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TMI Blog2015 (2) TMI 985X X X X Extracts X X X X X X X X Extracts X X X X ..... are not genuine and is not wholly and exclusively for the purpose of the business/profession of the assessee?" 2.1 Facts of the case, in brief, are that the assessee is an individual and is engaged in the business of liaisoning consultant. He filed his return of income on 30-10-2007 declaring taxable income of Rs. 17,46,750/-. During the course of assessment proceedings, the AO observed from the various details furnished by the assessee that the following expenses are not genuine and are not incurred wholly and exclusively for the purpose of business of the assessee. Sr.No. Date Name Amount Cheque No Purpose 1. 23-03-2007 Raman P. Shah 6,25,000 409246 Clearance expenses 2. 14-03-2007 Navin A. Surani 5,00,000 409244 Service charges 3. 23-03-2007 Babulal M. Maheshwari 5,00,000 409246 Service charges 4. 23-03-2007 Navin V. Gala 5,00,000 409247 Commission charges 5. 14-03-2007 Kishor K. Sheth 5,00,000 409243 Brokerage and commission charges 2.2 Rejecting the various explanations given by the assessee, the AO disallowed the above expenses on account of the following reasons : i. On enquiry with the banks, it was revealed that in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kerage expenses. It was submitted that the payments were made by crossed account payee cheques and therefore are genuine payments. The expenses of these persons and the payments made to them is established in view of the information of their bank accounts supplied by the bank to the AO. It was argued that the assessee has communicated to the AO the address of the 5 mediators who rendered services to the assessee. It was submitted that the assessee is not responsible for difference in signature of the said persons, particularly in view of the fact that genuineness of the payments to the said persons was proved on enquiry made by the AO with banks of the said persons. It was further argued that if the amount is disallowed than the resultant net profit would be 73% on a gross receipt of Rs. 65,25,000/- which is impossible. Accordingly, it was argued that the addition made by the AO should be deleted. 4. Based on the arguments advanced by the assessee the Ld.CIT(A) deleted the addition by observing as under: "7. I have carefully considered the assessment order of the A.O., submissions of the appellant and relevant records. The A.O. has raised objections which suggest that the expense ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t profit declared by the appellant at Rs. 19,16,858/-. The resultant addition upheld on this count shall be Rs. 13,45,642/- as against the addition of Rs. 26,25,000/- made by the A.O. on account of disallowance of expenses. The A.O. is directed accordingly." 4.1 Aggrieved with such order of the CIT(A) the revenue is in appeal before us. 5. The Ld. Departmental Representative strongly objected to the order of the CIT(A). He submitted that during the course of assessment proceedings the AO has conclusively proved that the expenses of Rs. 26,25,000/- debited to the P&L Account by the assessee are not genuine and not wholly and exclusively incurred for the purpose of his business. The AO has even gone to the extent of establishing that the assessee has adopted a circuitary route of withdrawing money from the books of account in the guise of expenses and bringing the same back into the books of account in the form of unsecured loans. He submitted that the decision of the Ld. CIT(A) in allowing 50% of the expenses is without any sound reason. He submitted that under the peculiar facts and circumstances of the case either the expenses are to be fully allowed or fully disallowed and no a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) is against public policy, therefore, such expenses in our opinion cannot be allowed. Further, the Assessing Officer had also given a finding that the money has come back to the assessee indirectly. Under these circumstances, we are unable to uphold the order of the CIT(A) and the same is set-aside and the order of the Assessing Officer is restored. Grounds of appeal No. 1 & 2 by the revenue are accordingly allowed. 8. Grounds of appeal No.3 & 4 by the Revenue are as under : "3. Whether on the facts and in the circumstances of the case, the Ld.CIT(A)-I, Nashik was justified in holding that the amount of Rs. 52,97,171/- is in the form of 'advance' and not 'income' of the assessee? 4. Whether on the facts and in the circumstances of the case, the Ld.CIT(A)-I, Nashik was justified in ignoring the fact that the amount of Rs. 52,92,171/- received by the assessee from NITCO has all the ingredients therein to consider the same as 'income' and not 'advance'?" 8.1 Facts of the case, in brief, are that the Assessing Officer during the course of assessment proceedings observed that the assessee has shown to have received unsecured loan of Rs. 52,97,1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee submitted that Nitco Tiles Ltd., has in fact paid an advance to the assessee for making necessary payment to seller of the land and for necessary expenses to be incurred for transferring the land without deduction of TDS. Later on, TDS was deducted to be on safer side. It was submitted that section 199 is an enabling provision for claiming deduction of TDS in subsequent years etc., The A.O. is not bound to assess the income in the year to which the TDS certificate relates as actual amount received by assessee is only Rs. 50 lakhs. The unclaimed TDS would result into loss of Rs. 2,97,171/- for no reason if deal is not finalized. Even if, for the sake of debate, it is assumed that Nitco Ltd. has made payment towards advance fees to the assessee, it shall not be the income of the assessee as the necessary services in the form of obtaining permission from government for transferring land under Forest Zone and Coastal Regulation Zone is not yet rendered by the assessee. Accordingly, it was argued that the revenue cannot be recognized in the year of receipt itself. Further, the assessee is following mercantile system of accounting. Even otherwise also in a cash system of account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, it is clear that the amount paid by the NITCO Ltd. is advance payment for which required services were not rendered by the appellant. 8.3.4 In view of the fact that the required services for which the payment was made were not rendered by the appellant in the form of necessary permissions from Government authorities and the actual purchase deal by arranging registered purchase deed between NITCO Ltd. and Shri S.S. Patil in respect of the said land. In view of these facts no 'income' accrued to the appellant in the year under appeal. What is to be taxed is income and receipt an amount cannot be the basis for levy of tax. 8.3.5 On perusal of the decision of Hon'ble Supreme Court in the case of CIT Vs. Shoorji Vallabhadas & Co. 46 ITR 144 relied on by the appellant, it is noticed that the Hon'ble Apex Court has pointed-out that I.T.Act takes into account two points of time on which the liability to tax is attracted, namely (i) accrual of income or (ii) receipt of income. It is further mentioned that the substance of the matter is 'income'. The Hon'ble Delhi I.T.A.T. while deciding similar issue in the case of K.K. Khullar vs. DCIT (2009) 116 ITD 301 ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ants of India also lays down that the revenue is to be recognized only after accomplishment of work after rendering services. It also lays down that such performance should be regarded as being achieved when no significant uncertainly exists regarding the amount of consideration that will be derived from rendering the services. 8.4 In view of the above facts and discussion and respectfully the ratio laid down by the above mentioned decisions of Hon'ble Supreme Court and I.T.A.T., Delhi Bench, I am of the considered view that the amount of Rs. 52,97,271/- was not income of the appellant for the year under appeal. The addition of Rs. 52,97,271/- is deleted. The A.O. is directed accordingly." 10.1 Aggrieved with such order of the CIT(A) the Revenue is in appeal before us. 11. The Ld. Departmental Representative strongly opposed the order of the CIT(A). He submitted that since the assessee follows cash system of accounting, therefore, the amount of Rs. 52,97,171/- represents the income of the assessee and the same cannot be considered as an advance. Since the said amount was received by the assessee after TDS, therefore, it is sufficient to hold that the said amount is in the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imilarly, from page 34 of the paper book, we find Nitco Tiles Ltd., vide letter dated 01-04-2009 has confirmed the debit balance of the assessee in its books at Rs. 52,97,171/- as on 31-03-2009. All these details were very much available with the AO but he has not considered all these things. Since Nitco Tiles Ltd. has paid an amount of Rs. 50 lakhs as advance to the assessee for proposed purchase of land belonging to one Shri S.S. Patil and since the deal could not be materialised due to certain clearances, therefore, the assessee in our opinion has rightly shown the amount as advance in its books and the Ld.CIT(A) was justified in treating the same as advance and not revenue in nature. In this view of the matter and in view of the detailed reasons given by the Ld.CIT(A) on this issue we do not find any infirmity in his order on this issue. Accordingly, we uphold the same and the grounds raise by the Revenue are dismissed. 14. Grounds of appeal No. 5, 6 and 7 being general in nature are dismissed. ITA No.1243/PN/2011 (A.Y. 2008-09): 15. Ground of appeal No.1 by the Revenue reads as under : "1. The Ld.CIT(A) has erred in the facts & circumstances of the case & in law, deleting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd fair and has not pointed out any discrepancy towards excessive and unreasonable claim of expenditure as alleged by the A.O. The expenditure incurred by the appellant on account of salary, travelling etc. appears to me to be reasonable considering the nature of business. However personal element in travelling expenditure incurred by the appellant at Rs. 91.037/- other than travelling expenses of staff and Hotel expenses etc. for land owners at Rs. 24,912/- cannot be ruled out. This expenditure is disallowed to the extent of Rs. 11.550/- i.e. 10% of Rs. 1,15,949/- (Rs. 91,037/- + Rs. 24,912/-). The balance disallowance of expenditure of Rs. 8,54,374 is deleted. This ground of appeal is partly allowed." 16.1 Aggrieved with such order of the CIT(A) the Revenue is in appeal before us. 17. After hearing both the sides, we do not find any infirmity in the order of the CIT(A). Admittedly, the books of accounts of the assessee are audited and no adverse comments have been reported by the auditors. Since the assessee is engaged in the business of liaisoning and consultancy, expenses such as hotel expenses, travelling expenses, etc. are routine expenses and are required to be incurred. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under : "6.4 I have carefully considered the facts of the case, the assessment order, the rival submissions and the position of law on the subject. The only reason stated by the A.O. for making the addition u/s. 68 is that the appellant has not filed confirmation letter from S.D. Corporation and hence the above mentioned amount of Rs. 25,00,000/- shown as loans and advances is not proved. The A.O. has not filed his comments by way of remand report upto the date. Therefore, it is legally presumed that the AO has no objection to their admission. Accordingly, additional evidences are admitted on merits. It is undisputed fact that the appellant has received the amount of Rs. 25,00,000/- from S.D. Corporation by cheque. The appellant could not obtain confirmation letter from S.D. Corporation during assessment proceedings in December, 2010, but could obtain the same in January, 2011. From a perusal of the same, it is evident that the credit is identified, its creditworthiness is established as the creditor is a company having substantial turnover and the receipt is through account payee bank cheque, hence the transaction cannot be doubted and the genuineness is established. Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same month and has deposited the cheque in Karnataka Bank. From the submission of the appellant, it has been noticed that in respect of other payments received from S.D. Corporation, the appellant has deducted TDS as the same were received towards fees but no TDS has been deducted in respect of payment of Rs. 25,00,000/- given as loan/advance. In view of the above facts and confirmation letter of M/s. S.D. Corporation, I am of the considered view that the A.O. is not justified in treating the amount of Rs. 25,00,000/- received by the appellant by bank cheque as unexplained cash credit. The addition u/s. 68 of Rs. 25,00,000/-, is therefore, deleted. The A.O. is directed accordingly. This ground of appeal is allowed." 19.1 Aggrieved with such order of the CIT(A) the Revenue is in appeal before us. 20. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We find the AO made addition of Rs. 25 lakhs being unsecured loan obtained from S.D. Corporation on the ground that assessee did not file any confirmation letter for such loan. We find the assessee filed such conf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16-01-2008 4,50,000/- 5,50,000/- Out of Rs. 6,00,000/- received from Shri. Jaysukh Dave on 09/01/2008 by cash and Rs. 4,00,OOO/- received on 15/01/2008 from Shri. Pravin Mehta by cash Total 11,57,000/- The AO, however, held that the assessee did not file the requisite details with supporting evidences to explain the source of such deposits. He, therefore, made addition of Rs. 11,57,000/- to the total income of the assessee. 22. In appeal the Ld.CIT(A) deleted the addition by observing as under : "7.3 I have carefully considered the facts of the case, the assessment order and the rival submissions. On perusal of the same, it has been noticed that the said deposits of Rs. 11,57,000/- in Karnataka Bank have been recorded by the appellant in the books of account regularly maintained and audited. The source of the said deposits, therefore, gets explained by the entries on receipt side of the cash book/bank book and hence the deposits cannot be regarded as unexplained deposits. The appellant has also demonstrated out the specific source of the said deposits. From the above submissions of the appellant, it has been noticed that the appellant has made paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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