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2016 (2) TMI 500 - ITAT DELHI

2016 (2) TMI 500 - ITAT DELHI - TMI - Reference to Districts Valuation Officer (DVO) - addition on LTCG - Held that:- The ratio of the judgement CIT Vs Nelopher I. Singh (2008 (8) TMI 165 - DELHI HIGH COURT) 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 .....

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decide afresh after providing adequate opportunity of being heard to the parties

Disallowance deduction on account of loss on sale of investment / 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 .....

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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 claim of assessee qua bad debts - addition on the ground that the assessee has failed to prove that the return of debts had actually b .....

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overable. The judgement of TRF Ltd. (2010 (2) TMI 211 - SUPREME COURT ) 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 on account of disallowance of bad debts. - Decided against revenue

Addition u/s 41(1) on account of cessation of liability - Held that:- The issue to be decided by the Tribunal is squarely covered by the judgem .....

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d view that there is no scope to interfere in the findings returned by Ld. CIT(A). - Decided against revenue

Addition of deduction of VRS expenses for the financial year 2000-01 u/s 35DDA - disallowance on the ground that the aforesaid section came into effect w.e.f. 01.04.2001 without any retrospective effect - Held that:- he 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 yea .....

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xpenditure. - 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 .....

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a juristic person, the question of disallowance of the amount on the ground that the same were of personal nature, does not arise. Addition on account of communication expenditure and vehicle running and maintenance expenses by considering the same of personal nature in case of assessee company, is not permissible as there is no element of personal nature in the communication expenses incurred by the assessee company - Decided against the Revenue

Addition on account of staff welfare .....

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h of ITAT for A.Y. 1988-89 and 2001-02, in favour of the assessee. So, we find no ground to interfere into the findings returned by Ld. CIT(A) on this issue also - Decided against the Revenue - I.T.A. No.1967/Del/2009 - Dated:- 20-1-2016 - SHRI N. K. SAINI, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER For The Appellant : Ms. Kesang Y. Shirpa, Sr. DR For The Respondent : Shri Ved Jain, CA ORDER PER KULDIP SINGH, JM: The appellant, DCIT, Faridabad (hereinafter referred to as 'the R .....

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42A of the Income-Tax Act;1961 vide letter FNO AddI.CIT7RI/ FBD/Valuation/07-08/ 1478 dated 04-12-2007 (copy of reference enclosed as Annexure- A) and not ix} s 55A of the Income Tax Act, 1961, which is an obfuscation of the true facts. " 2. "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 ₹ 1,28,34,510/- on account of long term capital gain and ₹ 23,75,712/- on account of short term capital gain ma .....

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e - 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 .....

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failed to prove that the liability still subsisted and in contravention of decision of Hon'ble Calcutta High Court in the case of Kesoram Industries & Cotton Mills Ltd. reported in 196 ITR 845. " 6. "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 ₹ 10,02,735/- made by the Assessing Officer on account of VRS expenses disregarding the fact that the payments of VRS expenses were made prior to intro .....

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) and were to be treated as Income u/s 2(24)(x) of the Income Tax Act, 1961, in contravention of the decision in the case of CIT vs. Pamwi Tissues Limited 215 CTR 150 (Born.) ?" 8. "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 ₹ 2,62,582/ - on account of communication expenses and ₹ 1,78,955/ - on account of vehicle maintenance expenses made by the Assessing Officer even though the assessee had f .....

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unt of 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 up .....

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ated 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 rejected the same vide letter dated 28.12.2007. Finding the explanation given by the assessee not tenable, long term capital gain to the tune of ₹ 2,36,97,760/- and short term capital gain to the tune of ₹ 60, 16,039/- were made and the same have been treated as income of the assesse .....

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ssee in his P & L account claimed bad debts of ₹ 90,97,536/-. Initially, the assessee has not field any reply to the questionnaire dated 09.02.2007 and again on 21.09.2007 he was called upon to file the reply which he had filed vide letter dated 20.11.2007. Finding the explanation of the assessee not tenable, claim of the assessee to the tune of ₹ 90,97,536/- qua bad debts has also been disallowed. 5. Regarding cessation of liability u/s 41 (1 ) of the Act, the assessee was requi .....

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as been noted that the said section was made effective w.e.f. 01.04.2001 without any retrospective effect, hence an amount of ₹ 10,02,735/- was added back to the total income of the assessee. 7. During assessment proceedings, it has been noted that an amount of ₹ 1,53,373/- received by the assessee from its employees in respect of PF contribution, was not deposited into the Government account within the specified time i.e. up to 15.11.2004, but the same was deposited on 16.11.2004. C .....

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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 disallow .....

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ase is not covered u/s 55A(a), the A.O. was not empowered to refer the matter to the Districts Valuation Officer (DVO); that DVO determined the rates of land in question arbitrarily without any evidence on record; that referring the matter to the DVO u/s 55A cannot be for the valuation of capital asset as on 01.04.1981 and relied upon the judgment cited as CIT Vs Nelopher I. Singh, 309 ITR 233 (Del.). 11.1 Undisputedly, land in question was purchased by the assessee in the year 1976 for a consid .....

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evidence like sale deeds of the similarly situated property to arrive at the conclusion that the value of the land is ₹ 200/- per sq. yard, rather fixed the rates on the basis of his subjective local inquiry. The DVO has assessed the cost of land by applying depreciation as on 01.04.1981 at ₹ 23,23,800/- as against the value of land assessed by the approved valuer at ₹ 25,31 ,667/-. Undisputedly, the assessee in its books of accounts charged depreciation on the building on year .....

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luding the building insurance have been verified by the Revenue U/S 143(3) of the act and accordingly, assessee has valued its building on WDV as on 31.03.2004. 11.3 The ratio of the judgement 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 prope .....

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stored 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 year 2004-05 undisputedly purchased between financial year 1988-89 to 1991-92, for ₹ 5,00,000/- and the same has been du .....

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s loan returned by M/s Vigyapan Bureau, Vakilpura, lama Masjid, Delhi-110006 However, he could not tell when the said loan was given to aforesaid concern nor could he satisfactorily explain the source of loan advanced by him. Therefore, in order to ascertain the facts, summons u/s.131 was issued to the Principal Officer, M/s Vigyapan Bureau, Delhi on 26.12.2007and was duly served requiring his presence on 28.12.2007. However, nobody appeared on the said date. In the mean-time, a copy of account .....

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dated 26.12.2007. However, no compliance was made to the same as mentioned earlier. 2.7 It is further seen that the amount of ₹ 5 lakhs was credited in the bank account of Shri Vinay Kumar Gupta on 29.10.2005 and the debit of the equal amount on account of payment to the assessee is reflected in his bank account on 02.11.2005. Quite surprisingly, the said amount of ₹ 5 lakhs has been found credited in the bank account of the assessee on 31.10.2005 as can be seen from the copy of the .....

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ly 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 .....

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n as to why the-sale of shares of Moriic India Ltd. be not treated as sham transaction. The facts and circumstances of the case clearly establish that the deal of sale of shares was organized as a ploy to show long term capital loss to set off the same against long term capital gains earned by the company on sale of land. Such transaction with a view to avoid tax is not approvable. Reliance in this regard is placed on the decision of the Hon 'ble Apex Court in the case of Me Dowell & Com .....

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rview of law - Similar observations in certain old Indian decisions are, therefore, not in keeping with the changed conditions Are obsolete in view of the manifold evil consequences of the avoidance - Judgment of Hon'ble Desai, J in Wood Polymer Ltd., vs. Bengal Hotels Ltd. 40 Company Cases 597 clearly hinted at a new approach to the problem by refusing sanction to amalgamation of companies mainly on the ground that the same would have facilitated the avoidance of tax under a legal cover- No .....

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ound elaborated at para 11 of the impugned order, inter alia that the A.O. has made the addition merely on the basis of suspicion, whims and fancies without any substantive material; that the material collected by the A.O. during assessment proceedings goes in favour of the assessee that the transaction of shares with the assessee company has been duly declared 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 prov .....

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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 ₹ .....

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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 .....

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CIT Vs Autometers, 292 ITR 345 (Del.), CIT Vs Morgan Securities & Creditors (P) Ltd. 292 ITR 339 (Del.), Pro CIT Vs Hitachi Home and Life Solutions (India) Ltd. ITA No.281 of 2015 dated 27.04.2015 (Guj.). Ram Gopal Vs ITO, I.T.A. No.4041 & 4480IDeIl2011 dt. 07.08.2015, ACIT Vs Living Media India Ltd. 40 ITR (Trib) 610 (ITAT Del.), contended that when the assessee has actually written off, there is no need for the assessee to prove that the debt has actually become bad. Hon'ble Apex .....

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ee. 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 .....

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1(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 subsists. Undisputedly, the liabilities to the tune of ₹ 15,55,893/- still subsisting in the balance sheet of the assessee. Ld. A.R. by relying upon the judgment cited as CIT Vs Sugauli Sugar Works Pvt. Ltd. 236 ITR 518 (S.C.), CIT Vs Shri Vardhman Overseas Ltd. 343 ITR 408, Mysore Agencies Pvt. Ltd. Vs CIT 114 ITR 853, CIT Vs Tamilnadu Warehousing Corpn 29 .....

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tor from enforcing the debt, has been well settled. If that principle is applied, it is clear that mere entry in the books of account 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 come to an end. Apart from that, that will not by itself confer any benefit on the debtor as contemplated by the section. The decision of the Calcutta High Court in CIT Vs Sugauli Sugar Works P. Ltd. 140 ITR 286 affirmed. " 15.1 .....

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said to have ceased. So, we are of the considered view that there is no scope to interfere in the findings returned by Ld. CIT(A). Hence, Ground No.5 is determined against the Revenue. 16. Ground No.6: The A.O. made an addition of ₹ 10,02,735/- by disallowing the deduction of VRS expenses for the financial year 2000-01 u/s 35DDA on the ground that the aforesaid section came into effect w.e.f. 01.04.2001 without any retrospective effect. 16.1 A perusal of the findings returned by the A.O. i .....

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, 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 .....

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and ₹ 1,78,955/- on account of communication expense and vehicle running and maintenance expenses by disallowing the deduction merely on the ground that the assessee himself submitted vide letter dated 29.10.2007 that out of total communication expenses 1/4th may be disallowed for non business purpose as no call register has been maintained and 1/4th of the expenses on account of vehicle running and maintenance may be disallowed for non business purposes as the log book has not been maint .....

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were of personal nature, does not arise. Even otherwise, this issue has been squarely decided in assessee's own case for assessment yeas 1997-98, 1998-99 and 2000-01 by ITAT Delhi Bench 'D' New Delhi in ITA Nos. 3506 & 3507/De1/2004 , 3159/De1/2001 (A.Y.1995-96) in favour of the assessee. ITAT Delhi Bench 'D' in case entitled 76 ITD 32 (Del.) determined the identical issue by holding that personal use of the car by Directors of the Company cannot be characterized as for n .....

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in the communication expenses incurred by the assessee company. Consequently, we find no reason to 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 conveyanc .....

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