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2018 (8) TMI 1631 - AT - Income TaxReopening of assessment - limitation period - requirement of obtaining sanction U/s 151 - Held that:- From the plain reading of Section 150(1) of the Act, it is clear that it begins with non-obstante clause as far as the limitation provided U/s 149 of the Act and therefore, Section 150(1) has an overriding effect on Section 149 and not over Section 151 - requirement of sanction U/s 151 of the Act is in the nature of check and balance and it is a measure against the misuse of power by the assessing authority for assessment or reassessment based the reasons not found satisfactory by the authorities provided U/s 151 - Accordingly, when the Assessing Officer admittedly issued notice U/s 148 after the four years from the end of the assessment year and without obtaining the sanction U/s 151 then such notice issued U/s 148 is in violation of provisions of Section 151 of the Act and consequently the same is invalid and the entire reassessment proceedings stand vitiated. Hence, we hold that the reopening of the assessee is not valid and the same is quashed. Disallowance of interest paid on unsecured loans - AO disallowed claim on the ground that the loan itself were found to be unexplained and addition was made U/s 68 of the Act in the earlier years and therefore, the claim of interest being consequential to the claim of unsecured loans which was disallowed in the earlier year - Held that:- Since this is a consequential issue to the issue of unsecured loans treated as unexplained cash credit by the Assessing Officer in the earlier year, accordingly, we set aside this issue to the record of the Assessing Officer for quantifying the amount of disallowance of interest if any after considering the addition made U/s 68 of the Act attend finality in the earlier assessment years. Accordingly, this ground of appeal is allowed for statistical purposes only. Addition of contract receipt as unaccounted income - Held that:- As AR of the assessee has now referred to the sale bills in support of his claim, however, we find that after expiry of about 10 years and in absence of books of account as well as other supporting evidence, this fact cannot be verified even from the government offices for want of relevant record preserved by the government offices after expiry of such a long period. Hence, in the facts and circumstances when the assessee did not produce books of account as well as other evidence in support of its claim that this amount of ₹ 7,68,966/- is part of the sales recorded in the books, then we do not find any reason to interfere in the orders of the authorities below qua this issue. Hence, this ground of assessee’s appeal is dismissed Unaccounted income - addition on account of interest income which accrued to the assessee from the debtor but the assessee has not included said amount in the return of income - Held that:- We find that undisputedly the assessee is following mercantile system of accounting and therefore, it is not permitted to follow the cash system of accounting only for a particular income when all other income are recognized by following the mercantile system of account. Hence, in view of the admitted position and as per the audit report the assessee is following mercantile system of accounting and the interest on unsecured loan given by the assessee duly recognized by the debtor and became due to the assessee then the same would be considered as income of the year under consideration. Hence, we do not find any error or illegality in the orders of the authorities below qua this issue. Hence, this ground of assessee’s appeal is dismissed. Addition on account of various expenses - Held that:- There is no dispute that the assessee has not produced books of account as well as supporting vouchers for the expenditure booked in the P&L account. Though, the expenditure debited to the P&L account may not be excessive, however, the assessee is under obligation to establish that the said expenditure was incurred wholly and exclusively for the business of the assessee. In absence of any supporting evidence, there is a clear default on the part of the assessee to prove the case that the entire expenditure was incurred wholly or exclusively for the purpose of business of the assessee. Hence, in the facts and circumstances of the case, when the ld. CIT(A) has already restricted the disallowance to ₹ 50,000/- as against of ₹ 1,00,000/- made by the Assessing Officer, we do not find any reason to interfere in the order of the ld. CIT(A)
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