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TMI Blog2019 (9) TMI 1600X X X X Extracts X X X X X X X X Extracts X X X X ..... ly based upon suspicion and presumptions whereas the assessee has proved by way of evidence in the form of copy of balance sheet, ledger account, confirmations/affidavits from the parties who made the refunds. - Decided in favour of assessee. Allowability of Staff Welfare Expenses - addition as made by the AO for providing food to the employees during the office hours in the Ramzan month as not been incurred for the business of the appellant - HELD THAT:- Assessee being a follower of Muslim religion has to incur these expenses in order to motivate the work force - assessment order and the appellate order were passed in a cryptic manner without bringing any facts on record to prove that these were personal expenses of the Directors. The addition was made purely on the basis of grey work of the AO - CIT(A) also upheld the same observing that expenses were incurred in a disproportionate ration and not reasonable. Even if for a moment, if we go by the theory of the Revenue authorities that the expenses are not reasonable, even then the total disallowance is not justified - addition made by the AO is not correct and needs to be reversed.- Decided in favour of assessee. Addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 04 to 2009-10 on 29.01.2010. The assessee complied with the notice while filing return of income for the current year on 04.03.2010, declaring income of ₹ 1,15,45,250/- During the course of assessment proceedings, the Assessing Officer asked the assessee to furnish information about receipt of cash exceeding ₹ 20,000/- specifically with regard to the refund of advance payment made for purchase of land. The assessee could not furnish any details/evidence to prove the receipt of cash refund and, accordingly, the cash received from Shri Mehmudbeg Umergeb Mirza of ₹ 5,51,000 and Shri Amirbeg Umergeb Mirza of ₹ 5,80,000/- was held to be unexplained cash credit u/s. 68 and added to the income of the assessee. 4. In the appellate proceedings, the learned CIT(A) also dismissed the appeal of the assessee after calling for a remand report from the Assessing Officer on various evidences filed by the assessee during the appellate proceedings in the form of confirmation letters from the parties who refunded the advance, their affidavits, etc. The Assessing Officer filed a remand report before the CIT(A) by stating that the said refund of advances were not genuine a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of which it is claimed that refund is received has the same survey no. as the land which was purchased as per appellant's submission. Since the appellant paid the two parties by cheque, it is clear that they had bank accounts. Why did not they return the amount by way of cheque? Why was cash deposited on 14 dates each of amount less than ₹ 50,000/- which is the limit for which insist on PAN? After carefully considering the documents on record and the by assessing officer and also keeping in view the explanation furnished by the appellant, the amount of ₹ 11,31,000/- deposited in cash is treated as unexplained cash credit u/s. 68 of the I.T.Act. This addition is upheld and the ground of appeal no.8 is dismissed. 5. After hearing both the parties and perusal of the material on record, we observe that in this case, assessee has entered into purchase agreements for which the assessee has paid advance to two persons viz. Shri Mehmudbeg Umergeb Mirza of ₹ 5,51,000 and Shri Amirbeg Umergeb Mirza of ₹ 5,80,000/- As per the facts on record, we observe that the land deal did not materialize and the said money was refunded on various dates by depositin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of ₹ 2,86,686/- was expenses to the appellant company. There is nothing to indicate that this incurred specifically on the employees of the appellant company. The allocation of expenditure does not necessarily prove that the expenditure is incurred for the business of the appellant company. Each company may have contributed to reimburse and expenditure incurred for the same does not mean that the expenditure is for the purpose of appellant's business. There are no details available as to the number of employees of the appellant company, the number of employees who are Muslims and the reasonableness of the claim of the expenses. From the copy of audited accounts, it is noted that in AY 200809 the total expenses on employees is shown as ₹ 73 lakhs. Out of this, salary is ₹ 27 lakhs, bonus ₹ 5 lakhs and gratuity ₹ 1.5 lakhs. As against this, the staff welfare expenses claimed is ₹ 18.32 lakhs and staff welfare educational benefit ₹ 15.31 lakhs. Under the head festival expenses Nil is shown. In the following assessment year 2009-10, the staff welfare expenses is only ₹ 2.84 lakhs. The expenses are clearly way out of proportion of ov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 153A read with section 143(3) of the Act. In this case, the assessment was completed at ₹ 1,26,61,978/- as against the return of income of ₹ 1,04,99,380/- by making an addition of ₹ 21,62,598/- on account of alleged discrepancies in stock in trade. During search, the search party has undertaken a physical verification of stocks in trade as on the date of search and according to the search party there was difference between book stock and physical stock. Accordingly, the AO called upon the assessee to give reconciliation of its stock in trade which was submitted by the assessee vide letter dated 18.11.2010 and 14.12.2010. The reconciliation as filed by the assessee is reproduced as under: LOCATION EXCESS PHYSICAL STOCK AMOUNT (Rs.) EXCESS BOOK STOCK AMOUNT (Rs.) BORSAD 4,97,920/- 19,11,742/- KHANPUR 1,94,855/- NIL KASARI 6,03,913/- 36,64,605/- VISHNOLI 4,365/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase. The Ld. A.R. submitted that assessee carries on its operation from four locations namely Borsad, Khanpur, Kasari and Vishnoli. The assessee has a system of preparing Management Information System (MIS) Reports whereby regularly the physical stock verification at different locations is undertaken and MIS reports are prepared. The procedure for such physical verification of stock generally takes about a week or so. However, the search party completed the physical verification at all four locations within a span of 12 - 14 hours. Because of this reason, there is every likelihood that there may be mistakes on the part of search party. Further, no incriminating documents were found during search and addition has been made solely of account the difference in stock as worked out by the search party and as per the Appellant. The difference in stock as worked out by the search party and as per the Appellant is mainly because of the following reasons : a. After the Tobacco is purchased, the same is checked at the factories and process report is prepared. The stock is taken in books only after the process report is prepared. In Annexure - 1 to Appellant's letter dated 24th Dece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of his arguments: 1. CIT vs. Balaji Wire Pvt. Ltd. (Delhi High Court) (304 ITR 693) 2. CIT vs. Utkal Alloys Ltd. (Orissa High Court) (319 ITR 339) 3. Radhey Shyam Tanwar vs. ACIT (Jodhpur ITAT) (77 TTJ 505) 4. Lakshmi Energy Food Ltd. vs. ACIT (Chandigargh ITAT) (2014) 44 taxmann.com 248 5. Mehra Art Palace vs. DCIT (Delhi ITAT) (2001) 114 Taxman 201 (Delhi Mag.) 15. The Ld. D.R., on the other hand, relied heavily on the order of Ld. CIT(A) and AO and submitted that there existed factual discrepancies in the inventories of the assessee physically as well as, as per the records maintained by the assessee and therefore the addition has rightly been made by the AO and affirmed by the Ld. CIT(A). 16. We have heard the rival submissions of both the parties and perused the material on record. In this case, we find that the assessee is operating from four locations as mentioned hereinabove and has the system of Management Information System in place for accounting of its inventories. The assessee has filed reconciliation explaining the discrepancies in the stocks as noted by the search party. The assessee has also filed before us the various d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argy on the part of the officers of the Revenue. 21. Under these circumstances, we are of the opinion that the Tribunal rightly came to the conclusion that the alleged excess stock calculated by the Revenue needs to be deleted. It is, of course, not possible today to redetermine the stock so the question of any remand does not arise. Similarly the Orissa High Court in the case CIT Vs Utkal Alloys Ltd (supra0 by following the Delhi High court in the case CIT Vs Balaji Wire Pvt Ltd 304 ITR 393 has deleted the addition by holding that assessee can not be made to suffer from the lethargy of the officers of the revenue when the search party did not find any incriminating evidences. 17. Under these facts and circumstances we are inclined to set aside the order of CIT(A) in view of the ratio laid down by the various High Courts and direct the AO to delete the additions of ₹ 13,01,053 on account of excess stock and ₹ 8,61,545/- on account of GP margin on excess of book stocks over physical stocks. The appeal of the assessee is allowed. 18. Resultantly both the appeals of the assessee are allowed. Order pronounced in the open court on 03.09.2019 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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