyush Steel Limited was an old advance for purchase of ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 40 A (2) has to be charged on reasonableness of expenditure having regard to fair market value of goods/services or facilities for which payment is made. It is also observed by various Courts that reasonableness of expenditure must be seen from the viewpoint of a businessman and not from the viewpoint of tax authorities and onus lies upon Assessing Officer to show that payment was excessive or unreasonable. In the facts of present case, authorities below has not cited any instances based upon which it can be ascertained that payment made by assessee was excessive and/or unreasonable. Ld.AO has not placed on record any instances of a job work carried out in respect of similar product as that of assessee to be a yardstick to form belief that payment made by assessee was excessive and/or unreasonable. Under such circumstances and after going through detailed evidences filed by assessee in the paper book, we are not in agreement with observations of authorities below and addition made deserves to be deleted . 13.2. Accordingly this ground raised by assessee stands allowed. 14. Ground No. 13-14 is in respect of addition of sum of ₹ 64,02,705/-, on account of alleged undisclosed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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