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2017 (5) TMI 680 - AT - Income TaxAddition of unexplained cash credit - Held that:- In the case of Rajendra Bahadur Singh huge cash was deposited i.e ₹ 5,00,000/- on 20.7.2009 which was stated to be kept in the house of the assessee out of tuition receipts whereas in the case of Sarojini Thakur ₹ 9,00,000/- on 18.7.2009 which was stated to be out of agricultural income kept in the house. We also find that in these cases the assessees were not government employees and not filing any return of income for the reasons that they are eiher deriving income which was below the taxable income or from agriculture which we find is not convincing and satisfactory. In case of remaining ₹ 3,00,000/-, we find that the assessee has proved genuineness of the transactions, creditworthiness and identity of the creditor. In our opinion, the order of the ld.CIT(A) in sustaining the entire addition of ₹ 17 lakhs is not correct as the assessee has produced the necessary documentary evidences regarding ₹ 3 lakhs. Whereas the source of ₹ 14 lakhs is full of doubts and cannot be accepted. In view of this facts, we are inclined to uphold the addition to the extent of ₹ 14 lakhs only by deleting the remaining the addition of ₹ 3 lakhs. In the result, the appellant gets relief of ₹ 12,35,000/- and the addition of ₹ 14 lakhs is sustained. This ground is partly allowed. Disallowance of commission expenses and audit fees - non deduction of tds - Held that:- We find merit in the submissions of the AR that the TDS was deducted from the commission payment and audit fee and duly paid in the government treasury before the due date of filing the income tax return u/s 139(1) of the Act as is evidenced by the receipt placed. In our view, the matter is requires verification at the end of the AO and therefore it would be reasonable and fair if the matter is restored back to the file of the AO for verification of claim of the assessee. Accordingly the AO is directed to allow the claim of the assessee if found correct as per law. Grounds of appeal no.2 and 3 are allowed for statistical purposes. Addition of 25% of the labour charges paid to brother of the assessee treating - addition u/s 40A(2)(b) - Held that:- The authorities below have failed to point out any unreasonability or excessiveness viz-a-viz all the labour charges paid to Dhirendre T Singh vis-à-vis prevalent market rate in order to make disallowance under section 40(2)(b) of the Act. In is necessary that the AO must record satisfaction regarding the payments made to the related persons that the same is unreasonable or excessive having regard to the prevailing market rate for the said services rendered by the later party. In our opinion, the disallowance made by the AO on adhoc basis and confirmed by the FAA by just stating that the total labour charges are nominal in relation to the turnover of the assessee and was disallowed for want of evidence and reasonability. In our opinion, this cannot be the ground for making disallowance u/s 40(2)(b). - Decided in favour of assessee. Disallowance of expenses pertaining to car expenses, credit chares, hotel expenses, petrol, telephone expenses and travelling expenses - Held that:- The expenses disallowed by the ld.CIT(A) is excessive and is on higher side. In our opinion, it would be reasonable if the disallowance is restricted to 7.5% of the total expenses as against 15% confirmed by the FAA. Accordingly, the AO is directed to make disallowance to 7.5% of the total expenses. This ground is partly allowed in favour of assessee. Enhancement of the income u/s 41(1) - cessation of liability - Held that:- The assessee has shown sundry creditors and advances from sundry debtors in the balance sheet on liability side. We further find that the assessee has suomotu written back an amount of Rs. ₹ 7,04,240/- in the assessment year 2011-12 which ceased to exist for which the trading liability has extinguished. In our opinion, the action of the ld.CIT(A) in making enhancement u/s 41(1) of the Act is contrary to the provisions of law in view of the fact when the assessee himself was showing the liability as existing on the balance sheet date and the ld. FAA has no locus standi to assess the income of the assessee under section 41(1) of the Act.- Decided in favour of assessee.
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