TMI Blog2016 (2) TMI 500X X X X Extracts X X X X X X X X Extracts X X X X ..... / asset - Held that:- Shri Vinay Gupta has failed to prove the source of investment of ₹ 5,00,000/-in the shares of M/s. Moriic India Ltd. As none has appeared on behalf of M/s. Vgyapan Bureau despite issuance of summon u/s 131 of the Act, to prove the contention of the assessee. he assessee’s contention to have sold 3,00,000 shares of its subsidiary company at loss to generate liquidity of ₹ 5,00,000/- is incomprehensible for the reason that after 15 years of investment he has sold shares at loss just to generate liquidity of ₹ 5,00,000/- particularly when he had already generated funds to the tune of ₹ 4,50,00,000/- on account of sale of property earlier than sale of shares and the assessee has even furnished no explanation when called upon to explain as to why the sale of shares of M/s. Moriic India Pvt. Ltd. be not treated as sham transaction. Therefore, the amount of ₹ 5,00,000/- credited in the books of accounts of Vinay Kumar Gupta on 29.10.2005, who has debited equal amount of payment to the assessee by reflecting the same in his books of accounts on 02.11.2005 and resultantly a sham transaction - Decided in favour of revenue Disallowance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the deduction claimed in the year under consideration is only a consequential relief for the 5th year. So, even otherwise, Section 35DDA does not preclude the assessing authority to consider the VRS payment as revenue expenditure. - Decided against revenue Disallowance on account of late payment of PF contribution - Held that: It is the settled principle of law that the expenditure are allowable u/s 43B of the Act, even if deposited late, but before the date of filing of return of income. In the instant case, the assessee has deposited the amount late by 5 days but before the filing of return for the relevant period. So, we find no ground to interfere into the findings returned by Ld. CIT(A) on this issue deleting the addition - Decided against the Revenue Addition on account of communication expense and vehicle running and maintenance expenses - Held that:- A.O. has merely disallowed 1/4th of the total expenditure on account of communication expenditure on the basis of letter written by the assessee, but has failed to make out any element of personal nature by applying his mind in the said expenditure particularly in case of a company. When expenses have been made by a comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 1,28,34,510/- on account of long term capital gain and ₹ 23,75,712/- on account of short term capital gain made by the Assessing Officer disregarding the fact that the Assessing Officer had referred the matter to the D VO after satisfying all the requirements as laid down in section 142A of the Income Tax Act, 1961 and adopted the value based on report of the DVO after giving proper and adequate opportunities to the assessee vide his letter No. 1837 dated 24-12-2007 (copy enclosed as Annexure-B) in response to which the assessee had given his reply vide letter dated 27-12-2007 (copy enclosed as Annexure - C). 3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred on facts and in law in allowing the long term capital loss of ₹ 76,84,124/- disregarding the fact that the purchaser, Shri Vinay Kumar Gupta was not a genuine person and the deal was a sham transaction. 4. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred on facts and in law in deleting the addition of ₹ 90,97,536/- made by the Assessing Officer on account of bad debts written off disregarding the fact that the assessee had failed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conveyance expenses made by the Assessing Officer even though the assessee had failed to furnish any evidence that entire expenses were incurred wholly and exclusively for the business purposes and even though these expenses were not fully verifiable. 2. Briefly stated, the facts of this case are: during the processing of return of income declaring net loss of Rs.l,35,71,940/- and revised return claiming loss of Rs.l,11,10,2661-, the case was selected for scrutiny and consequent upon the notices issued u/ss 143(2) and 142(1) of the Act along with questionnaire Shri Ashok Agarwal, Director Commercial, Santosh Gupta CA, T.C. Goyal, Sr. Manager Accounts attended the proceedings filed submissions to various queries raised and produced books of accounts and the case was also discussed with them. The assessee company is into the business of manufacturing and trading of auto components. In order to compute the capital gain qua the property sold by the assessee, a report of DVO dated 24.12.2007 was called and the assessee was confronted with the valuation, who has filed reply of the same. Objections raised by the assessee to the valuation report were forwarded to the DVO who has rej ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count, it was noted that the assessee had debited ₹ 10,50,328/- as communication expenses. But on query, the Ld. A.R. stated that all registers for the telephones has not been maintained and vide letter dated 29.10.2007, assessee submitted that out of total communication expenditure, 1/4th thereof may be disallowed for non business purpose as no call register has been maintained. So, 1/4th of the communication expenditure amounting to ₹ 2,62,582/- was disallowed and added back to the total income of the assessee. 9. From the P L account, it was noted that the assessee had debited ₹ 35,34,889/- as staff welfare expenses. On query, assessee stated that 1/10th of the total expenses may be disallowed for non business expenses as the expenses of such nature cannot be verifiable, so 1/10th of the staff welfare expenses amounting to, ₹ 3,53,489/- has been disallowed and added back to the total income of the assessee. 10. The assessee carried the matter before Ld. CIT(A) by way of appeal who has partly allowed the appeal. Feeling aggrieved, the revenue has come up before the Tribunal by filing the present appeal. 11. Grounds No.l 2: Ld. D.R. chall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udgement CIT Vs Nelopher I. Singh (supra) is that when there is nothing on record to prove that assessee received a consideration from the sale of said property more than what is shown in the sale documents, the actual sale consideration recorded in the sale documents cannot be substituted by the value of the property arrived at by the DVO. Moreover, when Ld. CIT(A) has himself held in para 8 of the impugned order that neither the DVO nor the A.O. allowed any opportunity of being heard to the assessee before relying upon the report of DVO and thereby violated the rules of natural justice, he has committed error in deleting the addition on account of LTCG on land at ₹ 2,35,97,760/- and STCG on building at ₹ 60,16,039/-. 11.4 So, we are of the considered view that the matter is required to be restored to Ld. CIT(A) to decide afresh after providing adequate opportunity of being heard to the parties so far as Ground No.1 2 are concerned. 12. Ground No.3 : The A.O. disallowed the deduction of ₹ 76,84,124/- on account of loss on sale of investment / asset. The assessee claimed to have sold 3,00,000 equity shares of M/s. Moriic India Ltd. during financial y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are market, who had earlier never invested in the shares except for applying for a few hundred shares of a company in its LP.O., would invest such a heavy amount in the shares of a company which has already gone into liquidation. ii) It is equally incomprehensible that the assessee who had invested ₹ 30, 00, 000/- in its subsidiary company about 15 years ago would sell shares at a loss when the buyer was allegedly convinced that he would earn a profit, as a result of the deal. It is unfathomable that the assessee would sell the above said investment in its subsidiary company at such a loss just to generate liquidity of ₹ 5,00,000/- as contented vide letter dated 11th December, 2007 when it had already generated funds to the tune of ₹ 4,50,00,000/- on account of sale of property little before the said deal for shares was stuck. iii) The assessee's contention vide letter dated 11th December, 2007 that the buyer was contacted through the friend circle without identifying the said 'friend or the circle does not inspire confidence. 12.2 The A.O. concluded at par 2.l2 at page 15 of his order as under: 2.12 It may, further, be seen that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the income tax return in the passbook which has been produced before the A.O.; that from the query made with M/s. Vijay Business proves further confirmation of investment of ₹ 5,00,000/- through the returned cheque of loan. 12.4. However, we are of the view that the A.O. has based his decision on cogent reasons whereas Ld. CIT(A) has proceeded in deleting the addition on account of long term capital loss (of ₹ 76,84,124/-) on the basis of conjectures and surmises on the grounds inter alia that: i) Shri Vinay Gupta has failed to prove the source of investment of ₹ 5,00,000/-in the shares of M/s. Moriic India Ltd. As none has appeared on behalf of M/s. Vgyapan Bureau despite issuance of summon u/s 131 of the Act, to prove the contention of the assessee; ii) that scrutiny of statement of account supplied by Allahabad Bank goes to prove that an amount of ₹ 5,00,000/- was credited in the bank account of Vinay Kumar Gupta on 29.10.2005 and the debit of equal amount on account of payment to the assessee is reflected in his bank account on 02.11.2005 and more surprisingly, the said amount of ₹ 5,00,000/- was found credited in the bank account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as, in fact, been written off in accounts of the assessee. This exercise has not been undertaken by the AD. Hence, the matter is remitted to the AD for de novo consideration of the above-mentioned aspect only and that too only to the extent of the write off. 14.1 In the instant case, assessee has written off bad debts to the tune of ₹ 90,97,536/- as irrecoverable in the accounts books for the Assessment Year 2005-06 and in these circumstances, assessee has no need to further prove that the debt has become bad and it is not necessary for the assessee to establish that the debt has actually become irrecoverable. The judgement of TRF Ltd. (supra) is squarely applicable to the facts and circumstances of this case. Hence, we are of the considered view that there is no scope to interfere into the findings returned by Ld. CIT(A) in deleting the addition of ₹ 90,97,536/- on account of disallowance of bad debts. So, Ground No.4 is determined against the revenue. 15. Ground No.5: The A.O. made addition of ₹ 15,55,893/- u/s 41(1) on account of cessation of liability u/s 41 (1) of the Act on the ground that the assessee has failed to prove that the liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment order apparently go to prove that the addition has been made merely on the basis of wrong interpretation of the provisions contained u/s 35DDA of the Act. Any deduction claimed for the financial year 2000-01 u/s 35DDA is to be considered for assessment year 200 1-02, when undisputedly, section 35DDA become the statute w.e.f. 01.04.2001, the assessee is certainly entitled to get the benefit for the same. Moreover, A.O. himself had allowed VRS payment in the earlier year, and the deduction claimed in the year under consideration is only a consequential relief for the 5th year. So, even otherwise, Section 35DDA does not preclude the assessing authority to consider the VRS payment as revenue expenditure. So, finding no ground to interfere into the findings returned by Ld. CIT(A), Ground No.6 is determined against the Revenue. 17. Ground No.7 : The A.O. made addition of Rs. l,53,373/- by making disallowance on account of late payment of PF contribution. However, it is the settled principle of law that the expenditure are allowable u/s 43B of the Act, even if deposited late, but before the date of filing of return of income. In the instant case, the assessee has deposited t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interfere into the finding returned by Ld. CIT(A) on this issue and hence, ground No.8 is decided against the Revenue. 19. Ground No.9: The A.O. made addition ofRs.3,53,489/- on account of staff welfare expenses and ₹ 2,96,237/- on account of conveyance expenses merely on the basis that submissions made by Ld. A.R. of the assessee that 1/10th of the staff welfare expense and 20% of conveyance expenses may be disallowed for non business expenses as the same are not fully verifiable. 19.l So far as disallowance of conveyance expenses to the tune of ₹ 2,96,237/- by the A.O. is concerned the issue has been settled by Coordinate Bench of ITAT Delhi Bench 'D' in case entitled DCIT Vs Haryana Oxygen Ltd. 76 ITD 32 wherein personal use of car by the Directors of the company / staff of the company has been held to be for business purpose of the company. So far as disallowance of staff welfare expenses of ₹ 3,53,489/- made by the A.O. is concerned, a bare perusal of assessment order goes to prove that the entire work has been made by the A.O. on the basis of estimation as well as on the basis of alleged submissions made by the Ld. A.R. of the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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