TMI Blog2014 (11) TMI 796X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee whereas the outstanding amounts in the books of account of the assessee related to business transactions of the assessee – Decided in favour of assessee. Ad hoc disallowance on Administrative expenses – Held that:- The AO failed to provide any adverse comments during remand proceedings and, therefore, ad-hoc addition of 10% of expenses without furnishing any cogent reason is not justified and CIT(A) has deleted the same - decided against revenue. - I.T.A. No.2498 /Del/2012, I.T.A.No. 2658/Del/2012 - - - Dated:- 21-11-2014 - Shri I. C. Sudhir And Shri T. S. Kapoor,JJ. For the Appellant : Shri Satish Khosla, Shri Manish Malik, Adv. Shri Sahcin Jai, CA For the Respondent : Shri Sameer Sharma, Sr. DR ORDER Per T. S. Kapoor, AM: These are cross appeals filed by the assessee as well as by the Revenue against the order of Ld. CIT(A) dated 21.03.2012. The assessee has taken various grounds of appeal which are descriptive and argumentative in nature. However, the crux of grounds of appeal filed by the assessee relate to the action of Ld. CIT(A) by which he had confirmed the addition of ₹ 60,12,292/- on account of outstanding balance of ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffered suomotto as they cannot be verified. Therefore, A.O. made a disallowance of an amount of ₹ 52,46,828/-. Aggrieved with the addition, the assessee filed appeal before Ld . CIT(A). Ld. CIT(A) on the basis of various submissions, filed by the assessee and on the basis of additional evidences and on the basis of remand report obtained from A.O., partly allowed the relief to the assessee by holding as under: i) Difference in balances ₹ 59,10,262/-:- (a) Difference in the balance as per the books of accounts and the confirmation received from the party The Ld. AO has made an addition of ₹ 5,910,262 on account of the differences between the balance as per the books of accounts and balance as per confirmation received from the parties. The assessee had submitted the details of creditors showing the addresses and closing balance with the Ld. AO vide submission dated 13 September 2010. However, while issuing notices under section 133(6), the Ld AO wrongly issued notice to Ex-Protecta instead of Electro Sales , and to Dynamic Marketing Services instead of Dynamic Engineers Pvt. Ltd. , Hence, the confirmations received from the above said parties did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f sec. 68 of the Act, in case the assessee has not been able to give satisfactory explanation in respect of nature and source of any sum or if in the opinion of the AO such explanation is not satisfactory, the AO may treat the same as undisclosed income and add it to the income of the assessee meaning thereby the assessee is required to give satisfactory explanation about the nature and source of much sums found credited in the books of account. What kind of proof is to be furnished by the assessee is a question. It has come up for discussion in various judgments rendered by various Hon'ble Courts including Hon'ble Supreme Court and High Courts. The law discussed by the Hon ble Court in the case of CIT vs. Divine Leasing Finance Ltd. (supra) is also an important decision to quote. A delicate balance has to be maintained. The Hon'ble Delhi High Court in CIT vs. Dolphin Conpack Ltd. (supra) quoted at page 193 the following observations:- credit entry relates to the issue of share capital. the A.O. is also entitled to examine whether the alleged shareholders do in fact exist or not. Such 2m inquiry was conducted by the AO in the present case. In the course of the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king channels. In some case, affidavits/ confirmations of the share applicants containing the above information were filed The assessin8 officer did not carry out any inquiry into the income tax records of the persons who had given their file numbers in order to ascertain whether they were existent or not. He neither controverted nor disapproved the material filed by the assessee. Further, the assessee had specifically invited the assessing officer to carry out an enquiry and examine the assessment records of the share applicants whose income tax file numbers were given. Though the assessee officer had sufficient time to carry out the examination, he did not do so, but put forth an excuse that the assessee was taking several adjournments. This court observed that it is for the assessing officer to manage his schedule and he should have ensured that because of the adjournments he did not run out of time for discharging the duties cast on him by law. It was held that when details were furnished by the assessee, the burden shifted to the assessing officer to investigate into the creditworthiness of the share applicants which he was enable to discharge. Thus, the order of the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the assessing authority without giving cogent reasons and on the basis of conjectures and surmises In a plethora of judgments, it has been held that no disallowance of expense can be made by the assessing authority without giving cogent reasons and on the basis of conjectures and surmises. Some of the judicial precedents are as under: ⦁ Dhakeshwari Cotton Mills Ltd v. CIT [1954/ 261TR 775 (SC) ⦁ Friends Clearing Agency (P) Lid. Vs. Commissioner of Income Tax(2011) 237 CTR 464 (2011) (Delhi HC) ⦁ Nitin Sales Corporation v ITO (212 Taxation 49) (2008) (Delhi HC) ⦁ Birla Soft (India) Ltd. Vs. Deputy Commissioner of Income tax (2011) 136 TTJ 505 (Delhi ITA 1) In light of the above, it is respectfully submitted that Your Honour may kindly adjudicate the matter on merits, impart justice and delete the impugned additions made by the Ld. AO. The appellant prays before Your Honour to take the additional evidence submitted by the appellant on record and provide an opportunity of being heard. We shall be pleased be provide any further clarification that you may require in respect of the present case. 8.1 I have gone through the finding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttention was also invited to paper book pages 70-82 where copies of civil work allotted to said parties was placed. Similarly, we were taken to paper book pages 85-86 where a copy of labour work given to M/s. ANS Engineers was placed. Paper book pages 87-88 were also referred to highlight the copies of account of Agrawal Engineers to which payment of outstanding was made on 27.05.2008 and similarly, copy of work agreement was referred to at paper book pages 88-90. It was submitted that all these documents were before the lower authorities. To support his contention that these were before lower authorities, Ld. A.R. invited our attention to Ld. CIT(A) s order at page 10 where Ld. CIT(A) has noted about the submissions of assessee wherein it had noted that ledger account, invoices and bank statement evidencing payments made in subsequent year were enclosed at Annexure 8. 5. In view of the above, it was argued by Ld. A.R. that assessee had completed its onus and had submitted sufficient evidences to highlight that payment to outstanding creditors was made in the subsequent years. This fact was totally ignored by the A.O. during remand proceedings. In this respect, our attention was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er evidences regarding genuineness of transactions additions only on the basis that outstanding balances were not confirmed by creditors, the addition was not warranted. As regards the contention of Ld. D.R. that no other evidence was available regarding M/s. AMS Engineers available, the Ld. A.R. submitted that he had confirmation form this party but he does not want to file the same as additional evidence and it was produced before the Bench and it was submitted that the case of the assessee be decided on the basis of material available on record. Contesting upon case law of Nova Promoters as relied upon by Ld. CIT(A), Ld. A.R. submitted that in that case the issue of share capital from shareholders was involved whereas the present case involves addition of outstanding sundry creditors which happen to be on account of genuine business transactions. 8. Arguing upon revenue s appeal s ground No.1, the Ld. D.R. submitted that the addition was made on account of difference of balances with 4 parties and assessee had admitted for making addition on account of differences and therefore, Ld. CIT(A) had wrongly decided the issue in favour of assessee. Reliance in this respect was place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details with respect to payments made to these parties in subsequent year along with copies of bank statement where the cheques were debited along with copy of contract note/invoices and these evidences were forwarded to A.O. for comments. This fact is verifiable from order of Ld. CIT(A) at page 3 where Ld. CIT(A) has noted that vide letter dt. 30.08.2011 the A.O. was forwarded written statements dated 21.07.2011 and 30.08.2011. however, we find that A.O. failed to offer any comment on the evidences filed by the assessee and insisted for sustenance of disallowance on the basis that notices u/s 133(6) remained uncomplied with. We find that details submitted by the assessee before Ld. CIT(A) are placed at paper book pages 23-91 wherein the invoices raised by these parties along with the copies of bank statement from where the payments were made, are placed. As regards creditor AMS Engineers of which outstanding amount is ₹ 2,37,058/-, the Ld. A.R. during appellate proceedings before us had brought to our notice confirmation of this party for the satisfaction of the Bench but did not file the same as additional evidence as Ld. A.R. wanted that the case be decided on the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stical purposes. 12. As regards the issue of disallowance of expenses, we find that Ld. CIT(A) as allowed relief by holding as under: Ad hoc disallowance o(Administrative expenses: It is submitted before Your Honour that the expenses claimed by the company have been incurred wholly and exclusively for the purposes of the business carried on by the appellant during the subject year. The expenses have been duly accounted for and recorded as per duly accepted and recognized accounting principles and standards as well as methods of accounting prescribed u/s 145 of the Income tax Act, 1961. Further, the Ld. AO has wrongfully contended in the remand report that the appellant had suo-moto offered loss of administrative expenses to be disallowed and taxed It is submitted that the appellant never offered/accepted the said disallowance during any part of the assessment proceedings. The Ld. AO did not give-any cogent reasons for making the above disallowance. The above disallowance is based on conjectures and surmises and should not be sustained and in a plethora of judgments, it has been held that no disallowance of expense can be made by the assessing authority without giving coge ..... X X X X Extracts X X X X X X X X Extracts X X X X
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