TMI Blog2016 (4) TMI 301X X X X Extracts X X X X X X X X Extracts X X X X ..... the expenses have been incurred, thus, since, the incurring of expenses is not in doubt, the ad-hoc disallowance made by the ld. Assessing Officer cannot be said to be justified, more specifically, when no defect was pointed out in the books of accounts of the assessee, therefore, this ground of the assessee is allowed. Addition on account of purchases - Held that:- The assessee even after asking by the ld. Assessing Officer neither furnished the list of persons from whom purchases were made and even did not explain the genuineness of the purchases from the aforementioned three parties. The assessee was issued notice u/s 142(1) dated 18/03/2003 asking the assessee to explain the purchases but the same was neither explained nor the parties were produced at any stage. The totality of facts, clearly indicates that the onus cast upon the assessee to explain the genuineness of the claim was not discharged, therefore, we find no infirmity in the conclusion drawn by the ld. Commissioner of Income Tax (Appeals). So far as, cases relied upon by the assessee is concerned, they are on different facts, therefore, may not help the assessee. So far as, burden upon the Department is concerned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rading in hardware, steel and commission agency in the name and style of M/s Shipyard Company. The assessee in his profit loss account debited ₹ 63,101/- on account of staff welfare expenses, ₹ 1,12,752/- as Octroi charges and ₹ 1,70,791/- as transportation charges (total ₹ 3,46,644/-). During assessment proceedings, the assessee was asked to furnish supporting evidences. As per the ld. Assessing Officer, the assessee did not produce any bill or voucher. It has been observed in para 4.1 of the assessment order that no doubt, the assessee might have incurred these expenses but the quantum appears to be little higher, therefore, he made adhoc disallowance of ₹ 69,325/- at the rate of 20% and added to the income of the assessee. On appeal, the ld. Commissioner of Income Tax (Appeals) affirmed the same, against which the assessee is in appeal before this Tribunal. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, we note that keeping in view, the totality o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial available on record. The facts, in brief, are that the assessee claimed to have certain purchases from various parties. The assessee was asked to furnish the list from whom purchases were made. The ld. Assessing Officer was having information that Harsh Corporation (Rs.1,30,303/-), Shivam Trading Company (Rs.1,64,251) and M/s Swastik Enterprise (Rs.1,81,892/-) are on the suspicious list of parties, who are providing bogus bills, without supply of goods or material, on the basis of website of Sales Tax Department, government of Maharashtra (www.mahavat.govt.in). Notices issued u/s 133(6) of the Act by the ld. Assessing Officer was either returned back by the postal authorities with the remark not known or not responded too. The ld. Assessing Officer vide notice u/s 142(1) of the Act dated 18/03/2013 asked the assessee as to why the purchases made from these parties should be treated as bogus purchases and further why should not be added to the income of the assessee. The assessee was asked to file the details up to 22/03/2013. As per the ld. Assessing Officer, the assessee neither provided any explanation nor filed any details. The Sales Tax Department also published a list ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs DCIT 256 ITR 134 (Bom.) and also Laxmit Narayan Madanlal 86 ITR 439 (SC) from Hon ble Apex Court supports our view. Identical ratio was laid down in Dalmia Jain company Ltd. 33 ITR 294 (Pat.), Liberty Cinema 52 ITR 153 (Cal.) and Udaipur Mineral Development Syndicate Pvt. Ltd. 269 ITR 263 (Raj.). 3.4. Section 28 of the Act deals with profit gains of business or profession, whereas, section 37 of the Act deals with allowabiltiy of any expenditure (not being expenditure of the nature describe in section 30 to 36) and not being in the nature of capital expenditure or personal expenses of the assessee laid out or expanded wholly and exclusively for the purposes of business or profession. For ready reference, we are reproducing hereunder section 28 of the Act:- Profits and gains of business or profession. 28. The following income shall be chargeable to income-tax under the head Profits and gains of business or profession ,- (i) the profits and gains of any business or profession which was carried on by the assessee at any time during the previous year ; (ii) any compensation or other payment due to or received by,- (a) any person, by whatever na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of a firm from such firm : Provided that where any interest, salary, bonus, commission or remuneration, by whatever name called, or any part thereof has not been allowed to be deducted under clause (b) of section 40, the income under this clause shall be adjusted to the extent of the amount not so allowed to be deducted ; (va) any sum, whether received or receivable, in cash or kind, under an agreement for- (a) not carrying out any activity in relation to any business; or (b) not sharing any know-how, patent, copyright, trade-mark, licence, franchise or any other business or commercial right of similar nature or information or technique likely to assist in the manufacture or processing of goods or provision for services: Provided that sub-clause (a) shall not apply to- (i) any sum, whether received or receivable, in cash or kind, on account of transfer of the right to manufacture, produce or process any article or thing or right to carry on any business, which is chargeable under the head Capital gains ; (ii) any sum received as compensation, from the multilateral fund of the Montreal Protocol on Substances that Deplete the Ozone layer u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofession . [Explanation 1.]-For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure. [Explanation 2.-For the removal of doubts, it is hereby declared that for the purposes of sub-section (1), any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 (18 of 2013) shall not be deemed to be an expenditure incurred by the assessee for the purposes of the business or profession.] (2) [* * *] (2B) Notwithstanding anything contained in sub-section (1), no allowance shall be made in respect of expenditure incurred by an assessee on advertisement in any souvenir, brochure, tract, pamphlet or the like published by a political party. The word business used in the sections has been defined in section 2 (13) of the Act, which includes any trade, commerce or manufacture or any adventure or concern in the nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en the ld. Commissioner of Income Tax (Appeals) overlooked the factual matrix and rejected the details submitted before him. The assessee explained that the amount of ₹ 3,53,976/- for Meghna Enterprises and ₹ 2,76,838/- for Meghna Polymers Pvt. Ltd. are debit balances and these amounts has to be recovered by the assessee but still they were added to the income of the assessee. For the remaining three parties, it was explained that liabilities are still outstanding in the balance sheet, thus, there is no question of addition, more specifically, when the assessee has not written off the outstanding liabilities in the books of accounts. On the other hand, the ld. DR, defended the addition. 4.1. We have considered the rival submissions and perused the material available on record. In view of the foregoing discussion, we are of the view that one more opportunity needs to be provided to the assessee, so that true facts can be ascertained and then may be decided in accordance with law. The assessee is directed to furnish the necessary evidence before the ld. Assessing Officer so that it can be examined. Opportunity be provided to the assessee to substantiate his claim, thus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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