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TMI Blog2021 (11) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... 1990 - Infosys declared bonus shares and capital gain was earned on the sale of bonus shares. In this regard, the assessee has also placed copies of contract note, demat statement, statement of holding of Infosys shares in the paper book. After perusal of the detail filed by the assessee, it is clear that Assessing Officer has not taken into consideration the relevant submission along with copies of document filed by the assessee in support of his claim of long term capital gain on the sale of impugned shares. Therefore, we restore this issue to the file of the Assessing Officer for deciding de-novo after verification of the detail filed - Decided in favour of assessee for statistical purposes. Disallowance of bad debt - since the assessee has not offered the corresponding income in its books, therefore, claim of bad debt is not allowable - HELD THAT:- As per the agreement in case of non-recovery from such parties, the same will be recovered from the sub-broker. In this regard, the assessee has placed copy of debit not of Motilal Investment Services, statement of bad debt written off, copy of customer account from books of the assessee etc. After perusal of the aforesaid fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Based on the findings of Ld. CIT(A) in the preceding year Ld. A.O. without giving due consideration to the facts and submissions at assessment stage disallowed ₹ 2,69,784/-. Every assessment is independent. The said disallowance of expenses is bad in law and deserves to be quashed. 2 Disallowance of payment of Rent to specified persons 2,88,000/- Based on the finding of Ld. CIT(A) in the preceding year Ld. A.O. without giving due consideration to the facts and submission at assessment stage disallowed ₹ 2,88,000/-. Every assessment is independent. The said disallowance of expenses is bad in law and deserves to be quashed. Total ₹ 5,57,784/- 4. Looking to the opportunity for representing the defense your appellant preferred an appeal. 3. The fact in brief is that return of income declaring income of ₹ 65,370/- was filed on 11th October, 2013. The case was subject to scrutiny assessment and notice u/s. 143(2) of the Act was issued on 2nd Sep, 2014. The assessment u/s. 143 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt order. The assessee has explained the comparative prevailing rate and nature of rent and location of the premises etc on the basis of such rent were paid. The Assessing Officer has not accepted the submission of the assessee and stated that in the previous year also similar disallowance has been made, therefore, the Assessing Officer has restricted the payment of rent to the specified person as shown against each name as per table given below:- Name of the specified person Relationship with the assessee Nature of payment Amount paid in AY 2013- 14 Amount of rent proposed to be allowed Paras Gandhi Brother Rent 144000 84000 Purnima Gandhi Sister Rent 24000 18000 Rajshri Gandhi Sister in Law Rent 132000 72000 Rasilaben Gandhi Wife Rent 132000 72000 Gandh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities for which the payment is made or the legitimate needs of the business or profession of the assessee or the benefit derived by or accruing to him therefrom, so much of the expenditure as is so considered by him to be excessive or unreasonable shall not be allowed as a deduction. 8.3 A plain reading of the above provisions reveals that the disallowance under section 40A(2) can be made only when the AO is of the opinion that the payment made to the specified persons is excessive or unreasonable in comparison to the fair market value. In the case before us, the AO has not made any comparison of the salary paid by the assessee to the specified persons with the fair market value of such services. As such the AO has made the disallowance without making any comparison of the salary paid by the assessee with the fair market value. 8.4 We also note that almost similar salary was allowed by the assessee in the immediately preceding assessment year. In the year under consideration, the salary has slightly increased in comparison to the earlier year salary. Thus it is clear that the AO before making the disallowance of the salary has not considered the salary paid to these pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oking in the securities. It is the fact that the share market business is very much volatile and fluctuating. Thus nothing can be predicted for the profit or loss from such business. Therefore, the disallowance of salary expenses cannot be made in the event of a reduction in the business and profit of the assessee. 8.10 We also note that the assessee had explained the profile of all the specified persons before the learned CIT (A) and no defect of whatsoever was pointed out by him during the appellate proceedings. 8.11 In view of the above we are inclined to hold that the disallowance made by the AO was based only on the surmise and conjecture, without bringing any tangible material to justify that the salary was paid excessive and unreasonable. 8.12 Therefore, we reverse the order of authorities below. Accordingly we set aside the order of the learned CIT (A) and direct the AO to delete the addition made by him. Thus the ground of appeal of the assessee is allowed. On the issue of payment of rent, the operative para of the ITAT is reproduced as under:- 13.1 We have heard the rival contentions and perused the materials available on record. The issue i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere made or keeping in view the legitimate needs of the business of the assessee or the benefit derived by or accruing to the assessee therefrom. Be that as it may, we are of the considered view that in the absence of satisfaction of the basic condition for invoking of Sec. 40A(2)(a) by both of the lower authorities, the disallowance of 30% of the related party expenses i.e ₹ 38,87,705/- made under Se. 40A(2)(a) cannot be sustained . 14.5 In view of the above we hold that the AO has made the disallowance on his surmise and conjecture without bringing any evidence on record. Accordingly, we are not impressed with the finding of lower authorities in the given facts and circumstances. Accordingly, we set aside the order of learned CIT (A) and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed. Considering the decision of the ITAT as referred above, there is nothing before us on hand to differ from the issue raised in the case cited (supra) so as to take a different view on this issue. Therefore, since the issue is on hand have squarely covered following the principle of consistency, we find merit in the submission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... term capital gain on the sale of impugned shares. Therefore, we restore this issue to the file of the Assessing Officer for deciding de-novo after verification of the detail filed upon affording adequate opportunity to the assessee. Therefore, this ground of appeal of the assessee is allowed for statistical purposes. Ground No. 4 (Disallowance of bad debt of 3,31,070/-) 14. During the course of assessment, the Assessing Officer noticed that assessee has claimed bad debt of ₹ 3,31,070/- and stated Motila Oswal has debited the bad debt in assessee s account. In this regard, the Assessing Officer stated that assessee was a sub-broker of Motilal Oswal of Godra and his source of income was only brokerage received from M/s. Motilal Oswal. The Assessing Officer was of the view that since the assessee has not offered the corresponding income in its books, therefore, claim of bad debt is not allowable. Accordingly, the Assessing Officer has disallowed the claim of bad debt. 15. The assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee reiterating the facts as stated by the Assessing Officer. 16. During the course of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laimed that the same was out of the withdrawal made by the assessee in the three preceding years. However, the assessee failed to substantiate his claim with relevant supporting evidences, therefore, the Assessing Officer has added the same as unexplained to the total income of the assessee. 19. The assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee. 20. During the course of appellate proceedings before us, the assessee has reiterating the same submission that source of introduction of capital of ₹ 1,40,000/- was out of withdrawal made in the past three years. On the other hand, the ld. Departmental Representative has supported the order of lower authorities. 21. Heard both the sides and perused the material on record. The assessee has claimed that the source of addition to the capital account was out of withdrawal made in the past three years. However, the assessee has not furnished any relevant supporting evidences before the lower authorities. On this issue, we find that even during the course of appellate proceedings before us, the assessee has only furnished the copy of balance sheet of the assessee without a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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