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2021 (3) TMI 1149 - AT - Income TaxAddition of business promotion expenses u/s. 40(a)(ia) - Non-deduction of TDS - CIT(A) has not given relief in respect of expenditure the assessee seeks verification in respect of two items of expenditure i.e. in respect of M/s. Rakshit & Company and M/s. Choicest Enterprises Ltd. to whom the assessee had made payment - HELD THAT:- We find force in the said contention of the Ld. AR and we direct the AO to verify from these two concerns as to whether they (M/s. Rakshit & Company and M/s. Choicest Enterprises Ltd.) have shown these amounts/receipts in their trading receipts in this assessment year and have paid due taxes thereon. The assessee to give all the details to the AO regarding their identity. And, the AO to verify from these concerns the veracity of the payment made by assessee and if the AO finds that both the concerns have shown these two payments made by the assessee as their receipts and have paid taxes thereon in this assessment year, then no deduction u/s. 40(a)(ia) of the Act is warranted, if not, the same may be confirmed. In respect of other items confirmed by the Ld. CIT(A), the Ld. AR does not want to press taking into account the smallness of the amount and, therefore, those expenses to be disallowed u/s. 40(a)(ia) of the Act. So, this ground is partly allowed for statistical purposes. Disallowance on account of interest on office loan - AO disallowed it since this office was not utilized/put to use - as demonstrated that assessee has its own fund to the tune of ₹ 8,28,88,111/- and the loan amount is only to the tune of ₹ 1.3 cr. and, therefore, according to the Ld. AR, the assessee possessed mixed fund which includes its own fund in sufficient quantity - HELD THAT:- CIT(A) has found that the assessee has got the office in question registered next year i.e. F.Y 2016-17 i.e. AY 2017-18, which fact corroborates the finding of AO and therefore, the proviso to section 36(1)(iii) of the Act is attracted. And in this case, the presumption as per the ratio of the decision rendered by Hon’ble Bombay High Court in Reliance Utilities [2009 (1) TMI 4 - BOMBAY HIGH COURT] and HDFC [2014 (8) TMI 119 - BOMBAY HIGH COURT] cannot be applied because in those cases, there was mixed funds in the hands of assessee i.e. both own and borrowed funds and allocation of borrowed funds could not be specifically determined. In the case in hand, the loan amount was allocated for its office/capital which is a factual finding, which could not be disproved by the assessee, so the presumption based on mixed fund cannot be applied. So, we confirm the action of Ld. CIT(A). Therefore, this ground of appeal of assessee is dismissed. Addition on inflated purchases - According to the Ld. AR, promoter and directors of both the companies were same during that period and the entire business of both the companies were run by the same directors and since the indirect taxes has already been levied and paid by the sister concern and once this figure is deducted it is not more than the purchase price of the assessee i.e. ₹ 123 cr., therefore, according to him, there is no inflated purchase as alleged by the Ld. CIT(A) - HELD THAT:- CIT(A) has not enquired properly which fact is discernible from the show cause notice wherein the Ld. CIT(A) gave enhancement notice to assessee only alleging total inflated purchase to the tune of ₹ 4.99 cr. However, after receiving replies of assessee (supra), the Ld. CIT(A) has made an addition of ₹ 20,35,94,402/-. According to us, the action of the Ld. CIT(A) is bad for not conducting proper enquiry and for non-application of mind. Therefore, we set aside the order of the Ld. CIT(A) and remand this issue to the file of AO for verification of the details given (supra) and if the assessee has not inflated any purchase as contended by it, then no adverse view may be taken. With the aforesaid observation, we direct the AO to enquire into this limited issue raised by the Ld. CIT(A) and the assessee is directed to produce all documents pertaining to this issue to the AO and the AO to decide in accordance to law.
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