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2015 (7) TMI 684 - AT - Income TaxAddition made as unexplained cash credit u/s 68 - Held that:- A conclusion can be drawn that the assessee was never asked to produce the creditors. If the department had any doubt with regard to the genuineness of the transaction or creditworthiness of the creditors, they should have made proper enquiry and brought positive material on record to establish such fact. More so, when not only the identity of the creditors are available with the department, but their income tax particulars are also submitted by the assessee. The department could have also made enquiry with regard to the source of the money advanced as it was through proper banking channel and could have ascertained whether there is a nexus between the unaccounted income of the assessee and the money advanced. Without any such enquiry, the department cannot be permitted to treat the credit as unexplained income of the assessee on mere presumption and surmises or solely relying upon the entries made in the books of account showing the credit as share application money. In the aforesaid facts and circumstances, the assessee having proved the credits by establishing the identity of the creditors, genuineness of the transaction and creditworthiness of the creditors, through proper documentary evidence, he is not required to prove any further. Therefore, on overall consideration of facts and materials on record, we are of the view that no addition under section 68 of the Act can be made in the present case - Decided in favour of assessee. Unexplained credit under section 68 - Held that:- If the A.O. had any doubt with regard to the creditworthiness, he should have made proper enquiry with the concerned person to find out whether they had the capability to advance the amount to the assessee. The material on record demonstrate that A.O. without making any enquiry has made the addition merely on presumption and surmises. In case of trade credits also assessee has established the identity of the creditors by furnishing confirmation letters containing their name, address, income tax particulars etc. The entire transaction is through proper banking channel, thereby, proving its genuineness. Lastly, all creditors are income tax assessees which prove the source of credits. Therefore, following our detailed reasoning in paragraph Nos.13 to 13.3 in case of share application money, which also equally applies to the trade creditors, we delete the addition of ₹ 6,23,24,518. However, in respect of three creditors viz., Palomi Estates, Zisanuddin and others for a total amount of ₹ 28,69,185, it is a fact on record that assessee has neither furnished any confirmation letters nor any other evidence to establish the identity of the creditors, their creditworthiness and genuineness of the transaction. Therefore, in absence of any evidence submitted by assessee to prove the credits for the aforesaid amount, addition to the extent of ₹ 28,69,185 is sustained. - Decided partly in favour of assessee. Disallowance of interest expenditure claimed - Held that:- The primary contention of the assessee is that the investments made are out of surplus fund and no interest bearing fund has been utilized. In our view, the aforesaid facts require verification since if there is no nexus between the investment made and the borrowed fund, then, no disallowance can be made. As these aspects are not examined by either A.O. or learned CIT(A), we are inclined to remit the matter back to the file of A.O. to verify and take a decision in the matter, after giving due opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes. Disallowance made under section 40(a)(ia) - Held that:- The primary contention of the assessee since the entire interest amount is paid during the relevant previous year and nothing remained payable, no disallowance under section 40(a)(ia) can be made is acceptable. As held by the ITAT, Vizag Special Bench in the case of Merylin Shipping and Transport (2012 (4) TMI 290 - ITAT VISAKHAPATNAM), no disallowance under section 40(a)(ia) can be made if the entire amount was paid during the relevant previous year and nothing remained payable. The Hon’ble Allahabad High Court also in case of CIT vs. Vector Shipping Services P. Ltd., [2013 (7) TMI 622 - ALLAHABAD HIGH COURT] expressed similar view. Therefore, following the aforesaid decisions, we direct the A.O. to verify and allow the deduction claimed, if it is found that the entire amount was paid during the relevant previous year and nothing remained payable. - Decided in favour of assessee for statistical purposes. Disallowance as bad and doubtful debts written off - Held that:- As could be seen the A.O. while completing the assessment, has disallowed assessee’s claim of bad and doubtful debts by observing that the assessee has failed to prove that the debt has become irrecoverable. However, on going through the provision of section 36(1)(vii) read with sub-section (2), it is very much clear that the only condition which are required to be satisfied are, it must have been shown as income in the earlier assessment year and it is actually written off in the books of account. There is no necessity on the part of the assessee to prove that the debt has become irrecoverable. Therefore, keeping in view the clear statutory provision, we direct the A.O. to verify these aspects and allow the deduction claimed by the assessee.- Decided in favour of assessee for statistical purposes. Disallowance of fee paid for increase of share capital - Held that:- Assessee did not challenged the disallowance before the Ld. CIT(A) but has chosen to challenge the same before us through an additional ground. However, on going through the facts and materials on record as well as principle of law on the issue, we agree with the view of the A.O. that the fee paid to ROC for increasing authorized share capital is a capital expenditure, hence, cannot be allowed. - Decided against assessee. Disallowance of employees contribution to ESI and PF - assessee has not remitted the employees contribution to PF and ESI within the prescribed date as mentioned in section 36(1)(va) - It is the contention of the assessee that the employees contribution to ESI and PF though, was not paid within the due date as prescribed under section 36(1)(va) but such dues having been paid before the due date of filing of return of the income as prescribed under section 139(1), the amount is allowable as a deduction as per the provisions of section 43B. We find merit in the aforesaid submissions of the assessee - Held that:- There are a number of judicial precedents on this issue wherein it is held that if the employees contribution to PF and ESI is paid within the due date of filing of return of income under section 139(1), then, the amount is allowable as a deduction in view of the provision of section 43B. In view of the afore said, we delete the addition of ₹ 2,07,209 - Decided in favor of assessee.
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