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ACIT, Circle -33 (1) , New Delhi Versus Shri Anil Nath

2015 (8) TMI 222 - ITAT DELHI

Disallowance of bad debts - CIT(A) deleted disallowance - Held that:- From the facts on record, Ld. CIT(A) observed that the assessee had a long business relations with these parties and they were not only old but valuable customers/suppliers of the assessee who given significant business to the assessee. The Ld. CIT (A) takes note that the amounts written off in the case of Ajit Hospital and Gopal Surgical were in respect of sales made by the assessee to these parties. Whereas, in the case of A .....

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aking the impugned disallowance as the amounts in question were written off by the assessee in accordance to section 36(2) and 36(1)(vii) of the Act. Accordingly, the addition made by the Assessing Officer was rightly deleted by the Ld. CIT(A) - Decided against revenue.

Addition on account of sundry creditors - CIT(A) deleted addition - Held that:- A perusal of the letter of assessee shows that Amitabh Mendiratta was a retainer of the assessee who left the institution on 31.03.2008 an .....

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e, considering the facts of the case, ld CIT(A) has concluded that that there is no justification for the Assessing Officer to make the impugned addition. Accordingly, he deleted the addition which does not need any interference on our part - Decided against revenue.

Addition on account of proportionate disallowance of commission expenses - CIT(A) deleted addition - Held that:- CIT (A) took note of the fact that the assessee had fully explained the accounting of the impugned commissio .....

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that the payments of commissions were made after deducting corresponding TDS as per law. In the said facts and circumstances, ld. CIT (A) held that there was no justification for making any proportionate disallowance out of commission expenses - no infirmity in the findings of the ld. CIT (A). Therefore, she has rightly deleted the addition - Decided against revenue.

Addition on account of contravention of provisions of section 40A(3) - CIT(A) considering the practical problem with t .....

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#8377; 41,600/- on valid ground. In our view, the AO rightly held that since the assessee failed to furnish any evidence to prove that these payments did not fall within any of the exceptions of Rule 6DD, there was a contravention to the provisions laid down in section 40A(3) - Decided in favour of assessee.

Addition of salary expenses - CIT(A) deleted addition - Held that:- Out of 14 employees to whom the assessee claims to have paid the salary, only 3 were not given salary by cheque .....

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cause few employees have been paid salary as cash cannot justify disallowance unless the AO is able to bring any adverse material to suggest that the claim of salary incurred by the assessee is bogus - Decided in favour of assessee.

Addition on account of negative cash balance - Held that:- Finding of CIT(A) cannot be countenanced. The undisputed position is that there was negative cash balance on 01 November 2009 of ₹ 51,707/-. The basis of CIT (A) that expenditure incurred as .....

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sum of ₹ 57,707/- as unexplained income of the assessee. - Decided in favour of revenue. - ITA No.3805/Del./2013 - Dated:- 31-7-2015 - SHRI R.S. SYAL, AND SHRI A.T. VARKEY, JJ. For The Assessee : Ms. Y. Kakkar, DR For The Revenue : Shri P N Monga, Advocate and Shri Manu Monga ORDER PER A.T. VARKEY, JUDICIAL MEMBER : This appeal filed by the Revenue is directed against the Order dated 05.3.2013 passed by the Ld. CIT(A)-XXVI, New Delhi pertaining to assessment year 2009-10. 2. The Revenue ha .....

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proportionate disallowance of commission expenses. 4. The CIT(A) has erred in deleting addition of ₹ 41,600/- made by the AO on account of contravention of provisions of section 40A(3). 5. The CIT(A) has erred in deleting addition of ₹ 11,10,028/- made by the AO out of salary expenses. 6. The Ld. CIT(A) has erred in deleting the addition of ₹ 51,707/- made by the AO on account of negative cash balance. 7. The appellant craves leave to add, alter or amend any / all of the groun .....

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me on 29.9.2009 declaring a total income of ₹ 1,66,60,730/-. The case was selected for scrutiny under CASS. In compliance to the statutory notices served on the assessee, books of accounts were called for and were verified on test check basis and the assessment was completed in terms of order u/s 143(3) of the Act 1961 (hereinafter the Act ) at an income of ₹ 2,02,33,088/- as against the returned income of ₹ 1,66,60,730/- and made various additions vide order dated 28.12.2011. .....

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egard to ground no. 1 regarding deletion of addition of ₹ 6,04,805/- made by the AO on account of disallowances of bad debts is concerned, we find that in the course of assessment proceedings, the Assessing Officer noticed that the assessee had debited a sum of ₹ 9.23 lakhs as bad debts. The Assessing Officer asked the assessee to show whether all the conditions for allowability of bad debts as per the provisions of section 36(2) and 36(1)(vii) of the Act were fulfilled. Pursuant to .....

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8377; 1,27,722/- 3. Gopal Surgical ₹ 4,68,000/- ₹ 6,04,805/- Accordingly, the Assessing Officer disallowed an amount of ₹ 6,04,805/- the aggregate of the three aforesaid amounts u/s 36(2) of the Act and added to the income of the assessee. During the appellate proceeding, the Ld. CIT(A) on perusal of the material on record, noticed that in response to the query relating to bad debts amounting to ₹ 9,23,393/- appearing in the P&L account, the assessee had filed all the .....

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se parties and they were not only old but valuable customers/suppliers of the assessee who given significant business to the assessee. The Ld. CIT (A) takes note that the amounts written off in the case of Ajit Hospital and Gopal Surgical were in respect of sales made by the assessee to these parties. Whereas, in the case of Aesculap the amount represented the excess payment made by the assessee to foreign supplier. The assessee had filed details of bad debts written off with copies of accounts .....

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of the Act. Accordingly, the addition of ₹ 6,04,805/- made by the Assessing Officer was rightly deleted by the Ld. CIT(A), which does not need any interference from our part, hence, we uphold the same by dismissing the Ground no.1 raised by the Revenue. 8.1 Apropos Ground 2 regarding the deletion of addition of ₹ 2,44,850/- made on account of sundry creditors. During the course of assessment proceedings, the Assessing Officer asked the assessee to file confirmation pertaining loan a .....

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(A) has observed that the Assessing Officer referred to only a part of the reply filed by the assessee dated 15.12.2011 in the course of the assessment proceedings. The contents of the letter of the assessee dated 15.12.2011 is reproduced :- "Your show cause notice in regard to submission of confirmation of amount due to Mr. Amitabh Mendirata amounting to ₹ 2,44,850/- shown under the head Expenses payable. It is submitted that the amount pertains to the period 2007-08 and not pertain .....

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ned." We find that the copy of the account of Amitabh Mendiratta for the period from 01.04.2005 to 31.03.2008 (page 22 of paper book) clearly reflects ₹ 2,44,850/- as due for payment to Amitabh Mendiratta (closing balance). Page 23 of the paper book is the ledger account of Amitabh Mendiratta for the period 01.04.2008 to 01.03.2009 and it shows the same amount as opening balance. And page 24 of paper book shows ledger account of Amitabh Mendiratta which reflects opening balance as  .....

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of assessee shows that Amitabh Mendiratta was a retainer of the assessee who left the institution on 31.03.2008 and went abroad. The amount shown as sundry creditor by the assessee is the amount due to said Amitabh Mendiratta. Just because the assessee could not give the confirmation about the said amount which is due for Amitabh Mendiratta does not mean that it is a bogus entry made by the assessee. We find that the AO mis-directed himself by not going through the entire explanation given by t .....

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etion of addition of ₹ 18,36,524/- made by the AO on account of proportionate disallowance of commission expenses is concerned, we find that in the course of assessment proceedings, on perusal of the audit report the Assessing Officer noticed that though the assessee maintained his accounts on mercantile basis, income from commission was partly accounted for on receipt basis which was, according to AO, evident from the commission earned in the account of M/s. Overseas Associates which clea .....

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expenses be not proportionally disallowed because commission income was partly accounted for on receipt basis, when accounts were maintained on mercantile basis. According to the Assessing Officer, vide reply dated 8.12.2011, the assessee had accepted that the said amounts were accounted for on receipt basis and stated that the same were from overseas parties and that no commission was due from the overseas parties as on 31.3.2009. The Assessing Officer observed that this reply of the appellant .....

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8.12.2011 which has been referred by the Assessing Officer in his order. On perusal of the said reply of the assessee, she finds that the books of accounts were maintained on mercantile basis in respect of incomes and expenditure; and any commission due from the parties and any commission due to sub-dealers have been accounted for on accrual basis. The ld. CIT (A) took note of the fact that the assessee had fully explained the accounting of the impugned commission income. According to the ld. C .....

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sions were made after deducting corresponding TDS as per law. In the said facts and circumstances, ld. CIT (A) held that there was no justification for making any proportionate disallowance out of commission expenses. We have gone through the bank statement of the assessee i.e. of M/s. Overseas Associates with Corporation Bank for the period from 01.04.2008 to 26.08.2008 and 24.01.2008 to 03.02.2009 which is placed at page 25 - 26 PB, and copy of commission earned account in the books of the ass .....

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idence on record, we do not see any reason to interfere with it; hence, we uphold the same and dismiss the ground no. 3 raised by the Revenue. 8.3 Apropos ground 4 is relating to deletion of addition of ₹ 41,600/- made by the AO on account of contravention of provisions of section 40A(3) of the Act is concerned, we find that in the assessment proceedings, on examination of the cash book of M/s Overseas Associates, the AO noticed that the assessee had made payment of ₹ 41,600/- in cas .....

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he exceptions of Rule 6DD, there was a contravention to the provisions laid down in section 40A(3) of the Act. Therefore, he disallowed the amount of ₹ 41,600/-. However, we find that Ld. CIT(A) found fault with the AO for not giving any reason as to how this payment contravened section 40A (3) for purchase of gifts; and not a single payment, and has deleted the addition of ₹ 41,600/- relying upon the assessee s letter dated 8.12.2011 in respect of this payment stating that the payme .....

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day. We find on perusal of page 95 of PB, sale bill of gift for ₹ 41,600/- dated 08.08.2008, which was paid in cash, so is in contravention of section 40A(3) of the Act. Therefore, we find that the AO has disallowed the amount of ₹ 41,600/- on valid ground. In our view, the AO rightly held that since the assessee failed to furnish any evidence to prove that these payments did not fall within any of the exceptions of Rule 6DD, there was a contravention to the provisions laid down in .....

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the assessee to file the details in respect of salary expenses amounting to ₹ 18,88,656/- with necessary evidence. Since, the appellant did furnish evidence in respect of salary expenses, vide order sheet entry dated 12.12.2011, the Assessing Officer issued a show cause to the appellant as to why the salary expenses be not disallowed in the absence of evidence. The appellant in his reply dated 15.12.2011 filed before the Assessing Officer had submitted as under: " It is submitted that .....

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towards salaries paid are through payees account cheques which can be verified with the Bank statement submitted. We hope the enclosed details will satisfy you in regard to be payment made on account of salaries/ex-gratia/bonus in the year under reference." On perusal of the assessee s reply, the Assessing Officer noted that the aggregate salary issued by the assessee through cheques worked out to ₹ 15,16,256/- as against ₹ 18,88,656/- debited to the P&L account. Therefore, .....

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- (i.e. ₹ 7,82,628/- paid in cash and the difference that worked out amounting to ₹ 3,27,400/- (i.e. 18,88,656 - 15,61,256) was added to the income of the assessee. We find that the Ld. CIT(A) has observed that Assessing Officer had not made out of case for making the impugned disallowance and that the Assessing Officer had made vague observation to disallow a major part of the salary debited to the P&L A/c. According to the Ld CIT(A) the Assessing Officer had also wrongly worked .....

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impugned addition. In the instant case, we find that the AO has reproduced a chart presented by the assessee in page 5 & 6 of his order. From a perusal of the said chart, we find that out of 14 employees to whom the assessee claims to have paid the salary, only 3 were not given salary by cheque. Other 11 employees were paid by account pay cheque and cash. The assessee had produced the appointment letters of the said employees and confirmation from them that they have received the said salary .....

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e assessee is bogus. So the Ld CIT(A) righty deleted the addition of Rs. ₹ 11,10,028/-, which does not need any interference on our part, hence, we uphold the same by dismissing the ground no. 5 raised by the Revenue. 8.5 Apropos ground No. 6 relating to deletion of the addition of ₹ 51,707/- made by the AO on account of negative cash balance is concerned, we find that in the course of the assessment proceedings, on examination of the cash book vis-a-vis bank account statements, the .....

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k statement the withdrawal was on 3.3.2009. Accordingly, the assessee was asked to show cause as to why the negative cash balance due to cash withdrawal shown in cash book earlier than the actual withdrawals made from the banks, as per bank statement be not added to his income. Vide reply dated 8.12.2011, the assessee submitted that entries were made when cheques were issued. This was observed by the Assessing Officer as the assessee s attempt to misguide and in his opinion, the cash was to be d .....

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IL NIL ₹ 10000/- (Imprest expenses) Negative Balance ₹ 10,000+41,707=51,707/- 2.3.2009 Nil Actual bank withdrawal ₹ 67,200/- Nil Debit balance ₹ 67,200/- 3.3.2009 Actual bank withdrawal ₹ 25,000 ₹ 20/- Debit Balance ₹ 92,200/- Hence, the Assessing Officer worked out the negative balance as aggregating to (Rs.41,707 + ₹ 10,000) ₹ 51,707/- and added to the income of the assessee. Ld. CIT(A) deleted the addition of ₹ 51,707/- by relying on .....

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