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2015 (11) TMI 1364 - ITAT DELHI

2015 (11) TMI 1364 - ITAT DELHI - TMI - 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 .....

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he facts have not been brought out clearly by the assessee. The reconciliation statement of the difference in opening balances have not been furnished. 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 t .....

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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 that the payment of salary is excessive having regard to the fair market value of the services for which the payment is made. Accordingly, th .....

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ated in para 2 of the Ld.CIT(A) s order, 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  .....

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alary of ₹ 1,80,000/- to Smt.Bailu Khanna, wife of Sh. Anil Khanna, partner of the firm. As per the details furnished, Smt. Bailu Khanna was working as a senior merchandiser with the firm. After considering that the maximum salary paid to any employee was ₹ 1,20,000/- which was paid to Smt. Achal Bhatia, General Manager, the Assessing Officer held that the salary payment to Smt. Bailu Khanna was excessive having regard to the fair market value of the services, and disallowed ₹ .....

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xpenses 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 groun .....

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ed ClT(A) has grossly erred on the facts 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 .....

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erseas was returned with the postal remark not known . The A.O. also noticed that there is a difference in the closing balance shown by the assessee on 31.3.2005 at ₹ 30,93,780/- and the closing balance shown by M/s Ganesh Overseas on the same date i.e. 31.03.2005 at ₹ 25,20,641/-. There is a difference of ₹ 5,73,139/-. The AO submitted that addition of credit balance made in the assessment order, is required to be confirmed, for the reason that the creditor could not be found .....

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to M/s Ganesh Overseas, was returned by the postal authorities, no addition can be made of the credit balance by deeming the same as income. The Ld.Counsel argued that the assessee was having dealings with M/s Ganesh Overseas from the year 2002-03 and that it was selling 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 part .....

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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 not of the pattern of the earlier pay .....

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undry creditors were taken over by M/s Zanelini Apparels Pvt. Ltd. and some of the credit balances have been settled by that company in subsequent years. However for reasons best known to the appellant, the credit balance of ₹ 30,93,780/- in the name of M/s Ganesh Overseas was not taken over with other sundry creditors by the sister company, continued to be carried forward in the books of the appellant, and supposedly remains payable till date. As admitted by the appellant, the business wa .....

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account of M/s Ganesh Overseas, the opening balance as on 01.04.2004 is of ₹ 13,94,590/- whereas the opening balance in the books of the appellant amounts to ₹ 19,67,729/-. The difference of ₹ 5,73,139/- is accordingly treated as unexplained and added to the total income. The new credits of 11,26,051/- in the account of M/s Ganesh Overseas are also treated as unexplained as the creditor was not traceable, and the confirmation filed suffers from serious defects. Regarding the op .....

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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 secti .....

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ke payment of this liability and had actually discharged it later, no addition u/s 41(1) can be made. 7.4. The prime contention of the assessee is that there is no cessation of liability, during the year and hence the addition cannot be made. The contention of the Revenue is that the new credits of ₹ 11,26,051/- have not been explain along with the differenc in opening balances. It is further contended by the revenue that the confirmation given by M/s Ganesh Overseas suffers from serious d .....

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cheques and the assessee has sold DEPB licenses to the above party. Under these circumstances the addition u/s 41(1) cannot be made to the amount of ₹ 13,94,590/-. As regards the other amounts, confirmation letters have been filed by the assesee and the addition cannot be made merely on the ground that a letter posted by the A.O. to the assessee, has been returned unserved. The PAN number of the proprietor M/s Ganesh Overseas, has been furnished by the assessee. The A.O. could have made en .....

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