9911796707
TMI Blog2023 (2) TMI 905X X X X Extracts X X X X X X X X Extracts X X X X ..... ecord to vindicate the bonafides of outstanding liability on account of trade payables as claimed, we see no traction in the plea of the Assessee. We are rather persuaded by the contentions raised on behalf of Revenue. We are thus dis-inclined to interfere with the findings of Assessing Officer and CIT(A). Disallowance of expenses being 20% of other expenses - HELD THAT:- AO was within its power to estimate the disallowances under such circumstances, in discharge of its quasi-judicial function. The action of the Assessing Officer in making estimations thus cannot be dubbed as asymmetric or beset with any illegitimacy. The CIT(A) resonated with the action of the AO and concurred with the same owing to failure of the Assessee yet again to substantiate the claim. It will be wholly speculative for the tribunal to displace the quantum of estimations by some lower amount and say that estimate arrived by revenue under such gross circumstances was excessive or otherwise. We are in no position to weigh or modify the estimations as urged on behalf of the assessee on the basis of some abstract explanations offered on behalf of the assessee. AO has arrived at an estimate of disallowanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der in haste. Further, the Ld. CIT(A) has erred in not providing sufficient time considering that the Appellant was in the process of collecting various evidences such as withholding tax documents/ information from the jurisdictional TDS officer which were crucial evidence to substantiate its claims made in the appeal. 6. That the Ld. AO ignored the fact that the Circumstances were beyond the control of the Appellant due to which the required data / documents could not be submitted in time. 7. The dismissal of appeal by the Ld. CIT(A) is erroneous and unjustified. 8. That on facts and in the circumstances of the case and in law, the Ld. AO erred in initiating penalty proceedings under section 271(1)(c) of the Act, as not adjudicated by the Ld. CIT(A). 3. When the matter was called for hearing, the ld. counsel submitted that Grounds No.1, 2, 5 and 8 are not pressed. Consequently, these grounds are dismissed as not pressed. 4. Ground No.3 concerns adhoc disallowance of expenses of Rs.4,68,30,034/- being 20% of other expenses. 5. Briefly stated, the assessee-company is a subsidiary of Serco Group PLC, UK incorporated in India on 27.02.2006. The company was st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... balance of the sundry creditors. 7. Aggrieved by the additions made, the assessee preferred appeal before the CIT(A). 8. The CIT(A) however confirmed the estimated disallowance of expenses as well as additions under Section 68 on account of sundry creditors observing that the assessee has failed to furnish any satisfactory explanation or evidence about the incurring of expenses as well as the increase in the sundry creditors during the year. 9. Further aggrieved by the denial of any relief, the assessee preferred appeal before the Tribunal. 10. When the matter was called for hearing, the ld. counsel submitted that two main issues are involved for adjudication. 10.1 The Ld. Counsel adverted to first issue towards additions under Section 68 of the Act amounting to Rs.1,87,03,731/- being difference between opening balance and closing balance of creditors and contended that (i) factually, there is no new credit obtained and the sundry creditors outstanding at the end of the year are genuine and arose in the ordinary course of business. The trade payables at the beginning of the FY 2013-14 i.e. 1-4-2013 stands at Rs.21,17,67,393/- whereas the trade payable at the end of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with increase in rates of power and fuel. The ld. counsel further pointed out that the assessee company has taken office premise on lease and part of that has been sub-let to other parties wherein it derived income from sub-letting aggregating to Rs.243.63 lakh. Thus, the rent expenses claimed in other expenses Rs.666.06 actually works out to Rs.422.43. Moreover, such expenses on rent are normally fixed in the earlier years and similar rent expense of Rs.657.86 was incurred. The ld. counsel also quipped that TDS have been deducted on various expenses appearing under the head other expenses at applicable rates which re-enforces the claim of expenses being reasonable and genuine and incurred wholly and exclusively for the business purpose of the assessee company. 10.3 The ld. counsel harped that the Board of the assessee company in its resolution dated 27.08.2014 decided to close down the operations of the company in a foreseeable future as disclosed in the notes annexed to the financial statement. Thereafter, all the shares of the assessee-company were sold by the Serco Group to other entities namely, M/s. Travel Time Car Rental Pvt. Ltd. (TTCRPL) and Mahalaxmi Automotives P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd thus urged for reversal of the action of the Revenue Authorities. 10.5 In the alternative, the Ld. Counsel submitted that the disallowance made by the Assessing Officer @ 20% of the other expenses is unreasonable and excessive especially keeping the fact that TDS has been deducted on the major portion of the expenses and the payments have been made through banking channel. Further, out of rent expenses incurred, the assessee has earned income from sub-letting and loss incurred on account of foreign currency transactions also needs to be kept in mind. It was thus urged that the estimated disallowance, if any, should be curtailed and brought at a reasonable level. 11. The ld. DR for the Revenue, on the other hand, relied upon the order of the CIT(A) and the Assessing Officer. In furtherance, the ld. DR submitted that ample opportunities were given to the assessee to substantiate the genuineness of the creditors and also staggering amount claimed under the miscellaneous head other expenses . As can be observed from the assessment order, the Assessee has grossly failed to provide even the basic details about the nature of expenses claimed and merely wanted the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound to produce the full records which he does not claim even today to be in any position to do so. Thus, the course adopted by the Assessing Officer was most liberal and benign in the context of the circumstances. The abstract explanation offered by the assessee thus cannot be given any credence to topple the rightful action of the Assessing Officer and CIT(A). 11.3 As regards the assertions made on behalf of the assessee towards bad debts, foreign exchange fluctuation loss and rent etc., the ld. DR pointed out that each expense need to be seen in the context and acceptability of such claim is squarely a question of fact. In the absence of records, it is not known whether the bad debts claimed are in relation to business or otherwise. The claim of bad debt is subject to conditions enumerated in S. 36(1)(vii) r.w.s 36(2) of the Act. In order to claim the bad debt, such debt must go to swell the profits of the Co. and should arise in the course of ordinary business and thus each and every debt is not allowable. The onus in this regard is neither discharged nor ascertainable. Likewise, exchange fluctuation loss claimed by the assessee under the head other expenses also requires ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usion that no interference with the orders of Revenue Authorities are called for. 12. We have carefully considered the rival submissions and perused the first appellate order and the Assessment order. We have also perused the material and documents referred to and relied upon in the course of hearing by both sides. The additions/ disallowance made on two counts are in question namely (i) estimated disallowance of Rs.4,68,30,034/- being 20% of other expenses amounting to Rs.23,41,50,172/- in the absence of any substantiation of such expenses whatsoever and (ii) additions under Section 68 amounting to Rs.1,87,03,731/- being increase in the sundry creditors reported qua the previous financial year resulting from lack of explanation on nature and source of such increased credits. 13. The details of other expenses provided as per Note No.21 of the Audited Financial Statements are noted as under: Sl. No. Particulars Amount for the year ended 31.03.2014 (Rs.) Amount for the year ended 31.03.2013 (Rs.) 1 Power Fuel 3,80,41,461.00 1,08,87,689.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iably, multiple opportunities were given by the AO in this regard. In fact, on being inquired by the Bench, the assessee has continued to express its inability to do so even today claiming custody of records with old management and incapacity of new management to substantiate the claim. 16. On a similar footing, it is noticed that the bona fides and correctness of outstanding trade payables is not evidenced by any material available on record. The assessee has tried to prove its claim circumstantially in the absence of the foundational records citing peculiar circumstances of change of management. Before the CIT(A) also, the assessee had attempted to file certain documents to support its case circumstantially and without possession of any clinching evidence. 17. As observed, the assessee has entered into a Share Purchase Agreement which resulted in transfer of management and control from the one set of shareholders to the new set of shareholders namely M/s. TravelTime Car Rental Private Limited and M/s. Mahalaxmi Automotives Private Limited. The agreement runs into 44 pages punctuated by 24 clauses and sub-clauses duly numbered. The consideration involved for transfer of shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue, Clause No.7.1 of the Share Purchase Agreement gives an impression that the new management has duly obtained the financial records and naturally satisfied with its correctness prior to entering into any agreement of such magnitude. Such clause of the agreement runs contrary to the stand of the assessee towards non-availability of records. As contended, the assessee has deftly stonewalled the enquiry and investigations by such non-production of records by such craven excuses. 17.3 Thus, the story propounded on behalf of the assessee towards its inability to produce the books of account defies rationale and is utterly unconceivable and unbelievable and hence rejected. 18. In the absence of any records, the AO cannot be faulted in making estimations of possible disallowances towards nonbusiness purposes and other count. The explanation of the assessee to justify the genuineness of other expenses claimed without any cogent support material has no leg to stand. It is for the assessee to corroborate the entries in the financial records with documentary evidences when called for. Merely because similar expenses have been incurred in the earlier year by itself can be no grou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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