TMI Blog2012 (4) TMI 416X X X X Extracts X X X X X X X X Extracts X X X X ..... at: assessee made a claim of deduction under these provisions when income is computed at profit. The learned CIT(A), therefore, rightly directed the AO to consider this issue particularly when the assessee fulfilled conditions under these provisions. The learned CIT(A) merely directed the AO to allow the claim of the assessee as per law Regarding bad debts u/s 36 (1) (vii) - Held that: debts having been written off in the books of accounts in the year under consideration, the claim of bad debts is allowable to the assessee - Appeal is allowed Disallowance of insurance expense - AO rejected the claim of the assessee because the insurance cover was taken for loss of production and expected profit whereas insurance expenses were debited on estimate basis relating to destruction of machinery, building, raw material and finished goods. - held that:- Once assessee has shown income on account of insurance receipts out of the same incident and claimed expenses out of the same incident relating thereto, the claim of the assessee should have been appreciated and considered for both i.e. income and the expenditure on account of insurance. Similarly, assessee shall have to satisfy the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t own funds, therefore, there is no question of diversion of interest-bearing funds for giving loans and advances - Decided in favor of the assessee Regarding addition on account of loss on sale of raw materials of Rs.2,69,86,470 - After verification of the evidences produced by the assessee the AO had come to the conclusion that the loss claimed in respect of such sales of raw material is fictitious and therefore, the same has been disallowed and as per the clear finding in the assessment order, the AO stated that the addition made be confirmed - learned Counsel for the assessee also submitted that huge volumes of additional evidences are in order and the AO did not find any mistake in the same and hence, he has not commented on any of them - Held that: CIT(A) considering the details furnished found that the assessee has suffered loss and such findings of the learned CIT(A) have not been rebutted through any evidence or material on record - Appeal is dismissed - ITA No.298/Ahd/2006, ITA No.338/Ahd/2006, ITA No.4282/Ahd/2007 - - - Dated:- 6-1-2012 - SHRI BHAVNESH SAINI, A.MOHAN ALANKAMONY, JJ. Department by Mrs. Chhavi Anupam, CIT DR Assessee by Shri S. N. Soparka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at where is the license or CD to use software, nobody could produce the same. The summons was issued to various suppliers, but no one attended. The AO has, therefore, held that the purchases of these assets are not genuine and disallowed the depreciation calculated at Rs.12,82,17,500/-. It was submitted before the learned CIT(A) that all the assets purchased are genuine and the depreciation should be allowed. A copy of the appraisal report for valuation done by Dalal Mott MacDonald in respect of fixed assets was found during the survey. The value of the assets as on 31-03-2003 is more than the value of the assets as per the company s records. It shows that all the assets were purchased and the depreciation is rightly claimed. The assessee had purchased plant machinery not only from the alleged associated concerns, but purchased machinery parts in large number from overseas market from world leader manufacturers. The total machinery purchased worth Rs.94,97,96,045/- was added during the year, which included integrated software purchased from Design Electronics Soft Design. When the machineries were purchased, the company had two alternatives to purchase the software either to pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry. Further, it was not possible by the survey team to note down correctly all assts, as it was not physically possible to write down all the assets found during the survey at factory premises as there were large number of plant machineries and hence, the report prepared at the time of survey was not proper and complete. The fact that the assets are mentioned in the stock register in different hand writings and with numbers suffixed with A was only due to the reason that when it was found that the same were not entered earlier, it was entered. But this act did not make the purchase bogus. There were receipts of purchases, transportation payments, gate passes, and store receipts etc. which were properly maintained. Therefore, it was submitted that the depreciation should be allowed. The learned CIT(A) considering facts and the explanation of the assessee partly allowed the claim of the assessee. His findings in the appellate order in Para 5.4 and 5.5 are reproduced as under: 5.4 I have carefully considered the facts of the case as well as the submissions advanced by the appellant. As far as the addition of software is concerned, I agree with the submissions of the appellant t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee for grant of depreciation. The assessee was asked to produce the relevant copies of bills/invoices, challans of freight/transportation and expenses incurred for setting up of the machines and software. The purchases were made from the sister concerns. During the survey no fixed asset register was found. The register was produced subsequently in which there were differences in the entries. The statements of employees were recorded who have denied claim of the assessee. The repot of Dalal Mott MacDonald was found in survey, but only few assets were found recorded thereon. Some of the employees claimed in their reply that software are inbuilt and are supplied by the manufacturers of the machine. Concerned parties were summoned but they have not responded to the notice. The AO therefore, rightly disallowed the depreciation. The learned DR submitted that since no supporting evidence was produced therefore, the learned CIT(A) should not have deleted the part addition. On the other hand, learned Counsel for the assessee reiterated the submissions made before the authorities below and submitted that survey was conducted on 15-3-2005 after close of the financial year relevant to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the valuation report which was prepared about two years prior to the date of survey. The valuation shown by the valuer of assets was also stated to be more than the value claimed by the assessee. The assessee produced all the relevant details before AO regarding purchase of the assets but same has not been discussed in detail. The assessee also claimed that software was also purchased which was used for the purpose of business. The AO on the basis of report of Dalal Mott MacDonald also accepted the claim of the assessee in part and granted depreciation. Therefore, there was no reason for the AO to dispute the remaining part of such report which contained all the details of installation of the fixed assets in the premises of the assessee. Even, one of the persons examined during survey admitted that all the software were inbuilt. The learned CIT(A) on proper examination of evidences and material rightly came to the conclusion that software is intangible asset and was loaded in the system of machine. The learned CIT(A) also rightly held that installation of software could be checked by the technical person whether it was loaded in the system or not. Therefore, the finding in the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sufficient opportunity to the assessee considering the valuation report of Dalal Mott MacDonald and the evidences produced by the assessee for purchase of tangible assets. In the result, ground No.2 and 3 of the appeal of the assessee are allowed for statistical purposes. 7. The revenue on ground No.2 challenged the order of the learned CIT(A) in directing the AO to allow deduction u/s 80HHC and 80 IA of the IT Act. The assessee has not claimed these deductions at the time of filing of the return for the reasons that the income computed was at loss. However, when various additions were made and income is computed at profit, the assessee made claim of deduction under section 80IA and 80 HHC of the IT Act, because the assessee fulfilled all the conditions for grant of deduction under the above provisions. The claim of the assessee was not allowed by the AO because it was not claimed in the return of income. The learned CIT(A) found that claim of the assessee should be considered because the income is computed ultimately at profit due to the additions. It was also found that assessee fulfilled all the conditions for claiming deduction under these provisions. The AO was, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue is covered by decision of the Hon ble Supreme Court in the case of T. R. F. Ltd., 323 ITR 397 and order of ITAT Ahmedabad Bench in the case of Riasmo Lifesciences Pvt. Ltd. in ITA No.1275/Ahd/2009 dated 08-04-2011. The learned DR also submitted that the issue is covered in favour of the assessee by the above judgments. 13. On consideration of the facts of the case, we find that the issue is covered in favour of the assessee by the judgment of the Hon ble Supreme Court in the case of T. R. F. Ltd. (supra) in which it was held as under: This position in law is well-settled. After 1st April, 1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. However, in the present case, the Assessing Officer has not examined whether the debt has, in fact, been written off in accounts of the assessee. When bad debt occurs, the bad debt account is debited and the customer s account is credited, thus, closing the account of the customer. In the case of Companies, the provision is deducted from Sundry Debtors. As stated above, the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d/2006 is partly allowed. ITA No.4282/Ahd/2007 17. This appeal by assessee is directed against the order of learned CIT(A) dated 31-08-2007 for assessment year 2002-03, challenging the levy of penalty u/s 271 (1) ( c ) of the IT Act. 18. The assessee filed return of income showing total taxable loss of Rs.19.95 Crores, however assessment was completed u/s 143 (3) of the IT Act at Rs.14,79,99,040/-. The penalty was initiated on the following disallowances: (1) Claim of bad debts Rs. 18,89,51,846/-. (2) Depreciation on tangible assets Rs. 9,27,36,250/- 19. The AO levied the penalty on the above additions which was confirmed by the learned CIT(A) vide impugned order. 20. On consideration of the facts of the case, we are of the view penalty cannot be levied against the assessee. The assessee preferred appeal against the order of the learned CIT(A) on quantum before the Tribunal in ITA No.338/Ahd/2006 (supra). The claim of assessee for bad debts has been allowed and addition has been deleted. As regards the depreciation on tangible assets, the matter is restored to the file of the AO for reconsideration. Therefore, no penalty can be levied at this stage because both the addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irmed the addition. 26. On consideration of rival submissions, we are of the view the matter requires reconsideration at the level of the AO. The learned Counsel for the assessee submitted that insurance receipts and expenses should be considered together. However, learned DR submitted that no evidence was filed for the loss claimed. It is not in dispute that the assessee offered insurance receipts of Rs.1,25,87,770/- as income in the assessment year under appeal. The fire took place on April,1998 which is related to the assessment year under appeal in which machinery, building, raw material and finished goods were claimed to have been destroyed as is noted in Para 6 of the assessment order. The AO however, rejected the claim of the assessee because the insurance cover was taken for loss of production and expected profit whereas insurance expenses were debited on estimate basis relating to destruction of machinery, building, raw material and finished goods. The claim of assessee thus appears to be for loss of production i.e. finished goods and the expected profit thereon. Since fire had taken place in the assessment year under appeal, therefore, it cannot be said to be continge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal return of income. The learned CIT(A) following the order of the Hon ble Supreme Court in the case of Sun Engineering Works Ltd. dismissed these grounds of appeal of the assessee. The learned Counsel for the assessee did not dispute the above legal proposition. In view of the above facts that no such claims were made in the original return of income, therefore, authorities below rightly disallowed claim of assessee raised for the first time in the proceedings u/s 148 of the IT Act. The issue is covered against the assessee by the decision of the Hon ble Supreme Court in the case of Sun Engineering Works Ltd. (supra). Ground Nos. 5, 6, 7 and 10 of the appeal of the assessee are accordingly dismissed. 28. On ground Nos. 8 and 9, the assessee challenged the order of the learned CIT(A) in confirming action of the AO in disallowing bad debts provisions of Rs.9,37,942/-. The authorities below noted that the provisions for doubtful debts is not allowable in view of the amendment to section 36(1) (vii) of the IT Act. The learned Counsel for the assessee conceded that provisions for bad debts cannot be allowed and the issue may be decided against the assessee. No further arguments have b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d ground No.12 of the appeal of the assessee is dismissed. 31. On ground No.13, the assessee challenged order of the learned CIT(A) in not granting deduction u/s 80 IA of the IT Act on revised total income as computed in the impugned assessment order. The learned CIT(A) directed the AO to allow deduction u/s 80 IA as per provisions of the Act. The issue is same as is considered in departmental appeal in assessment year 2002-03 on ground No.2 on which the departmental appeal has been dismissed. Since, total income was revised to positive income, therefore, claim of assessee was rightly allowed by the learned CIT(A) as per law. Since direction is already given by the learned CIT(A), therefore, no further direction is required in this matter. This ground is accordingly disposed of. 32. On ground No.14, the assessee challenged the order of the learned CIT(A) in not granting deduction u/s 80 IA as well as deduction u/s 80 HHC of the IT Act upon the same gross total income without reducing the deduction granted under one section while calculating the deduction under other section. The learned CIT(A) following the decision of ITAT Chennai Special Bench in the case of Ragini Garments, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The AO held that the purchases from this party have been consistently held by the department to be bogus purchases. The AO following the orders for assessment year 2002-03 and 2003-04 disallowed the claim of the assessee. It was submitted before the learned CIT(A) that the AO was not justified in making addition without giving independent findings. The assessee made genuine purchases and in support of which assessee filed copies of bills/challans and payments were duly made. Therefore, no disallowance is called for. The learned CIT(A) following the order of Commissioner of Central Excise (supra) confirmed the order of the AO and dismissed the appeal of the assessee. 35. The learned Counsel for the assessee reiterated the submission made before the authorities below and submitted that search was conducted on 15-02-2002 subsequent to several years of assessment year under appeal and the assessee filed detailed evidences before the AO which have not been even discussed in the assessment order. Findings of excise authorities have not become final and nothing is brought on record against the assessee. He has submitted that ITAT Ahmedabad Bench in the case of the same assessee for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of penalty proceedings u/s 271 (1) (c) has been challenged, which is independent and separate proceedings. Ground No.20 is general. These grounds are accordingly dismissed. 38. In the result, appeal of the assessee in ITA No.4281/Ahd/2007 is partly allowed. ITA No.1510/Ahd/2009 ITA No.1890/Ahd/2009 39. Both the cross appeals are directed against the order of the learned CIT(A)-XIV, Ahmedabad dated 26-03-2009, for assessment year 2003-04. 40. The assessee on ground Nos. 1 and 2, challenged the disallowance of bad debts of Rs.1,27,59,170/- u/s 36(1) (iii) of the IT Act. It is noted in the impugned order that similar claim was made in respect of Paras Trading Corporation in assessment year 2002-03 in which addition was upheld by the learned CIT(A). Since the assessee could not produce any proof regarding efforts made for recovery of the debts, claim of bad debts was disallowed following the observation in assessment year 2002-03. We find that in assessment year 2002-03 the similar claim of the assessee in ITA No.338/Ahd/2006 above has been allowed by following the decision of the Hon ble Supreme Court in the case of T. R. F. Ltd. (supra). By following the same decision, we s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... served that the production shown by the assessee was much lower than the normal production and finding to that effect have been given by the Commissioner of Central Excise and the Tax Auditor has not given yield of finished products. The AO, therefore, held that purchases made from these parties were bogus and non-genuine and disallowed Rs.3,08,17,231/-. It was submitted before the learned CIT(A) that all the necessary proof have been furnished with regard to genuineness of the purchases along with supported documents. Addition is made by the AO without giving any independent findings. During the appellate proceedings assessee furnished details of purchases with invoices and proof as to delivery and evidences to prove the physical movements of the goods as filed in the paper book. It was, therefore, submitted that the same may be admitted under Rule 46A of the IT Rules because the assessee was not given sufficient opportunity to produce these details during the course of assessment proceedings. The additional evidences filed by the assessee were forwarded to the AO for his remand report. The AO in his report referred to search operation carried out by the central excise department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned Counsel for the assessee reiterated the submissions made before the authorities below and submitted that search was carried out by central excise department on 15-02-2002 which is prior to the start of the financial year relevant to the assessment year under appeal 2003-04. Therefore, finding of the excise department in earlier year have no concern with the subsequent year. In the remand report, PB-1510 dated 04-12-2007, the AO did not adversely comment upon the evidences and documents filed by the assessee proving the genuine purchases. Since, the claim of the assessee is not disputed by the AO; therefore, addition is clearly unjustified. He has submitted that the AO has disallowed purchases of Gujarat Pickers Industries Ltd. and Labdhi International for which detailed evidences are filed in the paper book from PB 915 onwards and the assessee filed about 400 pages in support of the contentions. No purchase was made from Ideal Petroproducts Ltd. and all the three parties filed the confirmations before the AO which is also mentioned in the assessment order. Therefore, even part addition is unjustified. The learned CIT(A) accepted the claim of the assessee but merely on lik ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l of the revenue is dismissed. 46. On ground No.5, the assessee challenged the disallowance of Rs.9,94,421/- u/s 35D of the IT Act and on ground No.6 challenged the disallowance of Rs.9,13,861/- in respect of public issue expenses. The AO following the orders of earlier years made the disallowances. The AO also noted that in assessment year 2000-01 the issue has been set aside but there is nothing on record to justify the deduction. The learned CIT(A) following the order of learned CIT(A) for assessment year 2000-01 and noting that appeal is pending before the Tribunal confirmed the addition and noted that if favourable decision is received from ITAT for the earlier year, the AO shall follow the same order. 47. The learned Counsel for the assessee at the outset submitted that ITAT Ahmedabad Bench in the case of the same assessee in assessment year 2001-02 in ITA No. 667/Ahd/2005 following the order of the Tribunal for assessment year 2000-01 restored the matter back to the file of the AO for reconsideration. Copy of the order dated 21-10-2011 is filed on record. The same is not disputed by the learned DR. By following the order of the Tribunal for assessment year 2001-02 (supra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases and the amount in each of the accounts runs into Crores of rupees from whom no purchases could have been made as the amount of advances granted exceeds the total purchases made in the entire financial year, so, the interest bearing funds of the assessee had been diverted towards grant of loans and advances to other parties. Therefore, the AO disallowed the claim of interest payment @12% on the advances which worked out to Rs.11,82,23,160/- u/s 36(1) (iii) of the IT Act but limited to the interest claimed. 50.1 It was submitted before the learned CIT(A) that the AO did not issue any show cause notice on this issue and that all the advances were made for business purposes either for purchase of materials or plant and machinery. Further, it was submitted that the assessee has substantial interest free funds at its disposal and in the absence of nexus between the borrowings and the investments, no part disallowance was called for. The learned Counsel for the assessee submitted that the entire disallowance has been made by the AO purely on estimate basis without establishing any nexus between the funds borrowed and advances granted. In any case the assessee has got its own funds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Torrent Financers Vs ACIT (2001) 73 TJ 624 (Ahd) and other cases cited, I am of the opinion that the disallowance of interest expenses in respect of advances given is not justified, hence the disallowance of interest expenses is deleted. 51. The learned DR relied upon the order of the AO. On the other hand, the learned Counsel for the assessee reiterated the submissions made before the authorities below and referred to PB 64 and submitted that share capital of the assessee with reserves and surplus are to the tune of Rs.284.20 Crores and as such the loans and advances are very small and addition has been rightly deleted by the learned CIT(A). The learned Counsel for the assessee relied upon the decision of the Hon ble Bombay High Court in the case of CIT Vs Reliance Utilities and Power Ltd., 313 ITR 340 wherein it has been Held, dismissing the appeal, that if there were funds available both interest-free and overdraft and/or loans taken, then a presumption would arise that investments would be out of interest-free funds generated or available with the company, if the interest-free funds were sufficient to meet the investments. In this case this presumption was established ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the AO held that the claim of loss in respect of sales of granules was fictitious and hence the same was disallowed. 53.1 It was submitted before the learned CIT(A) that the AO did not issue any show cause notice on this issue and the learned Counsel for the assessee furnished list of transactions and respective sales bills together with proof of delivery compiled at pages 1 to 914 in the paper book marked as Annexure A so as to prove the genuineness of the transactions made with these parties and submitted that the additional evidences be admitted under Rule 46A of the IT Rules as the assessee could not file these basic details as no specific show cause notice was issued. The additional evidences filed by the learned Counsel for the assessee were forwarded to the AO for his remand report. The AO in his reply dated 04-12-2007 reported that the issue has already been dealt with by the AO in page 12(iv) of his order. After verification of the evidences produced by the assessee the AO had come to the conclusion that the loss claimed in respect of such sales of raw material is fictitious and therefore, the same has been disallowed and as per the clear finding in the assessment orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been able to furnish necessary details including copies of sale bills and prove the genuineness of its claim of loss. It is also found that sales have been made out of opening stock and sales have not been made to any related, sister or associate concern of the appellant or its directors. Further depending on the quality of materials the price received was lower than the cost price. Considering the additional evidences and details filed by the appellant, I am of the opinion that the A. O. is not justified in making the disallowance of such a huge amount. The disallowance made in this respect is directed to be deleted. 55. The learned DR relied upon the order of the AO. On the other hand, the learned Counsel for the assessee reiterated the submissions made before the authorities below and submitted that entire documentary evidences were furnished before the learned CIT(A) copies of which are filed at PB 1 to 914 which clearly support the findings of the learned CIT(A). He has submitted that in the remand report filed by the AO the claim of the assessee has not been disputed. 56. On consideration of the rival submissions, we do not find any merit in this ground of appeal of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fy the differences which could not be reconciled by him. 58. The learned CIT(A) considering the explanation of the assessee deleted the addition. His findings in Para 8.3 of the appellate order are reproduced as under: 8.3 I have carefully considered the facts of the case and the submissions of the A. R. and the remand report of the A. O. I find that in respect of Abhishek Polymer Industries the difference has arisen in the opening balance of the party as payments have been made during the year to the said party by the appellant on bills discounted as per the reconciliation of accounts filed by the appellant at pages 1401 to 1456 of the paper book. As regards the party Labdhi International the appellant has stated that the difference in closing balance is of Rs.7,50,000/- which has arisen due to the fact that the said amount was given as an advance for materials to the said party which has been transferred to the regular account subsequently on 4-10-2004 and the appellant has filed a reconciliation of accounts at pages 1373 to 1398 of the paper book. It is seen that there was difference in opening balance in the contra account in respect of this party and during the year the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as made and the ITAT allowed the appeal of the assessee in assessment year 2000-01, but appeal is pending before the Hon ble High Court, therefore, addition was made. The learned CIT(A) considering these facts deleted the addition. On consideration of the rival submissions, we are of the view merely because appeal is pending on the same issue before the Hon ble High Court is no ground for the AO to make the addition. The learned CIT(A) correctly followed the order of the Tribunal and rightly deleted the addition. Ground No.6 of the appeal of the revenue is dismissed. 62. On ground No.7, the revenue challenged the deletion of addition made on account of machinery repair expenses of Rs.30,00,000/-. The AO found that the assessee has debited the amount in question as repairs to machinery and on verification it was found that no purchase have been made and the same was held to be non-genuine. The AO, therefore, held that expenditures was also fictitious and without proof addition was accordingly made. The learned CIT(A) found that in assessment year 2002-03, he has granted depreciation on the same machineries, therefore, expenses incurred by the assessee for annual maintenance shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r assessment year 2000-01 the order of the Tribunal is awaited. This ground was dismissed but it was directed that if any favourable decision is received, AO shall follow the same. Both the parties submitted that issue is same as is considered in assessment year 2003-04 on grounds No.5 and 6 in the appeal of the assessee. We accordingly, following the order of the Tribunal for assessment year 2003-04 direct the AO to follow the same decision. This ground stands dispose of accordingly. 70. On ground No.3, the assessee challenged the order of the learned CIT(A) in disallowing depreciation on tangible assets. The revenue on ground No.3 challenged the order of the learned CIT(A) in deleting the disallowance of depreciation on intangible assets. The learned CIT(A) following the order of assessment year 2002-03 allowed the depreciation on software purchases on intangible assets and confirmed the addition on account of disallowance of depreciation on tangible assets. Both the parties stated that issue is same as is considered by the Tribunal in assessment year 2002-03. By following the same order of the Tribunal above for assessment year 2002-03, the order of the learned CIT(A) granting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was submitted before the learned CIT(A) that payments have been made within the grace period and relied upon the decision of the Hon ble Supreme Court in the case of Vinay Cement Ltd. 312 CTR 268. The learned CIT(A) following the said decision deleted the disallowance because the payments have been deposited with the government before due date of filing of the return. Both the parties stated that the issue is covered in favour of the assessee by the above judgment which is also confirmed by the Hon ble Supreme Court in the case of Alom Extrusion Ltd. 319 ITR 306. In view of the above, ground No.6 of the appeal of the revenue is dismissed. 76. Grounds No.7 and 8 of the departmental appeal are general and are accordingly dismissed. 77. In the result, departmental appeal in ITA No.1892/Ahed/2009 is dismissed. ITA No.1512/Ahd/2009 ITA No.1891/Ahd/2009 78. Both the cross appeals are directed against the order of learned CIT(A)-XIV, Ahmedabad dated 27-03-2009 for assessment year 2005-06. 79. On ground No.1, assessee challenged the disallowance of 20% out of commission expenses of Rs.1,24,86,095/-. The revenue on ground No.2 challenged the order of the learned CIT(A) in de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore making the disallowance and the contention of the assessee was found to be correct. In such an event, no addition should have been made. It was further found that commission payment was also made in the last year and no defects have been pointed out in the maintenance of books of accounts and no adverse comments have also be given on the evidences maintained by the assessee. Therefore, merely on the basis of comparison of the expenses with last year without bringing any incriminating evidence against the assessee on record, the authorities below were not justified in making the addition against the assessee. The learned CIT(A) should have deleted the entire addition. In the result, the orders of the authorities below are set aside and entire addition is deleted. In the result ground No.1 of the appeal of the assessee is allowed and ground No.2 of the appeal of the revenue is dismissed. 83. On grounds No.2 and 3, the assessee challenged the order of the learned CIT(A) in disallowing bad debts of Rs.3.10 Crores out of Rs.92.10 Crores claimed by the assessee. The revenue on ground No.4, challenged the order of the learned CIT(A) in granting part relief to the assessee. The lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest u/s 234B and 234C of the IT Act which is mandatory and consequential. On ground No.6, initiation of penalty proceedings u/s 271 (1) (c) has been challenged, which is independent and separate proceedings. Ground No.7 is general. These grounds are accordingly dismissed. 86. In the result, the appeal of the assessee in ITA No.1512/Ahd/2009 is partly allowed. 87. The revenue on ground No.3, challenged the order of the learned CIT(A) in directing the AO to allow share application money of Rs.4,36,00,000/-. The AO disallowed the above amount u/s 68 of the IT Act being unexplained share application money. The assessee furnished details before the AO which includes details of preferential warrants issued to four companies i.e. Pan Emamy Cosmed Ltd., Vimpson Investments Pvt. Ltd., Shri Vikram Patel and Sharad C. Patel amounting to Rs.5,04,00,000/-. But the claim of the assessee was rejected treating the same as unexplained share capital money. It was submitted before the learned CIT(A) that addition on account of unexplained share capital was made in respect of share holders namely Vimpson Investments Pvt. Ltd. (Rs.80 lacs), Shri Vikram Patel (Rs.2.40 Crores) and Shri Sharad Patel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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