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2015 (4) TMI 222 - ITAT DELHI

2015 (4) TMI 222 - ITAT DELHI - TMI - Addition made under section 40A(3) - cash payment greater than ₹ 20,000/- having been made as evident from perusal of Cash Book - CIT(A) deleted the addition - Held that:- Single voucher was prepared to book the amount which does not mean that entire payment was made in a single day. The payments are not covered under the provisions of section 40A(3) of the Act, except the payments of ₹ 11,493/- (40,000- 28,507) paid on behalf of Kamlesh Bansal a .....

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rposes and did not cover the salary of two employees (i.e. Gunjan Chhabra and Vandana Desai) working in Faridabad branch (as they were not covered under the purview of same). The month-wise and branchwise charts of salary for both as per salary register and books of accounts were submitted to the AO. The above difference was also explained by way of another chart wherein details of salary paid to the 2 employees not covered under ESI were also shown. Also, it is pertinent to note that both of th .....

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(A) deleted the addition - Held that:- The concerned VAT legislation does not provide for availability of input credit against the output tax liability in case of loss of stock by fire, etc. Moreover, the input credit is even not available in a case where there has been normal loss, like evaporation credit is available only in respect of goods which have been or would be actually sold by the dealer. It is on the premise that where the goods have not been disposed by way of sale and there is no o .....

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or set-off against output tax liability. Accordingly, the loss on account of fire would need to be calculated based on the purchase price only. Thus, the appellant has satisfactorily explained the difference between stock Loss claimed and insurance claim made by assessee. - Decided in favour of assessee.

Disallowance of rent expenses - CIT(A) deleted the addition - Held that:- AO has failed to note the fact that these agreements had an escalation clause and accordingly the rent actual .....

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egistered with the VAT department in the respective states. Thus AO was not justified in making addition on account of rent expenses - Decided in favour of assessee. - I.T.A. No. 4272 /Del/2011 - Dated:- 31-3-2015 - Shri G. C. Gupta And Shri T. S. Kapoor,JJ. For the Appellant : Shri P Dam Kanunjha, Sr. DR For the Respondent : Shri K Sampath, Adv, Shri V Rajkumar, Adv. ORDER Per T. S. Kapoor, AM: This is an appeal filed by Revenue against the order of Ld. CIT(A) dated 27.06.2011. At the outset, L .....

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of salary between salary sheet submitted and P&L a/c citing that the difference of ₹ 72,153/- was on account of arrears paid b to employees which were duly verified by the AO from the books of accounts disregarding the fact that such was not the case and the difference of salary (Faridabad Branch) between salary sheet submitted and P&L account amount in to ₹ 4,60,462/- was disallowed since even though vide submission dated 13.12.2010, assessee submitted that the difference i .....

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₹ 4,60,462/- was not due to the reason adduced by the assessee. "3. Whether in the facts and circumstances of the case, the CIT(A) has erred in deleting addition of Rs.I,88,412/- on account of disallowance of loss on fire stock holding that the AO was not justified in making addition on account of difference between stock loss claimed and insurance claim made by assessee as the terms of the insurance policy did not allow for claiming the tax paid on such stock; since the CIT(A) has no .....

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specified limits and that the assessee furnished the details of rent paid before the AO as well as in the appellate proceedings and that all the deposits are registered with the VAT department in the respective states which is not acceptable since merely that some expense is claimed on the basis of payments made by way of account payee cheques does not substantiate the expense and claimed "details" made by assessee have to be substantiated with evidence to be allowable and in this case .....

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sions of Section 40A(3) the Ld. A.R. submitted that the assessee had made payments through imprest account and each individual payment was less than ₹ 20,000/- and in this respect he invited our attention to paper book page 10 onward wherein office expenses amounting to ₹ 26,442/- were debited and imprest account was credited with the similar amount. Ld. A.R. further submitted that pages 11 to 15 also comprised of payments made through imprest account and each individual payment was .....

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g payments through banking channel and such payment was covered by exceptions. 3.1 Arguing upon 2nd ground of appeal, Ld. A.R. submitted that difference in salary account was due to the fact that assessee had employed persons for which EPF was being deducted and, there was another group of people from the salary of whom no PF was deducted. He submitted that remaining difference as pointed out by A.O. was on account of arrears of salary. He submitted that complete reconciliation was submitted bef .....

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Ld. A.R. submitted that the rent claimed was paid through a/c payee cheque and the tax wherever applicable, was deducted and complete details of rent were submitted before A.O. as well as Ld. CIT(A) and, therefore, Ld. CIT(A) had rightly allowed the relief. 4. We have heard rival parties and have gone through the material placed on record. The relief granted by Ld. CIT(A) ground wise as contained in Ld. CIT(A) s order is reproduced below: 7. Grounds No.2 & 3 relate to the addition of ₹ .....

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the following cash payments. Vide submission dated 13.12.2010, the assessee gave certain submissions in respect of the said expenses, the said submissions have been examined and remarks thereon are delineated below in tabular form:- In view of the remarks above, the Assessing Officer added the aggregate of the said sums ₹ 2,35,995/- u/s 40A(3) to the income of the assessee. It has been submitted by the Ld. Counsel in this regard that the appellant had made certain payments in cash during t .....

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to different dates) and just the fact that one voucher has been prepared cannot result in conclusion of the fact that cash payment had been paid exceeding sum of ₹ 20,000 in a single transaction. One of the employees in the appellant's firm was given imprest to make payments on account of certain expenses and the above payments had been made on different dates out of such advance. Copy of the voucher along with purchase bills had already been furnished in the course of assessment proce .....

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lies. While the fuel payment was made by the appellant's employees from their imprest account, the final payment was then adjusted to that extent. Had the payment of fuel not been made by the appellant's employees, the smooth running of van would not have been possible which, in turn, would have resulted in loss of business to the appellant. Also, the payments were made on periodic basis. However, single voucher was prepared to book the amount which does not mean that entire payment was .....

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n subsequent periods. Since, the payment is for making statutory payments to the government, and is duly evidenced by supporting documents, the same cannot be considered for disallowance under section 40A(3) of the Act. ⦁ ₹ 29,528/- cash paid to Harish Express service - So far as the said addition is concerned, the appellant is not pressing for the same. ⦁ ₹ 28,400/- cash paid to Modern Sport Hire Cricket kit for match practice - There was a cricket match organized by t .....

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est were provided by the person (maintaining the account) on March 31st, 2008, whereas the tournament was held from March 7-10, 2008. Also, there were 2 umpires, whose charges were fixed at ₹ 1,000 per umpire per day. These payments were made directly to the umpires on daily basis. However, single voucher was prepared to book the amount which does not mean that entire payment was made in a single day. ⦁ ₹ 44,625/- cash paid to Sumer Lal Caterer for breakfast and lunch during c .....

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is over the entire contract period. However, single voucher was prepared to book the amount which does not mean that entire payment was made in a single day. ⦁ ₹ 45,000/- cash paid for purchasing TV for gift - The appellant had provided for sales promotion program for 3 business executives. The scheme was that the one who would achieve the targets would receive TV as gift. One of the executives won the scheme. The appellant had to make the payment in cash as there was no other way t .....

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e object is not to deprive the appellant of the deduction which he is otherwise entitled to claim. In view of the above submissions and documents placed on record, it is clear that the payments are not covered under the provisions of section 40A(3) of the Act, except the payments of ₹ 11,493/- (40,000- 28,507) paid on behalf of Kamlesh Bansal and ₹ 29,528/- paid in cash to Harish Express service which are hereby confirmed. The balance addition of ₹ 1,94,974/- [2,35,995/ - (29,5 .....

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ss account amounting to ₹ 4,60462/- not be disallowed. Vide submission dated 13.12.2010, the assessee submitted that the difference is due to salary paid to two employees not covered under the ESI Act. Assessee's contention has been examined. Without prejudice, even if the contention of the assessee is considered, there is still a difference of ₹ 72,153/- since the salary amount paid to two employees is ₹ 3,88,OOO/- Accordingly, it is clear that the assessee's explanati .....

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34/-. The AO disallowed ₹ 4,60462. In this regard, it is to be noted that firstly, the difference of ₹ 3,88,OOO was on account of the fact that salary register being maintained was for ESI purposes and did not cover the salary of two employees (i.e. Gunjan Chhabra and Vandana Desai) working in Faridabad branch (as they were not covered under the purview of same). The month-wise and branchwise charts of salary for both as per salary register and books of accounts were submitted to the .....

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ssions and documents placed on record, it is hereby held that the Assessing Officer was not justified in making addition on account of difference of salary as above. The addition of ₹ 4,60,462/- made on this count is, accordingly, hereby deleted. 10. Ground No. 6 relates to the disallowance of Rs.l,88,412/- on account of difference between stock loss claimed and insurance claim made by assessee. It has been observed by the Assessing Officer that vide order sheet entry dated 01.12.2010, the .....

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fire was ₹ 23 lakh and received less claim by ₹ 4,04,483.94 which had been debited to P&L account. Accordingly, the difference between ₹ 23 lakh and claim made to, the insurance company ₹ 21,11,588/- i.e. Rs.l,88,412/- is disallowed and added back to income. It has been submitted by the Ld. Counsel in this regard that the appellant's stock was lost by fire and a sum of ₹ 23,75,536/- was booked. However, as the claim filed before insurance company was only &# .....

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surance company (8) 21,11,588 21,11,588 Claim disallowed by AO [(C}=(A)- 1,88,412 (B)] Input credit which anyways is 2,63,948 • not allowable by Insurance company while granting claim (D) Claim filed with Insurance company (B) 21,11,588 Less: Approved by Insurance Co. 19,71,052 (E) Loss on account of unapproved claim (F) 1,40,536 Total loss as claimed by the appellant [(G)=(D)+(F)] 404,484 The essence of VAT legislation is that it provides credit/ set-off for input tax, i.e. tax paid on pur .....

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s which have been or would be actually sold by the dealer. It is on the premise that where the goods have not been disposed by way of sale and there is no output tax liability in respect of such goods, the dealer is not entitled to get the benefit of input tax credit. Thus, the input tax credit is also a loss for the dealer, as VAT department does not allow the availability in view of specific provisions in the Act and the insurance company does not make the payment on account of same in the eve .....

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fficer was not justified in making addition on account of difference between stock loss claimed and insurance claim made by assessee as above. The addition of ₹ 1,88,412/- made on this count is, accordingly, hereby deleted. 11. Grounds No.7 & 8 relate to the disallowance of ₹ 11,76,487/- on account of disallowance of rent expenses. It has been observed by the Assessing Officer that it is seen that the assessee has debited Rent Expense ₹ 16,82,887/- to the P&L A/e. Vide .....

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dded to income. It has been submitted by the Ld. Counsel in this regard that the appellant has been carrying on the business operations from 13 places, which are on rent. The AO has allowed the rent only in respect of the properties situated in Faridabad, Karnal and Chandigarh, based on the rent agreements. However, the AO has failed to note the fact that these agreements had an escalation clause and accordingly the rent actually being paid by the appellant after escalation was a sum of ₹ .....

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