TMI Blog2015 (12) TMI 765X X X X Extracts X X X X X X X X Extracts X X X X ..... 6DD are not exclusive. This was the business expdiencies of the company to pay in cash, therefore, we do not find that these payments are covered U/s 40A(3) of the Act. Accordingly, the addition confirmed by the ld CIT(A) is deleted. - Decided in favour of assessee. Addition on account of expenditure incurred on repair and maintenance treating the same as capital expenditure - Held that:- the assessee has fabricated the evidence at the time of photo copying. Original vouchers were not produced before the ld CIT(A). The genuineness of the expenses has been doubted by the lower authority, therefore, we confirm the order of the ld CIT(A) on this ground - Decided against assessee. Addition on account of cessation of liability U/s 41(1) - Held that:- burden is on the revenue to prove that the assessee has taken deduction in earlier year and there is a write-off bilateral. In assessee’s case, even unilateral written off has not been claimed by the company. The other creditors were advance received from the customer to the tune of ₹ 9,41,354/-, which was paid of in later years. The AR of the assessee filed relevant evidences for repayment in subsequent year, which proved that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5/-:- The ld CIT(A) erred in law as well as on the facts of the case in confirming the disallowances of ₹ 30,000/- on account of repair and maintenance of video camera and further erred in enhancing the disallowance to ₹ 2,7,25/-. The disallowance so confirmed and further enhanced by the ld CIT(A) is contrary to the provisions of law and facts of the case. Hence, the same kindly be deleted in full. Alternatively and without prejudice to above, the ld CIT(A) erred in law as well as on the facts of the case in not even allowing depreciation despite holding the expenditure of capital nature. Hence, the depreciation @ 15% kindly be directed to be allowed. 4. ₹ 2,26,805/-:- The ld CIT(A) erred in law as well as on the facts of the case in partly confirming the disallowances made U/s 40A(3) of the Act of ₹ 2,88,000/-. The disallowance so made and partly allowed is totally contrary to the provisions of law and facts on the record and hence the same kindly be deleted in full. 5. ₹ 51,744/-:- The ld CIT(A) erred in law as well as on the facts of the case in confirming the disallowance of the expenditure incurred on account of repair and mainte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the payments were made by the Directors later on it was reimbursed to them but entered in books on the date of payment. As far as negative balance on other days, the submission of assessee is not acceptable, since each and every narration was given in the entries in the cash book at the time of payment i.e. months for which paid, rate at which paid etc. Therefore, he held that shortage appearing in the cash book of assessee was on account of excess expenses in comparison to availability of cash. This shortage might be met by the assessee out of their undisclosed income. Thus he made addition of ₹ 62,327.90. 4. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the ld CIT(A), who had confirmed the addition by observing that the ld Assessing Officer had examined the cash book during the course of assessment proceedings. He has confronted the shortage of cash with the assessee. Bill of ₹ 1754/- against the telephone expenses by the Director, which was reimbursed by the firm on 23/07/2008 and same was clerical mistake committed by the Accountant, who made entries in the cash book. Similarly, the cash shortage of ₹ 61,195/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the ld CIT(A). Accordingly, this ground of assessee s appeal is dismissed. 8. The 3rd ground of the assessee s appeal is against confirming the disallowance of ₹ 30,000/- and enhancing the disallowance of ₹ 2,725/- on account of repair and maintenance. The ld Assessing Officer observed that the assessee had debited ₹ 15,000/- on 01/08/2007 and ₹ 15,000/- on 10/08/2007 under the head repair and maintenance of video camera. He further observed that the assessee did not own any camera, therefore, these expenses incurred on maintenance of camera owned by the Director. The ld Assessing Officer gave reasonable opportunity of being heard on this issue but the assessee did not furnish any reply before him. Thus, he made addition of ₹ 30,000/ in the income of the assessee. 9. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the ld CIT(A), who had confirmed the addition by observing that on perusal of bill of Shubham Electronics dated 11/5/2007 for purchase of CCTV camera amounting to ₹ 40,500/- which was ultimately settled for ₹ 38,500/-. Out of this, the amounts of ₹ 30,000/- and ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en employees on 07/09/2007 in violation of provisions of Section 40A(3) of the IT Act. When confronted, the appellant explained that no single payment in cash exceeding ₹ 20,000/- was made by it. The appellant submitted that payments were made on different dates however the accountant had inadvertently posted these entries on single day. The appellant also produced the vouchers of different dates but these were rejected by the A.O. as complete narration was available in the cash book itself. The narration of various entries in the cash book which are enumerated on page 3 of the assessment order showed that the entire payment of salary for four months was made on 07/09/2007. Further, only a single voucher bearing specific number was mentioned against each cash payment. This fact itself proved that the appellant had violated the provisions of Section 40A(3) of the IT Act. The subsequent vouchers were allegedly fabricated by the appellant. Hence these self made vouchers prepared afterwards are being rejected. The counsel of appellant has argued that addition of ₹ 61,195/- had already been made on account of shortage in cash balance. Therefore, the addition to this extent t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bhatnagar 20 TW 368 (JP) and Paras Cotton Company Vs. CIT (2003) 30 TW 168 (JD). There was no evidence that the assessee company was having cash crunch. He further relied on the decision in the case of Anupam Tele Services Vs. ITO (2014) 88 CCH 35 (Guj) wherein the Hon'ble High Court followed the decision in the case of Attar Singh Gurumukh Singh Vs. ITO (1991) 191 ITR 667 (SC) on business expediencies wherein it has been held that there were peculiar facts wherein the payee insisted upon cash payment only and following the decision in the case of Harshila Chordia Vs. ITO (2008) 298 ITR 349 (Raj.) wherein the Hon'ble High Court has held that the exceptions contained in rule 6DD are not exhaustive and that the said rule must be interpreted liberally. In the present case also, the payees insisted upon cash payment only being employees of the assessee firm, therefore, he prayed that no disallowance should be made. 14. At the outset, the ld DR has vehemently supported the order of the Assessing Officer. 15. We have heard the rival contentions of both the parties and perused the material available on the record. Prima facie it appears that the assessee has paid salary in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aipur Distillery Co. Ltd. (2004) 186 CTR 39 (Raj.) and argued that the assessee could not produce the purchase bills. Admittedly, the vouchers were produced before the ld Assessing Officer. He has drawn our attention on page No. 74 to 79 of the paper book. The appellant was having complete address of the fabricator however, the Assessing Officer never asked to produce him. It is clear from the vouchers that these expenses pertained to repair and maintenance, which is revenue in nature. Therefore, the same is to be allowed. 18. At the outset, the ld DR supported the order of the ld CIT(A). 19. We have heard the rival contentions of both the parties and perused the material available on the record. After examining page No. 74 to 79 of the paper book, it appears that the assessee has fabricated the evidence at the time of photo copying. Original vouchers were not produced before the ld CIT(A). The genuineness of the expenses has been doubted by the lower authority, therefore, we confirm the order of the ld CIT(A) on this ground. Accordingly, this ground of the assessee s appeal is dismissed. 20. The 6th ground of the assessee s appeal is against confirm the addition on accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... South Point Distributor ₹ 20000/- Star Medical Agencies ₹ 15000/- These deposits have already covered in the scrutiny assessment of A.Y. 1996-97. d) One party M/s Swastic Distributors having balance ₹ 100000/- on account of security deposit. We submit herewith a claim by the party for various payment alongwith this security deposit. A copy of such claim is enclosed for confirmation and your verification which include this security deposit also. e) The following parties account which are old outstanding and were under dispute and finally written off in financial year 2008-09 (A.Y. 2009-10). Arihant trading Co. ₹ 74123/- Outstanding since 2004 Atman Pharmaceutical ₹ 14280/- Outstanding since March 05 Sagar Chemicals ₹ 159972/- Outstanding since May 2006 S.A. Pharma ₹ 40425/- Outstanding since May 2005 Copy of account of wri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certainable. The assessee failed to furnish addresses of these persons. There is no detail of parties from whom the assessee got the security shown at ₹ 50,000/-. The assessee only submitted that this security was received in financial year 1995-96. He further relied on the decision in the case of CIT Vs. Rajasthan Golden transport Co. (P) Ltd. (2001) 116 Taxman 60. The amounts of security deposited are assessee s own money due to bar provided in Limitation Act. Even the assessee was not having addresses of these persons Correspondence of M/s Swastik Distributors filed by the assessee relates to F.Y. 1999-2000 where they were claiming the amount but the assessee had not paid their dues till date and even no correspondence was made after that day. Therefore, the security deposits to the tune of ₹ 3,60,000/- has been treated as income U/s 41(1) of the Act. 20.2 He further observed that as far as claim of assessee regarding unsecured loans is concerned, the same is verifiable from past records of assessee that the money was received by them from those persons but it is not verifiable that whether these were unsecured loans or advance against supply of medicines. The ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e would include the value of any benefit or perquisite, whether convertible into money or not, that would arise from the business. He further relied on the decision in the case of Solid Containers Ltd. Vs DCIT 308 ITR 417, which was applied in TV Sundaram Iyengar and Sons Ltd. 222 ITR 344, had distinguished its decision in Mahindra and Mahindra Ltd. Vs. CIT 261 ITR 501 and held that on waiver of loan taken for business purposes, the amount was retained in the business and as such, the amount that initially did not have the character of income became income liable to tax. In the case of T V Sundaram Iyengar Sons Ltd. (supra) the assessee had accepted his deposits. The assessee has written off these deposits. The Assessing Officer treated these deposits as revenue receipts, which was held capital receipt by the CIT(A) and Hon ble ITAT. However, the Hon'ble Supreme Court held that these receipts were originally capital receipt but change its character by efflux of time. The Hon'ble Supreme Court relying upon its judgment in the case of Punjab Distilling Industries Ltd. Vs CIT 35 ITR 519 by applying the above said principle, it was held that the assessee because of trading op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ressing/waived the liability. It does not mean that liability not existed or waived by the creditor. The number of Hon'ble High Courts held that mere unilateral reversal of entries by one party will not amount to cessation of liability and that expiry of the period of limitation prescribed under the Limitation Act could not extinguish the debt, but it would only prevent the creditor from enforcing the debt. Mere entry in the books of accounts of the debtor, made unilaterally without any act on the part of the creditor, will not enable the debtor to say that the liability has ended. The revenue had not proved the waiver by the creditor even there is not a case of unilateral waiver of the subjected liability. The ld CIT(A) had wrongly concluded that 18.05 lacs not liable to be returned is nothing more than a suspicion. The entire amount had been paid by the assessee in A.Y. 2013-14 and 2014-15 as per Annexure-A of the assessee s submission before the Bench. The ld CIT(A) had not considered the assessee s case laws referred before him in his order. The Assessing Officer as well as the ld CIT(A) had utterly failed to show that some deduction was really claimed and allowed in earlie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age No. 93 to 95 of the paper book. The ld Assessing Officer had not made any inquiry on it. Therefore, the ld Assessing Officer do not have any contrary evidence against the assessee, the addition is uncalled for. He further relied on the decision in the case of CIT Vs. Sadul textiles Ltd. 59 CTR 98 (Raj.), which is directly applicable on this issue wherein it has been held that onus was on the Assessing Officer that there was a bilateral waiver of liability. There was amendment in the law from A.Y. 1997-98 after that unilateral write-off has been treated a case of remission and cessation but in assessee s case, even there is no unilateral action and had not written off these amounts in the P L account. He further relied on the decision in the case of CIT Vs. Eid. Mohd. Nizammudin (2007) 294 ITR 139 (Raj.). The Hon'ble Supreme Court in the case of Chief CIT Vs. Kesaria tea Co. Ltd. (2002) 173 CTR 394 (SC) has held that unilateral action on the part of the assessee by way of writing off liability in its account, does not necessary mean that the liability has ceased in the eye of law. The amount written back is not chargeable to tax U/s 41(1) of the Act. He further relied on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n later years. The AR of the assessee filed relevant evidences for repayment in subsequent year, which proved that the assessee s liability was in existence. The revenue has not brought on record any adversary evidence to establish that liability was not inexistence or not paid in the subsequent year. The assessee has shown ₹ 3.60 lacs as security deposit out of this ₹ 2.10 lacs were added by the Assessing Officer in A.Y. 1996-97, which has been deleted by the ld CIT(A). No appeal had been filed by the revenue before the ITAT, therefore, issue is settled. Further remaining amount, the assessee filed confirmation and the ld Assessing Officer had not made any inquiry and established the case that liability is not inexistence. The case laws relied upon by the assessee are squarely applicable particular Hon'ble Supreme Court decision in the case of Chief CIT Vs. Kesaria Tea Co. Ltd. (supra). The case laws referred by the ld CIT(A) are squarely distinguishable on the ground that there was a written off either by the assessee or bilaterally. After careful consideration of all the facts and circumstances of the case and written submissions made by the ld AR on Section 41(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ployee s contribution. Therefore, he upheld order of the Assessing Officer on this ground. 27. Now the assessee is in appeal before us. The ld AR of the assessee has submitted that this is directly covered matter, for which he relied on the following case laws: (i) CIT Vs SBBJ (2014) 363 ITR 70 (Raj.) (ii) CIT Vs. JVVNL (2014) 363 ITR 307 (Raj.) (iii) ACIT Vs. M/s Anil Special Steel Industries Ltd., Jaipur (2014) 52 TW 189 (JP). (iv) CIT Vs. Alom Extrusions Ltd. (2009) 319 ITR 306 (SC)/ 227 CTR 417 (SC)32 DTR 49 (SC). (v) CIT Vs. Ghatge Pali Transports Ltd. (2015) 112 DTR 369 (Bom). Therefore, he prayed to delete the addition confirmed by the ld CIT(A). At the outset, the ld DR has vehemently supported the order of the ld CIT(A). 28. We have heard the rival contentions of both the parties and perused the material available on the record. The ld AR has submitted that the said amount of ESI has been paid before due date of return to the fund. In view of the facts and circumstances, we delete the addition made by the Assessing Officer and confirmed by the ld CIT(A). Accordingly, this ground of the assessee s appeal is allowed. 29. The 8th ground of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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