TMI Blog2015 (11) TMI 1364X X X X Extracts X X X X X X X X Extracts X X X X ..... nished. The A.O. has also not properly brought out the facts on this issue. Hence we deem it fit to set aside the matter to the file of the Ld.A.O. for fresh adjudication in accordance with law. Addition on outstanding balance of sundry creditors as income of assessee u/s 41(1) - Held that:- The Ld.CIT(A) sustained the addition on the ground that the assessee had not furnished any evidence to support the credit balances . Applying the propositions laid down in CIT vs. Auto Kashyap India Pvt.Ltd. (2010 (4) TMI 53 - DELHI HIGH COURT), the disallowance has to be deleted, as there is no writing off of the liability by the creditors. In the result this ground of the assessee is allowed. Disallowance of salary paid to the wife of Shri Anil Khanna, partner of the firm - disallowance made u/s 40A(i)(a) - Held that:- Salary paid to the General Manager was only ₹ 1,20,000/-. Smt. Ballu Khanna was paid ₹ 1,80,000/-, though she is only a graduate and this was her first employment. Hence, her qualifications and work experience to justify the payment of salary of ₹ 1,80,000/- could not be brought on record by the appellant. Hence in agreement with the findings of the AO t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firmations as called for, the Assessing Officer held that the liabilities no longer existed, and added the total amount of such sundry creditors of ₹ 10,77,844/- to the income. The Assessing Officer also disallowed a lumpsum amount of ₹ 50,000/- out of sales promotion expenses of ₹ 4,15,361/- for want of bills. The Assessing Officer disallowed 1/8th of expenses incurred on car maintenance, interest on car loan and car depreciation as log book was not maintained and the partners of the firm were not having any personal vehicles. The Assessing Officer also disallowed l/8th of the telephone expenses claimed, for personal use. 3. On appeal the First Appellate Authority granted part relief. Aggrieved, the assessee is in appeal before us on the following grounds. 1. The learned CIT(A) has grossly erred on the facts of the case in upholding the addition of ₹ 30,93,780/- as income of assessee while treating the outstanding balance due to M/s Ganesh overseas u/s 41(1) of the Income Tax Act, 1961. 2. The learned CIT(A) has grossly erred on the facts of the case in upholding the addition of ₹ 438348/- out of ₹ 40,77,844/- the outstanding ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its DEPB licenses and income from such sale was assessed year after year, and the payments were being received by account payee cheques. It was further submitted that the assessee used to receive money in advance from this party against the licenses to be sold to them. 7.1. The Ld.D.R. relied on the order of the First Appellate Authority and submitted that the genuineness of the transaction has not been demonstrated by the assessee. He argued that the address given by the assessee is wrong and that no attempt has been made to reconcile the differences in the accounts. The First Appellate Authority considered all these submissions and at para 4.2 observed as follows. 4.2 Copies of account of the earlier Financial Years 2002-03 and 2003-04 indicate that the appellant was selling DEPB licenses to M/s Ganesh Overseas for which it received money in advance. The copies of account show that the advances were being invariably received in round figures and' only settlement of balances was made through cheques of odd sums, but of very small amounts, that is in hundreds or thousands of rupees. The amounts allegedly paid by cheque of ₹ 6,14,307/- and ₹ 5,11,744/- are no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of Hon ble Delhi High Court in the case of CIT vs. Auto Kashyap India Pvt.Ltd. reported in 330 ITR 435. In the above judgement the Hon ble High Court dismissing the appeal, held that, Explanation 1 to section 41 had no applicability to the facts of the case, since there was no writing off of liability and only the sub head under which the liability was shown in the accounts books of the assessee was changed. No benefit accrued to the assessee by changing the nomenclature and, therefore, the outstanding credit balance could not be deemed to be profits and gains of the business of the assessee company within the meaning of section 41 of the Act. 7.3. Further the Ld.Counsel for the assessee contended that, It is a pre requisite condition, before having a recourse to section 41 of the Income Tax Act 1961, that the assessee must have either obtained the benefits in respect of the loss, expenditure or trading liability, incurred earlier by it or it should have received any benefits in respect of such trading liability by way of remission or cession thereof . He submitted that as the company acknowledged its liability to make payment of this liability and had actually discharg ..... X X X X Extracts X X X X X X X X Extracts X X X X
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