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TMI Blog2023 (7) TMI 1144X X X X Extracts X X X X X X X X Extracts X X X X ..... nue. Payment of lease rent - Addition made as assessee has not been able to prove with evidence that this expenditure has in fact been incurred in the first place - CIT(A) allowed the appeal of the assessee on the ground that the assessee has furnished copies of lease deeds, where complete names, addresses and other details of lease transactions are appearing - HELD THAT:- We observe that even before us, the assessee has not furnished any bank statement reflecting that the aforesaid payment was made to the lessor. Though, copies of lease deeds have been furnished and cheque details have also been furnished on plain paper, and it has been further submitted that all payments towards lease rents were paid through banking channels, however, the assessee has not been able to produce copies of bank statement evidencing that the payments have in fact been made to the lessor. Since the assessee has not been able to furnish copy of bank statement to substantiate that lease payments have been made to the lessor, the addition is liable to be sustained. Decided in favour of revenue. Provision for various expenses - Addition made as no documentary evidence has been submitted by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue to horizontal method of accounting being forwarded by the assessee. However, no further independent enquiry was made by ld. CIT(A). Accordingly, in the interest of justice, the matter is being restored to the file of Assessing Officer to carry out the necessary verification to ascertain whether there is any difference in stock or whether owing to the horizontal method of presentation followed by the assessee, there is no difference in actual terms, as asserted by the assessee. Disallowance on account of interest payment - AO added the above sum on the ground that the assessee gave no explanation for obtaining the loan or the utilization of aforesaid fund - HELD THAT:- On going through the records, it is observed that the assessee had taken loan from Bank of India amounting to Rs. 5.84 crores on which interest was paid by the assessee. There is no specific allegation regarding the genuineness of loan taken or that and further the ld. CIT(A) made a specific observations that this loan had been taken from earlier years. However, we observe that while as per the assessee, he has furnished a bank statement to prove payment of interest, however, the contents thereof are not legib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rve that that the assessee has not furnished any documentary evidence with respect to clearing and forwarding charges. Though, we observe that the ld. CIT(A) did not pass speaking order while confirming the addition, but the assessee has also not filed any supporting whatsoever either before the AO or before ld. CIT(A) and also before the Assessing Officer in remand proceedings to support the genuineness of the aforesaid claim. Liquidity damages - CIT(A) confirmed the addition on the ground that assessee has been unable to demonstrate that the liquidity damages are not a capital expenditure and are not on account of purchase of any capital asset - HELD THAT:- Apart from the explanation furnished by the assessee that the liquidity damages are on revenue account since they pertain to shortage and quality difference on material supplied, the assessee has not furnished any other supporting evidence such as correspondences exchanged with M/s. P G Godrej Ltd. for final settlement of invoice, invoices for goods supplied to M/s P G Godrej Ltd. and further no confirmation of the party was also placed on record at any stage before the Revenue Authorities as well as before us - Thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases are being taken up together. We shall first take up Department s appeal for assessment year 1997- 98. 3. The Department has raised the following grounds of appeal:- 1. The Ld. CIT(A) has erred in admitting additional evidence, without subjecting it to the test of Rule 46A. 2. The Ld.CIT(A) has erred in law and on facts in deleting the addition of Rs. 22,49,990/- as unexplained investment in capital assets, without properly appreciating the facts of the case and the material brought on record. 3. The Ld.CIT(A) has erred in law and on facts in deleting the disallowance of Rs. 16,97,925/- made by the AO on account of without properly appreciating the facts of the case and the material brought on record. 4. The Ld.CIT(A) has erred in law and on facts in deleting the disallowance of Rs. 15,09,258/- made by the AO on account of provision of various expenses, without properly appreciating the facts of the case and the material brought on record. 5. The Ld.CIT(A) has erred in law and on facts in deleting the disallowance of Rs. 23,83,022/- made by the AO on account of interest payments, without properly appreciating the facts of the case and the materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade addition of Rs. 22,49,990/- on account of unexplained investment in capital assets on the ground that the assessee has not been able to prove that investments in the said asset have in fact been made and source thereof has also not been explained. 8. In appeal, ld. CIT(A) allowed the appeal of the assessee primarily on the ground that the Assessing Officer has not found any defects in the books of accounts and in the assessee s books, auditors have not mentioned any adverse comment in the audit report. 9. Before us, the ld. Departmental Representative submitted that from the perusal of the order passed by ld. CIT(A), it is evident that there is no basis for allowing the appeal of the assessee with respect to this ground of appeal. In response, the counsel for the assessee relied upon the observations made by the ld. CIT(A) in the appellate order. 10. Before deciding the issue, it would be useful to produce the relevant extracts of the order passed by ld. CIT(A) for reference. 9.2.1 Regarding the addition of Rs. 22,49,990/- as unexplained investment in capital assets, the correct figure is Rs. 11,78,831/- and not Rs. 22,49,990/- as mentioned by the AO. These assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve that even before us, the assessee has not furnished any bank statement reflecting that the aforesaid payment was made to the lessor. Though, copies of lease deeds have been furnished and cheque details have also been furnished on plain paper, and it has been further submitted that all payments towards lease rents were paid through banking channels, however, the assessee has not been able to produce copies of bank statement evidencing that the payments have in fact been made to the lessor. Since the assessee has not been able to furnish copy of bank statement to substantiate that lease payments have been made to the lessor, the addition is liable to be sustained. 16. In the result, ground no. 3 of the Department s appeal is allowed. Ground No. 4 (Ld. CIT(A) erred in deleting the disallowance of Rs. 15,09,258/- on account of provision for various expenses) 17. The brief facts in relation to this ground of appeal are that the assessee had made provision for various expenses amounting go Rs. 15,64,126/- and the Assessing Officer had disallowed the entire provision of Rs. 15,64,126/- in the assessment order. 18. In appeal, the ld. CIT(A) substantially allowed the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 91,29,369/- (Schedule 17 of audited accounts). Hence the same cannot be disallowed once the learned A.O. has not found any defects in books of account and similarly auditors have also not pointed out any anomalies. The addition is deleted and the assessee gets relief of Rs. 9,88,622/-. 23. On going though the records of the case, we observe that the aforesaid amount was disallowed by the Assessing Officer on specific ground that no documentary evidence has been filed by the assessee in support of the claim. Further, from perusal of the order passed by ld. CIT(A), it is observed that ld. CIT(A) has not given any basis whatsoever for allowing the assessee s appeal with respect to provision for power expenses amounting to Rs. 9,88,622/-. Accordingly, in the light of the above facts, the relief allowed by the CIT(A) with respect to unpaid power bills is directed to be set aside, since the assessee has failed to produce any evidence to substantiate the claim. 24. In the result, ground no. 4 of Department s appeal is partly allowed. Ground No. 5 (Ld. CIT(A) erred in deleting disallowance of Rs. 23,83,022/- on account of interest payments) 25. The brief facts relating to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r affording relief to the assessee. The assessee had not filed any documentary evidence giving details of communication address of the parties to whom interest was paid nor were any details filed as evidence to show actual payment of interest to the aforesaid three parties. Accordingly, looking into the instant facts of the case, the relief granted by the ld. CIT(A) to the assessee with respect to this ground of appeal is directed to be set aside. 29. In the result, ground no. 5 of Department s appeal is allowed. Ground No. 6 (ld. CIT(A) erred in deleting disallowance of Rs. 50,44,504/- on account of stock difference) 30. The brief facts in relation to this ground of appeal are that during the course of assessment, the assessee was asked to explain its stock difference amounting to Rs. 50,44,504/- debited to the profit and loss account. However, in absence of any reply by the assessee, the Assessing Officer made an addition of the aforesaid amount and added the same to the total income of the assessee. 31. In appeal, the counsel for the assessee submitted that the assessee has prepared its profit and loss account in horizontal format. Under this format, as per the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f facts relating to this ground of appeal are that during the course of assessment, the Assessing Officer observed that the assessee had claimed bank interest expenses amounting to Rs. 1,15,75,698/-. However, the Assessing Officer added the above sum on the ground that the assessee gave no explanation for obtaining the loan or the utilization of aforesaid fund. 36. In appeal, the assessee submitted that it had paid interest to banks on various credit facilities as per copes of bank statement submitted to the Assessing Officer during the course of assessment proceedings. It was submitted that these bank accounts are not new loans and that they are continuing from earlier years. Further, it was submitted that the Assessing Officer has not made any adverse observation to the effect that the bank loans taken by the assessee are non-genuine. Accordingly, the assessee is eligible for deduction of bank interest expenses. Accordingly, the CIT(A) allowed the appeal of the assessee with respect to this ground of appeal with the following observations:- 19.2 I have carefully considered submission of the appellant as well as the observation of the A.O. From the audited Balance sheet sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) ought not to have confirmed the aforesaid disallowances. With respect to disallowances/additions confirmed by ld. CIT(A) Ground No. (i) 1,14,211/- 41. The brief facts with respect to this ground of cross objection is that during the course of assessment, the Assessing Officer observed that the assessee has not been able to prove with evidence details of addition in respect of fixed assets as claimed and accordingly the Assessing Officer disallowed claim of depreciation amounting to Rs. 1,14,211/- and added the same to the total income of the assessee 42. In appeal, the ld. CIT(A) confirmed the addition on the ground that assessee could not prove the use of these assets for business purpose. 43. Before us, the counsel or the assessee invited our attention to pages 20-24 of the paper book giving details of addition to fixed assets. The counsel for the assessee submitted that primarily depreciation has been claimed on purchase of new vehicle during the impugned assessment year. Accordingly, it was submitted that ld. CIT(A) erred in confirming the addition without appreciating the facts placed on record. 44. On going through the details placed on record, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the income of the assessee. 50. In appeal, the ld. CIT(A) upheld the disallowance on the ground that the assessee has not been able to substantiate the contentions from audited accounts. Further, the assessee has also not furnished details of contract for purchase from the foreign party to substantiate the genuineness of the claim. 51. Before us, the counsel for the assessee submitted that the aforesaid foreign exchange fluctuation loss was in respect of bank guarantee furnished by the assessee in respect of purchase contract with a Singapore party. The assessee drew our attention to page 99 of the paper book in which details of foreign fluctuation have been explained. 52. On going through the records of the case, we observe that the assessee has not furnished any supporting details viz. copy of bank guarantee, copy of purchase contract with Singapore party etc. to substantiate the claim of foreign exchange to substantiate the genuineness of the claim. This fact has also been correctly observed by the ld. CIT(A) while upholding the addition. Accordingly, we find no infirmity in the order of ld. CIT(A) so as to call for any interference. 53. In the result, ground no. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfirmed the addition, however, no reason whatsoever has been given in the order as to on what basis the aforesaid addition was confirmed. Notably, there is no discussion with respect to clearing and forwarding expenses in the order passed by ld. CIT(A) 60. On going through the case records, we observe that that the assessee has not furnished any documentary evidence with respect to clearing and forwarding charges. Though, we observe that the ld. CIT(A) did not pass speaking order while confirming the addition, but the assessee has also not filed any supporting whatsoever either before the Assessing Officer or before ld. CIT(A) and also before the Assessing Officer in remand proceedings to support the genuineness of the aforesaid claim. 61. Accordingly, ground no. 1(v) of assessee s cross objection is dismissed. Ground No. 1(vi) liquidity damages (Rs. 7,91,427/-) 62. The brief facts relating to this ground of cross objection are that during the course of assessment proceedings, the Assessing Officer requested the assessee to furnish details of liquidity damages amounting to Rs. 7,91,427/-. In absence of any details having been furnished by the assessee, the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough the records of the case, we observe that no details of miscellaneous expenditure have been furnished by the assessee at any stage before the Revenue Authorities. No details with respect to miscellaneous expenditure (breakup of miscellaneous expenses or any supporting documents) were furnished either before the Assessing Officer or before ld. CIT(A) during the course of appellate proceedings. Therefore, the Revenue Authorities did never got an opportunity to examine the nature and/or genuineness of the aforesaid claim, and further no details with respect to miscellaneous expenditure have also been furnished before us as well. Accordingly, in the interest of justice, the matter is being restored to the file of Assessing Officer to enable the assessee to file necessary details with respect to miscellaneous expenditure incurred by the assessee along with supporting documents in support of its claim. 71. In the result, ground no. 1(vii) of assessee s cross objection is allowed for statistical purposes. ITA No. 415/Ahd/2016 filed the Department 72. This appeal filed by the Department against the deletion of levy of penalty u/s. 271(1)(c) of the Act on the ground that si ..... X X X X Extracts X X X X X X X X Extracts X X X X
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