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TMI Blog2023 (12) TMI 626X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is a running account with these parties held by the assessee. CIT(A) has relied on various decisions of Apex Court as well as various High Courts and ultimately deleted the above addition. Considering the fact that the A.O. has failed to discharge the preliminary onus and has made the addition in summary manners, in our considered opinion, the CIT(A) has committed no error in deleting the addition of Rs. 20,00,37,558/- made u/s 41 of the Act. Accordingly, we dismiss the Ground No. 1 of the Revenue. Disallowance of 50% of handling charges - Since the opening outstanding was added by the A.O., he was of the opinion that the amount is not being paid to party expenses during the year are also treated as not genuine and 50% of the same has been disallowed - CIT(A) deleted addition - HELD THAT:- Since, the Assessee was following Mercantile System of Accounting and not on cash basis, the expenses cannot be disallowed merely on the basis of nonpayment to the vendors. It has been observed by the CIT(A) that the A.O. has not brought on record any material or evidence to show that the expenses claimed are not genuine or the expenses have not been incurred for the purpose of business. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 40A(2)(b) - increase of Director s remuneration - A.O. on perusal of employees benefit expenses found that there is increase in expenses from Rs. 4,72,44,155/- to Rs. 5,15,49,744/- while there was a reduction in total revenue of the assessee from 71.09 crore to 45.39 crore - HELD THAT:- It is found that the assessee had given no explanation before the A.O. regarding increasing the remuneration of Directors but during the first appellate proceedings, the assessee made elaborate submission and the CIT(A) observed that there is an increase of Directors remuneration as the Directors have been given rent free accommodation and the landlord has increased the rent during the year and the perquisite value of the land free accommodation has been duly shown in ITR filed by the Directors. The said fact has not been brought to the notice of the A.O. and the same has been left without examining by the A.O. Therefore, we remand the issue involved in Ground No. 6 to the file of the A.O. for fresh adjudication with a direction to the assessee to substantiate its claim by providing the evidence. - SHRI N. K.BILLAIYA, ACCOUNTANT MEMBER AND SHRI YOGESH KUMAR U.S., JUDICIAL MEMBER For the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt order dated 09/12/2018, the assessee preferred an appeal before the CIT(A), the Ld. CIT(A) vide order dated 22/01/2019 partly allowed the Appeal filed by the assessee. Aggrieved by the order of the CIT(A), the Department of Revenue preferred the present Appeal on the grounds mentioned above by challenging the deletion of additions. 5. Ground No. 1 is regarding deletion of addition of Rs. 20,00,37,558/- made by the A.O. u/s 41 of the Act. The ld. Ld. Departmental Representative by relying on the assessment order submitted that the CIT(A) has committed error in deleting the addition of Rs. 20,00,37,558/- made by the A.O. u/s 41 of the Act. Per contra, the Ld. Assessee's Representative relying on the finding and order of the CIT(A) submitted that the Ground No. 1 of the Revenue is devoid of merit and the same is deserves to be dismissed. 6. We have heard both the parties and perused the material available on record. During the assessment proceedings, the assessee was asked to furnish comparative details of the balances of trade payables for last three years in a tabular form along with particular and also to submit confirmation letters from the Creditors. The assessee fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Delhi ITAT in the case of Smt. Sudha Loyalka, New Delhi vs Ito, in ITA No. 399/Del/2017, in which it has been held (after discussing various decisions of the Apex Court as well as various High Courts) that- 6. If addition has been mentioned u/s 41(1), ingredients of section 41(1), the burden of proof which is resting on revenue in view of the following judicial decisions has not been discharged. 6.1 There is no evidence that the liability has ceased to exist and that too in the year under appeal. The very fact these amounts are being shown as payable in the balance sheet of the assessee go to establish that there was no cessation of the liability as held in the following judicial decisions:- 6.2 Impugned liabilities are very much payable by the assessee as and when demanded and unless it is demanded, these are bound to be shown as outstanding. The very fact that these liabilities are appearing in the balance sheet is a strong acknowledgement of the debts payable by the assessee as has recently been held in the case of CIT vs Tamilnadu Warehousing Corporation 292 ITR 310(Mad). It has also been held in the case of Ambica Mills Ltd vs CIT 54 ITR 167 (Guj) that lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s is evident from a plain reading of the assessment order. Therefore, Ld. A.O. miserably failed to discharge the said burden in view of the following decisions and therefore this addition is liable to be deleted on this Short ground alone. There could very well be the possibility of the loan creditors or advances from the business constituents under the head of sundry creditors for which there could never be any claim of deduction having been allowed. 6.6 The A.O. has not established with evidence that the liability in respect of the above outstanding balances has ceased to exist. AO has gone on presumption and that too by placing the burden wrongly on the shoulders of the assessee. Section 41(1) does not envisage any such presumption of cessation and fix the incidence of tax thereon. 6.7 In the absence of any material having been brought on record to establish that the deduction was claimed or credit balance has been remitted, addition cannot be made u/s 41(1) in view of the following decisions: Steel and General Mills Co. Ltd vs CIT 96 ITR 438(Del) CIT vs Nathubhai Desha Bhai 130 ITR 238 (MP) Liquidator, Mysore Agencies P Ltd vs CIT 114 ITR 853(Karn) K.V. Moos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r considered opinion, the CIT(A) has committed no error in deleting the addition of Rs. 20,00,37,558/- made u/s 41 of the Act. Accordingly, we dismiss the Ground No. 1 of the Revenue. 8. Ground No. 2 is regarding deletion of addition of Rs. 2,27,64,303/- made by the A.O. on account of disallowance of 50% of handling charges. 9. The Ld. Departmental Representative relying on the observations made in the assessment order submitted that the CIT(A) committed error in deleting the addition. Per contra, the Ld. Assessee's Representative by supporting the findings and conclusion of the CIT(A), submitted that the Ground No. 2 of the Revenue is devoid of merit and the same is liable to be dismissed. 10. Heard. During the assessment proceedings, the assessee submitted purchase ledger summary showing Rs. 35,67,25,274/-(under various heads) debited in P L account as cost of services. The assessee reported to have incurred Rs. 4,55,28,607/- towards handling charges and copy of the ledger account shows that the said amount is payable to Consultancy and Investment Services-Moscow. Since the opening outstanding was added by the A.O., he was of the opinion that the amount is not bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d amount has been repaid. In the absence of any material on record, that the amount has been repaid the CIT(A) has committed error in deleting the addition. 13. The Ld. Assessee's Representative relying on the findings of the CIT(A) submitted that the bank statement has been duly uploaded on the e-portal and the copy of the statement was also furnished before the A.O. but the same has not been considered by the A.O. and the CIT(A) has rightly deleted the addition. 14. Heard both the parties. The Ld. A.O. observed that the Director, Sh. Naveen Rao has given loan of Rs. 2.45 crores to the assessee, when A.O. asked to furnish the evidence regarding the said loan, the assessee submitted the acknowledgment of ITR and confirmation was also filed, but the assessee has not filed copy of the bank statement of Naveen Rao, therefore, the A.O. made the addition u/s 68 of the Act. It is the case of the assessee that the bank statement has been duly uploaded on the e-portal and also furnished the copy to the A.O. which has not been considered by the A.O. during the assessment proceedings. It is not clear as to whether the CIT(A) while deleting the addition has actually verified the ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt income, therefore, we find no error or infirmity in restricting the disallowance u/s 14A of the Act to the amount of dividend income i.e. Rs. 2,52,128/- and the balance disallowance has been rightly deleted by the CIT(A). Thus, we find no merit in Ground No. 5 of the Revenue, accordingly Ground No. 5 of the Revenue is dismissed. 20. Ground No. 6 is regarding deletion of increase of Director s remuneration of Rs. 53,90,000/- the Ld. Departmental Representative relying on the assessment order and submitted that no explanation has been forwarded by the assessee for increase of the remuneration of the Directors, the order of the CIT(A) in deleting the addition is erroneous and the same is liable to be reversed. Per contra, the Assessee's Representative relying the findings of the CIT(A) sought for dismissal of Ground No. 6 of the Department. 21. Heard the parties. During the assessment proceedings, the A.O. on perusal of employees benefit expenses found that there is increase in expenses from Rs. 4,72,44,155/- to Rs. 5,15,49,744/- while there was a reduction in total revenue of the assessee from 71.09 crore to 45.39 crore. Since the increase in employee benefit expenses wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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