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2015 (6) TMI 22 - ITAT DELHI

2015 (6) TMI 22 - ITAT DELHI - TMI - Unclaimed liability and cessation of liability - CIT(A) deleted the addition - Held that:- It is an uncontroverted finding by the CIT(A) that the amounts which were shown as payable to M/s. Geo-chem Laboratories, M/s. Jain House and Shri Sohan Lal Ghai have been subsequently paid by the assessee. Under these circumstances, there cannot be any good reason to conclude that these were ceased liabilities. We have also noticed that the details of identity, creditw .....

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ELHI HIGH COURT). In view of these discussions, as also bearing in mind entirety of the case, we approve the conclusions arrived at by the CIT(A) and decline to interfere in the matter. - Decided against revenue.

Disallowance of salary - amount was far more excessive as compared to preceding year when there was some business activity whereas in the period under consideration there was no business activity - CIT(A) deleted the addition - Held that:- There is nothing more than increase .....

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oes not necessarily lead to proportionate reduction in staff salaries. In view of these discussions, as also bearing in mind entirety of the case, we approve the conclusion arrived at by the CIT(A) and decline to interfere in the matter. - Decided against revenue - ITA No. 4390/Del./2011 - Dated:- 27-3-2015 - Shri I. C. Sudhir And Shri Pramod Kumar JJ. For the Appellant : Shri P. Dam Kaunajma, Sr. DR For the Respondent : Shri O.P. Mody, Advocate ORDER Per Pramod Kumar, A.M.: 1. This appeal, file .....

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(Appeals) has erred in deleting the addition of ₹ 3,66,287/- out of the addition of ₹ 1,57,15,137/- on account of unclaimed liability and cessation of liability ignoring the findings of the A.O. 3. On the facts and in the circumstances of the case and in law, the learned CIT(Appeals) has erred in deleting the addition of ₹ 7,69,951/- made by A.O. on account of unclaimed liability in the name of Priyanka Jhunjhunwala ignoring the findings of the A.O. and wrongly treating it as a .....

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liabilities shown against their names as cessation of liability . It was in this backdrop that the addition of ₹ 3,66,287, representing amounts due to Geo-chem Laboratories Pvt. Ltd. (Rs.41,231), M/s. Jain House (Rs.30,210) and Sohan Lal Ghai (Rs.2,94,846), was made. The Assessing Officer also noticed that an amount of ₹ 7,69,951 is shown as payable for interest and the assessee contends that this amount will be paid when financial position of the assessee improves. The Assessing Of .....

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s been shown in the balance-sheet by the assessee in the subsequent years which is evident on perusal of the copies of the balance sheet as at 31.03.2009 and 31.03.2010 that were submitted during the appellate proceedings. Under the circumstances stated above and in view of the discussions made above, I am of the considered view that the provisions of section 41(1) are not applicable to the instant case in respect of the liability standing against the names of the creditors namely, M/s. Geochem .....

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discharged its onus of proving the identity and creditworthiness of the persons and genuineness of the transactions by furnishing the confirmation letters, assessment particulars including PAN and TDS particulars in respect of the loan creditors. It is noted that the identity of the aforementioned loan creditor has been established by submitting her Permanent Account Number (PAN); it is also observed that the loan creditor or lender was a share holder of the appellant company who had advanced lo .....

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unt number (PAN), assessment and TDS particulars, the primary onus of proof has been discharged by it. However, the A.O. cannot be precluded from further investigation for the purpose of finding the genuineness of transaction and creditworthiness of the creditors. There is no indication in the assessment order that the A.O. has made any enquiry for the verification of the loan before arriving at the conclusion that it remained unexplained. There is no evidence or material to even suggest, as poi .....

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aking addition on account of unsecured loan to the extent of ₹ 7,69,951/- from loan creditor namely Ms Priyanka Jhunjhunwala. Therefore, the addition of ₹ 7,69,951/- made on account of unsecured loans from Ms Priyanka Jhunjhunwala is deleted. As a result, Grounds of appeal No. 2 & 3 are allowed. 5. The Assessing Officer is aggrieved of the relief so granted by the CIT(A) and is in appeal before us. 6. We have heard the rival contentions, perused the material on record and duly co .....

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tor Ms Priyanka Jhunjhunwala were duly furnished and the revenue has not brought on record any material against the same. In any case, there is no dispute that these amounts reflected in the balance sheet were not even written back by the assessee and these being so shown in the balance sheet also constituted as an acknowledgment of debt, as was held by Hon ble jurisdictional High Court in the case of CIT vs. Shri Vardhman Overseas Ltd. (343 ITR 408). In view of these discussions, as also bearin .....

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here was no business activity. 4(ii). The assessee failed to furnish details of employees such as their name address and job being performed by them. 10. During the course of assessment proceedings, the Assessing Officer noticed that the expenses on salaries have gone up, from ₹ 4,08,882 in immediately preceding year, to ₹ 21,86,710 in the present year. It was explained to the Assessing Officer that in the preceding year, a substantial part of salary expenditure could be recovered fr .....

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of justifying the salary had been discharged by the appellant Company. Further, it is not in dispute that the salary expenses as incurred were fully vouched and verifiable. It was also explained on behalf of the appellant that whereas in the preceding year a substantial amount of salary was recovered from a sister concern named Priyanka Overseas (P) Ltd., there was no such recovery during the year under appeal and due to this reason the claim of salary expenditure was ₹ 21,86,710/- during .....

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what expenditure has to be incurred and in which circumstances every businessman knows his interest best and the AO cannot direct the assessee to conduct its business in a particular manner. Further reasonableness of the payment has to be judged not on any subjective standards of the AO but from the point of view of commercial expediency. In this context, reliance is placed on the decision of the Apex Court in S.A. Builders Ltd. Vs. CIT (2007) 288 ITR 1 (SC) (approving Delhi High Court judgment .....

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ourt in CIT vs. Dalmia Cement (Bharat) Ltd. (2002) 254 ITR 377 that once it is established that there was nexus between the expenditure and the purpose of the business (which need not necessarily be the business of the assessee itself), the Revenue cannot justifiably claim to put itself in the arm-chair of the businessman or in the position of the board of directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. No businessman can .....

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