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2017 (2) TMI 850 - AT - Income TaxRejection of books of accounts - G.P. addition - assessee did not produce itemwise quantitative details, did not file proper evidence to prove the rejection of material, overall lower GP rate of 8.65% as against 13.92% and some other mistakes relating to improper valuation of closing stock at higher value and alteration in purchase bills - Held that:- There are certain facts which are undisputedly accepted by the Revenue which are that assessee’s books of accounts are audited u/s 44AB of the Act and as per Tax Audit Report assessee is maintaining register for purchase and sale, bank book, cash book, VAT register, journal register. Tax Audit Report also shows the quantitative details of goods traded by the assessee. Assessee also demonstrated with the copy of accounts of M/s Siddharth Enterprise, Chennai that rejection of material was genuine. The quantum of value of purchase and sale has not been disputed as they were fully vouched. Also when the commission income is not considered for calculating gross profit rate then the real picture of the business of trading of packing material shows that assessee has a better gross profit of 6,88% as against 4.68% of preceding year coupled with a better turnover figure of ₹ 3,35,60,936/- as against turnover of Financial Year 2007-08 at ₹ 2,09,28,595/-. This is a known fact that commission income is a indirect income which normally forms part of profit and loss account and, therefore,trading figures (excluding commission) shows that assessee has an improved gross profit rate. Thus on discussion made above wherein assessee is regularly maintaining books of account which are audited, regular returns under VAT have been filed, no major defect in the quantum of purchase and sale has been observed, quantitative details of closing stock as on the year end has been furnished, details of rejection of material duly provided before the lower authorities and above all a better turnover and improved gross profit, action taken by ld. Assessing Officer rejecting books of accounts is held to be incorrect. We, therefore, accept the trading results of the assessee and delete the impugned addition - Decided in favour of assessee Disallowance of interest expenses and processing charges relating to funds borrowed from financial institutions - whether personal loans taken by assessee are for the purpose of business or not and secondly if they are for the purpose of business then whether disallowance is called for u/s 40(a)(ia) of the Act for non-deduction of TDS? - Held that:- Matter needs to be reexamined by the Assessing Authority specifically for the loans taken during financial year 2008-09 and assessee is required to supply necessary information and supporting evidences to prove that personal loans taken from non banking financial institutions during Financial Year 2008-09 have been utilized specifically for the purpose of business and not for personal purposes. AO has also to examine all expenditure for interest claimed with specific details of interest paid on personal loans and housing loans and if expenses include interest paid on home loan to Reliance Capital or others the same needs to be disallowed. As far as other personal loans taken during the year, if ld. Assessing Officer is satisfied that they have been utilized for the purpose of business then with regard to disallowance u/s 40(a)(ia) of the Act for non-deduction of TDS. Issue is now well settled in the case of CIT vs. Ansal Landmark Townships Pvt. Ltd. (2015 (9) TMI 79 - DELHI HIGH COURT) observing that the insertion of second proviso inserted by the Finance (No. 2) Act, 2004.to Section 40(a)(ia) is declaratory and curative in nature and it has retrospective effect from 1st April, 2005,and to be given retrospective effect and to be applied in the cases where TDS has not been deducted on the payments but expenses should be allowed if assessee is able to prove that the payee also has included the receipt from assessee in the return of income and paid due taxes. Accordingly ld. Assessing Officer may ask the assessee to furnish a certificate of Chartered Accountant as well as copies of income-tax returns of the alleged financial institutions which can prove that interest paid by the assessee has been included in their income. As regards processing charges is concerned they will be allowed only in respect of personal loans utilized for business purposes which will depend on the result of the fresh examination to be carried out by the Assessing Officer as discussed in the preceding paragraph.matter set aside for reconsideration Association expenses - whether he said expenditure is admissible deduction U/s 30 to 37? - Held that:- Undisputedly receipts submitted relating to expenses of ₹ 79,000/- do not have the name of assessee. Further payments made relate to Financial Year 2006-07, 2007-08, flat transfer fees etc. which have been paid to Shri Harshad R. Shah, Bhavna K. Gor and, Shantaben B. Shah. We further observe that the audited balance sheet of the assessee filed on 31.3.2009 under the head ‘fixed asset’ there is no office building shown rather at sl.no. 9 of the schedule houseresidence is shown at ₹ 3,38,380/- and at sl.10 investment in residence at flat no.603 is shown at Rs…20,45,927/- It seems that assessee has paid the impugned expenses of ₹ 79,000/- with relation to the residence at flat no.603 and the expenses also relates to common maintenance, electricity charges etc. In the given facts of the case as well as receipts of the impugned expenses it is very well evident that assessee has miserably failed to prove that the impugned expenses of ₹ 79,000/- has been made towards business expenditure no concrete evidence has been placed before the lower authorities and even before us. We, therefore, are of the view that ld. Assessing Officer has rightly disallowed the association expenses - Decided against assessee. Addition on account of transportation charges - Held that:- Assessee has not tried to place material evidence in a proper way before both the lower authorities which could have been easily done because assessee’s accounts are audited and assessee is strongly supporting the same. Certainly when information were not available with the adjudicating authorities it is very hard to verify the genuineness of the expenditure and the same has happened in this case also. We also observe that facts relating to this ground are varying since the assessment proceedings then before the first appellate authority as well as in the additional evidence examined by the ld. Assessing Officer. As a result of this variation in facts, adjudication of the issue is not materializing to a correct finding. We, therefore, are of the view that this issue of transport expenses needs to be examined afresh by the ld. Assessing Officer on the basis of documents and details to be provided in totality by the assessee. Needless to mention a proper opportunity of being heard to be given to the assessee before adjudication. This ground is allowed for statistical purposes. Denial of claim U/s 80GGC for payment to a political party namely Lok Jan Shakti party - Held that:- We are really very surprised to observe that the above receipts which totaled to ₹ 3,51,000/- paid in cash to Lok Janshakti Party are paid in Financial Year 2009-10 relevant to Asst. Year 2010-11 whereas assessee has claimed deduction for Financial Year 2008-09 relevant to Asst. Year 2009-10 showing that payment in cash of ₹ 3,51,000/- has been made on 31.3.2009. It is very strange that the deduction which has been claimed for Financial Year 2008-09 the corresponding payment has been made in 2009-10 and ever since the assessment proceedings assessee is giving different submissions along with other evidences. In the given facts and circumstances of the case wherein the impugned payments of donation have been made in Financial Year 2009-10 evidenced by the receipts issued by the political party whereas claim has been made for Financial Year 2008-09 we are of the considered view that assessee is not eligible for any deduction u/s 80GGC of the Act - Decided against assessee
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