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2013 (1) TMI 185 - AT - Income TaxPayments to private parties liable to TDS - Non business expenditure - addition by AO as said sum of Rs.18.79 crores was not expended wholly and exclusively for the purposes business - CIT(A) deleted the addition - assessee’s claim of reimbursement of the said amount from its clients - Held that:- Assessee received the said payment of Rs.18,79,38,741 on account of reimbursement of expenses from its clients apart from agency commission and the agency commission has been considered as assessee’s income and the same is reflected in its profit and loss account. Assessee has adjusted reimbursement of the expenses received on behalf of its clients and, therefore, agreeing that the same do not constitute part of assessee’s income. As decided in Jay Kay Freighters Pvt Ltd (2013 (1) TMI 167 - ITAT NEW DELHI) that the amount mentioned in the bill raised by shipping companies on ultimate consumer were initially paid by the assessee and, thereafter assessee got reimbursed the said amount from its client including the charges of the assessee for service rendered. Therefore, assessee was not a person responsible for deduction of tax at source in terms of section 194C, accordingly, provisions of section 40(a)(ia) cannot be invoked - in favour of assessee. Bad debts written off - disallowance as assessee could not demonstrate that debts which have been claimed as bad debts has actually become irrecoverable - Held that:- As per existing provisions of section 36(1)(vii), after amendment w.e.f. 1.4.1989, it is not necessary for the assessee to prove that the amount written off as bad debt is indeed bad for the purpose of allowance under section 36(1)(vii) as decided in TRF Ltd Vs CIT [2010 (2) TMI 211 - SUPREME COURT] - in favour of assessee. Addition on account of share premium amount - AO on statement of Shri George Joseph and relying on the statement made u/s.133A at the time of survey considered the issuance of share capital as bogus and not genuine - Held that:- assessee filed copies of requisite details viz; copy of share application form from each of the above named four applicants’ along with copy of board resolution, their bank statement giving particulars of cheque nos. and the amount debited from their accounts, as also copy of confirmation letters. Assessee has also filed the copy of the income tax return of each of the applicants evidencing that they are assessed to tax establishing their identity. Assessee has also filed copy of the certificate of incorporation and the Memorandum and Article of Association in the paper book, thus not only proving the identity of the share applicants but also established the creditworthiness of the share applicants and the genuineness of the transactions. The CBDT in its Instruction dated 10.3.2003 stated that confessions, if not based upon credible evidence, are later retracted by the concerned assessee and, therefore, such confession during the course of search and seizure and survey operations do not serve any useful purpose. The CBDIT also advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income tax Department. Also while recording statement during the course of search & seizure and survey operation, no attempt should be made to obtain confession as to the undisclosed income - as decided CIT vs. S.Khader Khan son (2007 (7) TMI 182 - MADRAS HIGH COURT) and Paul Mathew & Sons vs CIT (2003 (2) TMI 25 - KERALA HIGH COURT ) that no addition can be made or sustained simply on the basis of statement recorded at the time of survey/search. Therefore, there should be some material to co-relate the undisclosed income with such statement. Thus said statement made at the time of survey on 23.2.2006 cannot be the sole basis for making the addition by treating the issuance of share at a premium of Rs.8000 as bogus. Thus as assessee has furnished details of share application with PAN No. and bank statement. Further, said share applicants have also filed confirmation letters mentioning bank details to make the payment to assessee company for allotment of shares it can be concluded that transactions are admittedly recorded in the books of account both by the assessee company as well as aforesaid share applicants - no addition on account of unexplained cash credit is warranted - the action of AO is contrary to the decision of Hon’ble apex Court in the case of Lovely Exports (2008 (1) TMI 575 - SUPREME COURT OF INDIA) - in favour of assessee.
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