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2019 (1) TMI 933 - AT - Income TaxAddition u/s 68 - creditworthiness of the respective parties from whom the assessee had received loans - Held that:- Though the assessee had placed on record the copies of the bank accounts of the respective lenders, however neither any effort had been put in either by the assessee to establish beyond doubt the creditworthiness of the said lenders, nor any such exercise had been embarked upon by the A.O. As the identity of the parties has been accepted by the CIT(A) and the same has not been assailed by the revenue before us, thus the same attains finality and is not dispute. The matter as regards the creditworthiness of the respective parties from whom the assessee had received loans aggregating to ₹ 2,14,92,800/- had not been proved, thus on the said count the issue requires to be revisited by the A.O The matter is therefore set aside to the file of the A.O, who is herein directed to readjudicate the genuineness and veracity of the loan transactions under consideration after making necessary verification as regards the creditworthiness of the lender parties. Needless to say, the A.O shall afford a reasonable opportunity of being heard to the assessee during the course of the set aside proceedings. Further, the assessee shall remain at a liberty to place on record fresh documentary evidence in order of substantiate the creditworthiness of the parties under consideration. The Ground of Appeal No. 2 & 3 are allowed for statistical purpose. Disallowance of Legal and Professional fees - Held that:- We are of the considered view that the aforementioned disallowance was carried out by the A.O not only for the reason that certain vouchers were not verifiable, but also for the reason that the assessee had failed to maintain any log book/record which could rule out incurring of any part of the aforementioned expenses for non business purposes. In the absence of irrefutable documentary evidence which could substantiate the claim of expense raised by an assessee, the assessing authority is left with no other option but in all fairness to disallow a part of such expenditure so claimed by the assessee. In the case before us, as the assessee had failed to maintain the log book/records, and had merely tried to support its claim of cash expenses on the basis of self made vouchers, thus we are of the considered view that the A.O not inspired by the said unsubstantiated claim of expenses by the assessee, had thus in all fairness disallowed 10% of such expenses leading to a consequential addition of ₹ 8,01,550/- in the hands of the assessee. We thus not finding any infirmity in the orders of the lower authorities, uphold the disallowed of 10% of the total expenses of ₹ 80,15,452/-. Disallowance of repairs and maintenance expenditure - Held that:- We though are in agreement with the observations of the lower authorities, that an expenditure which is in the nature of a “capital expenditure” cannot be allowed in the garb of claim of the same by the assessee as a revenue expenditure, but in the absence of any reference to any such “capital expenditure” of ₹ 1,00,000/- which had been claimed by the assessee as a “revenue expenditure”, we are unable to persuade ourselves to dislodge the aforesaid claim of expenditure so raised by the assessee. We thus, in the backdrop of our aforesaid observations delete the addition/disallowance of the repair and maintenance expenses and set aside the order of CIT(A) to the said extent. Disallowance u/s 41(1) - cessation or remission of liability - Held that:- A.O before inferring the cessation or remission of liability under Sec. 41(1) has however failed to verify as to whether any part of outstanding liability was discharged by the assessee in the succeeding years or not. On the basis of our aforesaid deliberations, we are of the considered view that the matters requires to be revisited by the A.O. A.O shall during the course of the set aside proceedings verify as to whether any part of the outstanding liability of ₹ 5,57,78,625/- as claimed by the assessee had been discharged in the succeeding years, or not. Further, the assessee is afforded an opportunity to place on record the confirmations from the respective parties and/or documentary evidence which could substantiate to the hilt that the said respective liabilities were outstanding as on 31.03.2010 and had neither ceased or stood remitted. In case the assessee fails to substantiate its claim in respect of the aforesaid liabilities, then the A.O shall remain at a liberty to assess it as the deemed income of the assessee under Sec. 41(1). Addition u/s 36(1)(va) - delay on the part of the assessee in depositing the amount of the employees contribution to ESIC and PF - Held that:- We find that though the assessee had made the payments towards employees contribution to provident fund and ESIC beyond the stipulated time period, however the said amounts were paid before the “due date” of filing of the return of income by the assessee under Sec. 139(1) of the Act. We are of the considered view, that now when the aforementioned amounts had been deposited by the assessee before the “due date” of filing of the return of income, thus no disallowance of the said amount was called for in the hands of the assessee. We find that the issue under consideration is squarely covered by the judgment of the Hon”ble High Court of Bombay in the case of CIT Vs. Ghatge Patil Transports Ltd. (2014 (10) TMI 402 - BOMBAY HIGH COURT). The Hon”ble High Court in its aforesaid order had clearly observed that both employees and employers contribution would be covered under the amendment to Sec. 43B. Disallowance u/s 40(a)(ia) - Held that:- The word “Payable” occurring in Sec. 40(a)(ia) refers not only to those cases where the amount is yet to be paid, but would also cover the cases where the amount has actually been paid. In the backdrop of the aforesaid settled position of law, the contention raised by the assessee is dismissed Disallowance of depreciation on car - Held that:- The assessee was duly entitled towards the claim of depreciation on the aforesaid motor car, set aside the order of the CIT(A) and delete the disallowance of depreciation sustained by the CIT(A). Addition u/s 68 - Held that:- The matter as regards the “nature” and “source” of the cash credits aggregating to ₹ 2,46,78,611/- appearing in the books of accounts of the assessee requires to be revisited. The matter is set aside to the file of the A.O, who is herein directed to readjudicate the genuineness and veracity of the loan transactions under consideration after making necessary verifications as regards the “nature” and “source” of the aforementioned cash credits. Needless to say, the A.O shall afford a reasonable opportunity of being heard to the assessee during the course of the set aside proceedings. Further, the assessee shall remain at a liberty to place on record fresh documentary evidence in order to substantiate the genuineness and veracity of the loan transactions of the parties under consideration. Disallowance of the legal and professional fees expenses - Held that:- We find that a similar disallowance by the A.O of legal and professional fees of ₹ 96.66 lacs that was paid for defending a criminal complaint, was deleted by the CIT(A) in the assesses own case for A.Y. 2008-09, after the A.O had in his remand report admitted that the said expenditure was allowable in the hands of the assessee. Further, on appeal by the revenue the Tribunal had upheld the order of the CIT(A) and had observed that the revenue could not show as how the claim of the said expenditure was not allowable. We thus, in terms of our aforesaid observations and the view taken by the coordinate bench of the Tribunal while disposing off the appeal of the revenue in the assesses own case for A.Y. 2008-09 are of the considered view that the legal and professional fees expenses incurred by the assessee was duly allowable as an expense under Sec. 37 Recharacterization of the business loss as a speculation loss by the A.O. - Held that:- We find that the A.O in all fairness observing that the assessee had not maintained separate books of accounts for speculation and non-speculation income, thus in proportion of turnover had allocated expenses of ₹ 49,591/-, as having been incurred by the assessee in context of the speculation activity carried out by it. On the basis of the aforesaid deliberations, the A.O had worked out the total speculation loss in the hands of the assessee at ₹ 15,42,375/- [i.e. ₹ 14,92,784/- + ₹ 49,591/-]. We have deliberated at length on the issue under consideration and are persuaded to subscribe to the observations of the lower authorities as regards the recharacterization of the share trading loss of ₹ 14,92,784/-, and further allocation of expenses of ₹ 49,591/- towards the speculation activities of the assessee. We thus, finding no infirmity in the order of the CIT(A) who had approved the aforesaid view of the A.O, uphold his order to the said extent. The Additional Ground of Appeal raised by the assessee is dismissed.
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