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TMI Blog2023 (9) TMI 537X X X X Extracts X X X X X X X X Extracts X X X X ..... he fact that the assessee had not submitted necessary documentary evidence to substantiate its allowability in accordance with the provision of section 37(1) of the Income Tax Act, 1961. 2. Whether on the facts and in the circumstances of the case, the Ld. CIT-(A) justified in restricting disallowance from 20% to 10% made on account of vehicle and telephonic expenses by A.O, without appreciating the fact that the assessee had failed to establish that the said expenditure had been incurred only exclusively for business purpose? 3. Whether on the facts and the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition on account of unsecured loans of Rs. 3,52,75,000/- without appreciating the fact that assessee has failed to establish the identity, genuineness and creditworthiness of the lenders as required under the provisions of section 68 of the IT. Act? 4. Whether on the facts and the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the disallowance of interest of Rs. 39,01,339/- on loan of Rs. 3,52,75,000/- ignoring the fact that the assessee has failed to establish the identity, genuineness and creditworthiness of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the corresponding interest paid is unaccounted income of the assessee. Accordingly, a sum of Rs. 3,91,76,339/- was added to the total income of the assessee company. 6. Aggrieved by the order of Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A), who has allowed the appeal of the assessee, observing as follows: "Ground No. 5 & 6 pertains to unsecured loan received from 19 parties of Rs. 3,52,75,000/- and interest claimed of Rs 39,01,339/-. The appellant has received loan through account payee cheque and has paid interest to all the parties (except 1 party namely Aumgene Biosciences Pvt. Ltd. wherein the loan is taken as well as repaid during the year in short span). All the parties are assessed to tax and TDS is also duly deducted on the interest paid. The appellant has also submitted account confirmation, contra confirmation, bank statement, balance sheet and the copy of the return of income with the computation of income (supra). Further the supporting documents filed during assessment proceedings are tabulated below: Sr. No. Name of the lender Whether confirmation filed? Whether ITR/Financial Statement and Bank statement filed? Whether o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and law. Hence, the addition made u/s 68 of Rs. 3,91,76,339/- is deleted which includes the unsecured loans of Rs. 3,52,75,000/- and the interest amount of Rs. 39,01,339/- and the ground of appeals 5 and 6 are allowed. 6. In the result, this appeal is partly allowed." 7. Aggrieved by the order of the Ld. ld. CIT(A), the Revenue is in appeal before us. 8. The Learned Departmental Representative (Ld. DR) for the Revenue submitted that on verification of the huge unsecured loan claimed of Rs. 3,52,75,000/-and its related interest payment up to Rs. 39,01,339/- it was noticed by the Assessing Officer that, the assessee has mainly taken loan from 19 parties in which most of the parties belongs to Kolkata, whose credentials are dubious. The assessee was asked to provide the necessary details as required under the section 68 of the Act to prove the bona fide of the transactions such as evidence regarding identity of the lenders, genuineness and creditworthiness of the transactions. However, the assessee has failed to produce the required details fully. The Assessing Officer has noticed that confirmation from lenders, contra account statement, ledger accounts etc. were not furn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts of the case including the findings of the ld. CIT(A) and other material brought on record. We note that all lenders are assessed to tax. The ITR of lenders are accepted by Department u/s 143(1) of the Act and even the interest income offered by them is subjected to tax which is duly paid and hence no adverse view is called for. The loans are taken through banking channels and interest is paid to all the lenders and on which TDS is deducted. There is no finding of cash deposit in bank account of the lenders. The Confirmation of all lenders were filed during assessment proceedings and no further enquiry were deemed necessary by the Assessing Officer. Out of the 19 parties, 13 parties are directors or their relatives or sister concern from whom the assessee had also taken loan in the past which was always accepted during scrutiny assessment of earlier years. The Assessing Officer has made addition u/s 68 of the Act because he has doubted the creditworthiness of the certain Pvt. Ltd. companies from whom assessee has taken loans. However, it is submitted that the said companies are NBFCs and hence their purpose of the business itself is granting of loans and hence the creditwo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tablish that these expenses were incurred exclusively for business purpose and also could not provide the necessary documentary evidences such as authentic bills/ vouchers which supports its claim. Further majority of the expenses were incurred in cash. Hence, the Assessing Officer has correctly disallowed 20% of such expenses, therefore, addition made by the Assessing Officer should be upheld. 14. On the other hand, ld Counsel submitted that expenses were restricted to 10% or deleted fully in earlier assessment years by ld CIT(A), therefore the same ratio is applicable to the current assessment year. The ld Counsel stated that ld CIT(A) has passed a reasoned and speaking order therefore, the same should be upheld. 15. We have heard both the parties and perused the materials available on record. We note that during sample verification of various direct and indirect expenses claimed by assessee in respect of the year under consideration, the claims of following expenses were not found to be entirely or adequately supported by documentary evidence: Sr. No. Details of Expenses Amount of Expenses (Rs.) 1 Cooly & Cartage Expense 26,77,135/- 2 Repairs & Maintenance Expense For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of Rs. 13,86,975/- being 20% of total expenses of Rs. 69,34,877/-. On perusal of details submitted by the appellant and the scrutiny assessment of AY 2011-12 and AY 2010-11, it is observed that: no additions were made in respect of cooly & cartage, repairs & maintenance expenses others, repairs and maintenance for building and general expenses. However, the disallowance of 20% was made in case of travelling expenses which was reduced to 10% only by the Id. CIT(A) in preceding A.Y. Further, the Chart submitted by appellant expressing the expenses as percentage of turnover shows that there is no inflation in expenses and the same are in lines with earlier year. Considering the same, disallowance of travelling expenses is reduced to 10% being Rs. 13,765/- out of Rs. 1,37,658/- and the total disallowance in respect of other expenditures of Rs. 13,59,445/- are held to be incurred for the purpose of business and are allowed. The ground of appeal is partly allowed. The ground of appeal- Ground No. 3 pertains disallowance of Rs. 86,595/- on account of vehicle expenses. The appellant has placed reliance on the decision of Honourable Gujarat High Court in case of Sayaji Iron & Engg. Co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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