TMI Blog2012 (7) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... e. identity, creditworthiness of loan creditors as well as genuineness of transaction were established. No adverse material had been brought on record by the A.O. and, therefore, the addition made by the A.O. simply on the basis of this aspect hat the notice issued were received back unserved is not justified. Addition deleted. Repairs to plant and machinery - factory expenses - dis-allowance of excess expenditure in comparison to expenditure incurred in previous year - Held that:- Unless it is established that the claim of expenditure is either bogus or is of capital/personal in nature, dis-allowance is not justified. In absence of any contrary material on record, addition made is deleted - Decided in favor of assessee. Unexplained advances - addition made of notional interest - Held that:- When there is no finding to the effect that actually the loan had been granted on interest or that interest has actually been collected and collection of interest was not reflected in the account, no addition can be made on account of notional interest. Addition is deleted. See B & A Plantations and Industries Ltd Vs CIT (1999 (12) TMI 43 (HC)) - Decided in favor of assessee Bad debts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- Letter were issued to the above parties were returned unserved with the remarks that closed , left , etc. Notices u/s 133(6) were issued to three persons but there was no response. The inspector was deputed to make spot inquiry of the concerns who have made share application money. The inspector has reported that premises of all the parties except that of Padmavati Steel (India), has been closed since long. Further he has reported that the building in which Padmavati Steel (India) was carrying business has been demolished and a new building constructed on the same place. In response to the show cause notice dated 16-2-2005, the assessee failed to produce investors who had advanced to the share application money. Under the circumstances the A.O held that the identify and creditworthiness of the investors and the genuineness of the transactions was not established by the assessee. Accordingly the shareapplication money of ₹ 35,00,000/- was added u/s 68. 2.1.1 Being aggrieved, the assessee carried the matter in appeal before Ld. CIT(A) but without success and now, the assessee is in further appeal before us. 2.1.2 It is submitted by the Ld. A.R. that thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brief facts are that it is noted by the A.O. in the assessment order that the assessee has taken unsecured loan of ₹ 1,85,740/- during this year. The A.O. held that in the absence of proper address, identity, creditworthiness and genuineness of transaction, which are required to be established u/s 68 of the Income tax Act, 1961 could not be established. He made addition of this entire amount of ₹ 1,85,740/-. Being aggrieved, the assessee carried the matter in appeal before Ld. CIT(A). It was held by Ld. CIT(A) that out of this total addition made by the A.O. of ₹ 1,85,740/-, there was typographical mistake o ₹ 1 lac and therefore, he restricted the addition to ₹ 85,740/-. Now, the assessee is in further appeal before us. 2.2.1 It is submitted by the Ld. A.R. that complete details of unsecured loan including opening balance, receipt and payments during the present year are available on page 18 of the paper book and from this, it can be seen that ₹ 85,740/- was received by the assessee company during this year from this party i.e. Param Steel Engineering Co. who was having opening balance of ₹ 8,61,578/-. It was submitted that in v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt year 2004-05. 4.1 Grounds No.1 2 are interconnected, which are as under: The order of learned Commissioner of Incometax( Appeals) [called, CIT(A)] is bad in law as well on facts on the following grounds; (1) The learned CIT(A) has erred in confirming addition of ₹ 31,55,000/-made by A.O. in respect of share application money received during the year. (2) The learned CIT(A) has erred in confirming the addition of ₹ 80,45,000/- made by A.O. on account of unsecured loans (Deposits). (2.1) Without prejudice to main ground no. (2); the learned CIT(A) Assessing Officer (AO), both have committed mistake in calculating the amount of disallowable at ₹ 80,45,000/- whereas ₹ 31,45,000/- represents old deposits and already disallowed in A.Y. 2002-03 and A.Y. 2003-04 (included in total disallowable of ₹ 72,00,000/-) as under; Opening Balance as on 01-04-2003 Rs.72,00,000/- Disallowed in A.Y. 02-03 35,00,000/- Disallowed in A.Y. 03-04 37,00,000/- 72,00,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ured loan. It was submitted that in respect of receipt of share application money, no addition is justified and it was agreed by both the sides that this issue is identical to ground No.1 raised in assessment year 2002-03 and 2003-04 and the same can be decided on similar lines because confirmation from all these applicants are available in the paper book containing address, PAN as well as bank statements etc. Regarding unsecured loan of ₹ 80.45 lacs received during this year, it was submitted that all these amounts were received by a/c payee cheques and confirmation along with PAN and Bank statements of lenders were submitted before the A.O. and are also available in the paper book and, therefore, no addition is justified even with regard to unsecured loan. 4.1.4 Ld. D.R. supported the orders of authorities below. 4.1.5 We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below. We delete the addition on account of share capital on the same line as in earlier years as per above because necessary documents and evidence are furnished by the assessee in this year also. For unsecured loans, we find that Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case are that it is noted by the A.O. in the assessment order that assessee has claimed repair expenses of ₹ 3,34,700/- whereas, in the immediately preceding year, such claim was only ₹ 1,22,588/-. The A.O. asked the assessee to explain the increase in the expenditure of ₹ 2,12,112/-. The A.O. has noted that the assessee has failed to offer the reason for increase in expenses and on this basis, the A.O. made disallowance of this amount of ₹ 2,12,112/- out of the total expenditure claimed by the assessee of ₹ 3,34,700/-. Being aggrieved, the assessee carried the matter in appeal before Ld. CIT(A) but without success and now, the assessee is in further appeal before us. 4.2.2 It is submitted by the Ld. A.R. that the complete details are available on pages 50-53 of the paper book for the entire expenses of ₹ 3,34,700/- and it can be seen that all are petty expenses. It is further submitted that repairing expenses cannot be equal in all the years and, therefore, no disallowance is justified without bringing any adverse material on record. 4.2.3 Ld. D.R. of the revenue supported the orders of authorities below. 4.2.4 We have considered the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the authorities below. 4.3.4 We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below. We find that as per the P L account for the present year available on page 55 of the paper book containing figures of preceding year also, the sales of the present year is ₹ 138.55 lacs as against ₹ 95.34 lacs in the preceding year. This goes to show that the increase in sale is about 50% compared to the preceding year. As per the quantitative details available on page 48 of the paper book also, the increase in production quantity is there to the extent of about 50%. This aspect was totally ignored by the authorities below while comparing the expenditure of the present year with the preceding year. Moreover, there are various expenses, which are not comparable on the basis of production or sale value. This is also not said by the A.O. that any of the expenditure booked by the assessee under this head is bogus or capital / personal in nature and simply on this basis that the expenditure in the present year is more than the preceding year, no disallowance is justified. This can be a valid reason to initiate i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance made by the A.O. and confirmed by Ld. CIT(A) amounts to double disallowance. It was submitted that this issue may be restored back to the file of the A.O. for a fresh decision after verifying this aspect. 4.4.3 Ld. D.R. of the revenue supported the order of Ld. CIT(A). 4.4.4 We have considered the rival submissions, perused the material on record and have gone through the orders of uahtorities below. We find that on page 16 of the assessment order, the A.O. has made addition of ₹ 4,03,880/- by stating interest on term loan from SIDBI u/s 43B and he further made addition of ₹ 8,48,715/- regarding interest accrued as per his discussion in para 7 of the assessment order. Hence, we find force in the submissions of the Ld. A.R. of the assessee that there may be double addition made by the A.O. first on the basis of tax audit report and second on the basis of figures in the balance sheet. We, therefore, feel it proper that the issue should go back to the file of the A.O. for fresh decision and hence, we set aside the order of Ld. CIT(A) on this issue and restore this matter back to the file of the A.O. for afresh decision. He should examine the contention of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that interest has actually been collected and collection of interest was not reflected in the account, no addition can be made on account of notional interest. In the present case also, there is no allegation of the A.O. that such advances were granted on interest or the interest was received on such advances and, therefore, in the light of this judgment of Hon ble Gauhati High Court, the addition made by the A.O. on account of notional interest cannot be sustained. Respectfully following the judgement of Hon ble Gauhati High Court, this addition is deleted. This ground is allowed. 4.6 Ground No.7 is as under: (7) The learned CIT(A) has erred in confirming the addition made by A.O. of ₹ 5,95,768/- in respect of bad debts written off and ₹ 59,080/- in respect of advances written off (Rs.5,95,768/- + ₹ 59,080/- = ₹ 6,54,848/-). 4.6.1 It was submitted by the Ld. A.R. of the assessee that this issue is now covered in favour of the assessee by the judgment of Hon ble Apex Court rendered in the case of TRF Ltd. rendered in 323 ITR 397 (S.C.) with regard to the claim of the assessee regarding bad debits written off. Regarding the advances written o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orders of authorities below. 5.1.2 We have considered the rival submissions, perused the material on record an have gone through the orders of authorities below. We find that from all the three loan creditors, assessee has furnished loan confirmation containing address and PAN and also submitted bank statements of these loan creditors and there is no cash deposit in these bank accounts of the loan creditors immediately before the issue of concerned cheques to the assessee. Ld. CIT(A) has confirmed this addition simply on the basis of the order of his predecessor in assessment year 2003-04 whereas in the present year, the assessee has fulfilled all the three ingredients of Section 68 i.e. identity and creditworthiness of loan creditors and genuineness of transaction. No adverse material has been brought out on record by the A.O. in spite of having complete addresses, PAN, confirmation and bank statements of the loan creditors. In our considered opinion, in the facts of the present case this addition made by the A.O. u/s 68 is not justified. We, therefore, delete the same. 5.2 In the result, the appeal of the assessee is allowed. 6. In the combined result, the appeal of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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