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2015 (11) TMI 1364

Addition of outstanding balance due to M/s Ganesh overseas u/s 41(1) - Held that:- The existence of M/s Ganesh Overseas cannot be doubted, as it has a PAN number and it has been dealing with the assessee in the earlier F.Ys 2002-03 and 2003-04. This fact has been recorded by the Ld.CIT(A) in para 4.2 of his order. The amounts are received through account payee cheques and the assessee has sold DEPB licenses to the above party. Under these circumstances the addition u/s 41(1) cannot be made
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vidence 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, .....

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which is extracted for ready reference. 2. The appellant filed return of income for the Assessment Year 2005-06 on 31.10.2005 declaring a loss of ₹ 18,73,988/-. The case was selected for scrutiny under CASS. During the scrutiny assessment proceedings, the Assessing Officer noticed that the ledger account of a creditor M/s Ganesh Overseas showed an opening balance of ₹ 19,67,729/- and credit entries during the year of ₹ 6,14,307/- and ₹ 5,11,744/-, however there were no t .....

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ficer also required the appellant to file confirmations of all sundry creditors with whom there were no business transactions during the year. As the appellant failed to file confirmations 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 o .....

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of the case in upholding the addition of ₹ 60,000/- salary paid to Smt. Bailu Khanna u/s 40A(2)(b) of the Income Tax Act, 1961. 4. The appellant seeks leave to add or to amend the foregoing grounds of appeal, if it becomes necessary to do so in the interest of justice. 4. We have heard Smt. Ritu Sharma, Ld.Sr.D.R. on behalf of the Revenue and Shri Ashok Malik, the Ld.Counsel on behalf of the assessee. 5. After careful consideration of the facts and circumstances of the case, perusal of ma .....

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rt was made available to the assessee for its rejoinder. The assessee submitted that M/s Ganesh Overseas was a proprietary concern of Mrs. Anitha Sharma, her PAN number was given. It was submitted that the opening balance differences, may be on account of reconciliation differences. It was pointed out that the current year s transactions were confirmed by M/s Ganesh Overseas. 7. The assessee contended that merely because the letter addressed by the Ld.A.O. to M/s Ganesh Overseas, was returned by .....

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ppellant 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 not of the pattern of the earlier payments. If at all these amounts pertain t .....

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r 2004', hence M/s Ganesh Overseas could not have been expecting to procure more licenses from the appellant - even in respect of the opening balance as on 01.04.2004. For all the above reasons, it is held that the appellant has failed to explain the nature of the credit balance of ₹ 30,93,780/-, and has failed to prove the genuineness or the source of the amounts received of ₹ 6,14,307/- and of ₹ 5,11,744/-. According to the copy of account of M/s Ganesh Overseas, the open .....

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eld 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.Co .....

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self is in doubt. Hence the Ld.D.R. prays that the order of the Ld.CIT(A) be upheld. 8. On a careful consideration of the facts of this case, we are of the considered opinion that the existence of M/s Ganesh Overseas cannot be doubted, as it has a PAN number and it has been dealing with the assessee in the earlier F.Ys 2002-03 and 2003-04. This fact has been recorded by the Ld.CIT(A) in para 4.2 of his order. The amounts are received through account payee cheques and the assessee has sold DEPB l .....

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4,83,348/-. The Ld.CIT(A) sustained the addition on the ground that the assessee had not furnished any evidence to support the credit balances of ₹ 4,38,348/-. Applying the propositions laid down by the Hon ble Delhi High Court in CIT vs. Auto Kashyap India Pvt.Ltd. (supra), 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. 10. The next ground is on disallowance of ₹ 60,000/- being .....

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