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TMI Blog2024 (3) TMI 722X X X X Extracts X X X X X X X X Extracts X X X X ..... vouchers produced by the assessee. Thus there is no need to sustain the lumpsum disallowance of Rs. 5 lac. We derive support from the case of ACIT Vs. Ganpati Enterprises Ltd. [ 2013 (12) TMI 1097 - ITAT DELHI] where in held that The findings extracted nowhere reveals what was the total amount of expenditure claimed by assessee, which specific voucher was not in accordance with law. In a just sweeping statement, AO observed that on verification, some of the expenses were found to be unverifiable, but what were those expenses, he should make out in the assessment order, only then he can disallow them. Therefore, the said disallowance was to be deleted. Ground no. 1 raised by the assessee is allowed. Addition of interest against interest free loans - as argued assessee has sufficient non-interest bearing fund available in the books of accounts - HELD THAT:- Assessee has sufficient non-interest bearing funds to give advance to its members and the interest received is more than the interest paid. Thus, as respectfully following the finding recorded by Reliance Industries Ltd. [ 2019 (1) TMI 757 - SUPREME COURT] wherein it has been held that Tribunal having found that the interest free ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -. The case was selected for limited scrutiny and notice u/s. 143(2) issued on 31/08/2015 was duly served. Due to change of incumbents fresh notices u/s. 143(2) were also issued and duly served. In response to these notices and notice issued u/s. 142(1), alongwith questionnaire, AR of the assessee appeared from time to time and furnished written submissions. Books of accounts Bills and vouchers produced were also test checked for the related issues. The appellant AOP is a Royalty Toll Plaza contractor. As per information furnished by the AR of the assessee to the AO the AOP was formed on 28/02/2013 and the F.Y 2013-14 is the first year of its business operation. 3.1 During the course of assessment proceeding the ld. AO noted that the assessee declared the net profit of Rs. 5,03,351/- on Total receipts of Rs. 130,79,67,909/- (This receipts also includes Rs. 1,06,99,465/- interest on FDRs, Rs. 7,405/- as profit from Mutual fund Rs. 7,750/- Profit from others). NP rate comes to 0.04% only. During the course of assessment proceedings the assessee was asked to justify the reasons for Low NP. In compliance of this, the AR of the Assessee, vide his submission dated 15/11/2016. The assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der consideration. The AO has disallowed Rs. 5,00,000/- out of expenditure of Rs. 129,76,39,335/- made by the appellant on account of non-verifiable nature of the evidences furnished by the appellant. The AO has mentioned in the order that self made slips or kachhe bills issued by local traders are furnished during the assessment proceedings. As per order the issue has been discussed with the AR and the AR of the appellant stated that due to the nature of work, it is true that some expenses were booked on the basis of slips provided by the employees and kachhe bills provided by the local small traders. The AO noted that in the absence of proper bills the geniuses of these expenses claimed could not be verified. The appellant argued that the AO has not pointed out particular bill or voucher. The argument of the appellant is not acceptable in view of the acceptance made by the AR of the appellant before the AO. The arguments of the appellant are considered but it is found that the AR of the appellant accepted that due to the nature of work, it is true that some expenses were booked on the basis of slips provided by the employees and kacche bills provided by the local small traders. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rse of assessment proceedings observed that n.p. rate declared by the assessee at 0.04% is very low. Assessee has explained various reasons for low np. However from the bills and vouchers produced it was noted that some vouchers of expenses are supported only by self-made slips or kaccha bills issued by local traders. Therefore in the absence of proper bills the genuineness of the expenses could not be verified. Accordingly he made lump sum disallowance out of expenses at Rs. 5,00,000/-. 3. The Ld. CIT(A) at Para 4.3 of its order held that the contention of the assessee that AO has not pointed out particular bill or voucher which is not genuine is not acceptable as the assessee accepted that due to nature of work, some expenses were booked on the basis of slips provided by the employees and kaccha bills provided by local small traders. Accordingly he uphold the lump sum disallowance made by the AO. 4. It is submitted that against the contract receipt of Rs. 129,72,53,289/- (123,39,72,642 + 6,32,80,647) assessee has claimed expenditure of Rs. 125,89,68,900/-. Apart from this other expenditure of Rs. 3,86,70,435/- was claimed as per the details given at Page 3 of the assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat it is not open to the department to adopt a subjective standard of reasonableness and disallow a part of business expenditure as being unreasonably large, or decide what type of expenditure the assessee should incur and in what circumstances. Thus, the jurisdiction of the Assessing Officer is only confined to decide Profits and gains of business or profession , i.e., whether the expenditure claimed was actually and factually expensed or not and whether it was wholly and exclusively for the purpose of business. Reasonableness of the expenditure can be considered only from this limited angle for the purpose of determining whether in fact amount was spent or not. Arthur Anderson Co. Vs. ACIT 2010-TIOL-416-ITAT-Mum In this case it was held that the very concept of token disallowance is bad in law because such a disallowance is inherently based on surmise conjectures and devoid of a legally sustainable foundation. It is a case where one accepts all the contentions but not the consequences flowing from accepting the same. This cannot meet our approval. No particular information has been called for by the AO nor has the AO pointed out any deficiency in the details furnished by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO. 3. It is submitted that assessee has non-interest bearing fund in the form of its members capital account amounting to Rs. 31.96 crores on which no interest has been paid. This is evident from the Balance Sheet filed before Ld. CIT(A) (copy enclosed).As per the Balance Sheet advance to members others is Rs. 17,51,22,278/- which comprises of advance to mining department Rs. 16,50,62,278/- and to AOP members Rs. 1,00,60,000/-. The amount of Rs. 1,00,60,000/- infact represents the withdrawal of capital by the AOP members but for accounting convenience it is shown as advance to AOP members instead of debiting it to their capital account. Further the assessee has earned interest income of Rs. 1,06,99,465/- which is more than interest paid of Rs. 59,38,425/- as evident from the P L A/c (copy enclosed). Thus assessee has sufficient non interest bearing funds to give advance to its members and the interest received is more than the interest paid. Hon ble Supreme Court in case of CIT Vs. Reliance Industries Ltd. (2019) 175 DTR 1 has held that Tribunal having found that the interest free funds available to the assessee were sufficient to meet its investment, it could be presumed tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s doubts about the genuineness of the expenses and therefore, he deem it fit to make the lump sum disallowance out of expenses at Rs. 5,00,000/-.The assessee carried this disallowance before the ld. CIT(A). The ld. CIT(A) held that the contention of the assessee that AO has not pointed out particular bill or voucher which is not genuine is not acceptable as the assessee accepted that due to nature of work, some expenses were booked on the basis of slips provided by the employees and kaccha bills provided by local small traders and therefore, he sustained the lump sum disallowance made by the AO. 8.1 Before us the ld. AR of the assessee argued that against the contract receipt of Rs. 129,72,53,289/- (123,39,72,642 + 6,32,80,647) assessee has claimed expenditure of Rs. 125,89,68,900/-. Apart from this other expenditure of Rs. 3,86,70,435/- was claimed as per the details given at Page 3 of the assessment order. Out of it the expenditure on installment, finance charges, bank interest and royalty collection charges amounts to Rs. 129,47,16,171/-. This constitutes 99.80% of the contract receipt. These expenditures are paid to the Government or are otherwise through banking channel. After ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the contention of assessee that it received interest free capital contribution from the members of the AOP is not supported by the evidence and assessee did not provide evidence to prove that advance was made wholly and exclusively for business purpose and thus he confirmed the disallowance made by the AO. Before us it is submitted that that assessee has non-interest bearing fund in the form of its members capital account amounting to Rs. 31.96 crores on which no interest has been paid. This is evident from the Balance Sheet filed before Ld. CIT(A).From the same balance sheet it is also evident that advance to members others is Rs. 17,51,22,278/- which comprises of advance to mining department Rs. 16,50,62,278/- and to AOP members Rs. 1,00,60,000/-. The amount of Rs. 1,00,60,000/- infact represents the withdrawal of capital by the AOP members but for accounting convenience it is shown as advance to AOP members instead of debiting it to their capital account. Further the assessee has earned interest income of Rs. 1,06,99,465/- which is more than interest paid of Rs. 59,38,425/- as evident from the P L A/c. Thus, assessee has sufficient non-interest bearing funds to give advan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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