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2016 (4) TMI 664 - ITAT LUCKNOW

2016 (4) TMI 664 - ITAT LUCKNOW - TMI - Unsecured loans u/s 68 - Held that:- The assessee has furnished only one confirmation of Shri Deoki Nandan Jhunjhunwala in respect of fresh loan of ₹ 2.40 lac from Ms. Anita Jhunjhunwala but for this loan also, apart from furnishing confirmation, the assessee has furnished nothing else before us also about creditworthiness of this loan creditor. Hence, it is seen that for none of the loan creditors, the assessee has furnished any evidence regarding t .....

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xtent of ₹ 1,87,983/-, CIT(A) has confirmed the addition of ₹ 27,107/- being the difference in 10% of closing FDR balance and FDR interest shown by the assessee as income. In our considered opinion, since the amount of FDR interest shown by the assessee as income is very much close to even the estimation by the Assessing Officer and CIT(A) in the absence of details and this is the claim of the assessee that interest income was accounted for by the assessee on actual basis, we hold th .....

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eel security deposit on 16/04/2007. Hence, it is noted that this contention that security deposit is transferred to the customer account is not being supported by the copy of ledger account of Shiva Steel, Lucknow customer. Regarding the second party i.e. Madhyeshiya Traders, the copy of ledger account of Madhyeshiya Traders of the customers is available on page No. 166 of the paper book and in this amount a credit of ₹ 50,000/- is on 05/05/2007 on account of transfer from security deposit .....

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party i.e. Anil Kumar Mishra, we feel that for this small amount of ₹ 2,000/-, it cannot be said that the assessee could not establish the creditworthiness etc. of the person from whom this security deposit has been received and therefore, we delete this amount also. In this manner, the assessee gets part relief of ₹ 52,000/- and balance addition is confirmed.- Decided in favour of assessee in part

Addition being interest and finance charges - Held that:- We find that out .....

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per book but for discounting charges also, section 43B is not applicable and hence, this is noted that to all those claims regarding interest expenditure to which section 43B is applicable, there is no outstanding amount and for the remaining amount of interest and discounting charges, section 43B is not applicable and therefore, disallowance made by Assessing Officer is not justified. We, therefore, delete the same - Decided in favour of assessee

Disallowance being 25% of the expense .....

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xpenses under this head are being produced and in the earlier year, there was no disallowance under this head and all the expenses are vouched but there is no finding given by CIT(A) that these assertions of the assessee in the written submissions are incorrect. Hence, ad hoc disallowance under this head is not justified. We, therefore, delete the same - Decided in favour of assessee

Disallowance being 40% of the expenses under the head salary, wages and bonus - Held that:- As per the .....

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the amount of provision of gratuity which has been separately disallowed by Assessing Officer as per Para 5 of the assessment order and after excluding this amount, the claim under this head is almost equal to the claim under this head in the preceding year. There is no other reasoning given by the Assessing Officer for making these disallowances except stating that the claim in the present year is almost double. But when this is not factually correct after excluding the amount of gratuity of & .....

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ing year. Therefore, we feel that no disallowance under these heads is called for in the facts of the present case. We, therefore, delete the same.- Decided in favour of assessee

Inclusion of Extraordinary income to the total income of the assessee - Held that:- No reason to interfere with the order of CIT(A) because when an income is included by the assessee itself in the computation of income filed by the assessee along with the return of income, if the assessee pleads that such amo .....

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nst the order passed by learned CIT(A)-II, Lucknow dated 31/01/2014 for the assessment year 2007-08. 2. Ground No. 1 is general in nature and therefore, does not require any separate adjudication. 3. Ground No. 2 is as under: "2. Because the learned first appellate authority ought not to have confirmed addition of ₹ 15,23,787/- in respect of unsecured loans u/s 68 of the Income Tax Act, 1961." 4. It was submitted by Learned A. R. of the assessee that on page No. 89 of the paper b .....

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per said detail, the amount of fresh loan received during the present year is ₹ 35,14,887.63 and the addition was made by the Assessing Officer of a lesser amount of ₹ 15,23,787/- only. In reply, it was submitted that the addition was made by the Assessing Officer of the amount of difference between the closing balance of unsecured loan and the opening balance of unsecured loan and since various amounts were received during the present year and repaid during the present year to the .....

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assessee was asked to furnish details of loans taken from promoters but no details have been filed and under these facts, the Assessing Officer made the addition of that amount which is the difference between the closing balance and opening balance of unsecured loans from promoters. Hence, it is seen that this addition was made by the Assessing Officer for the reason that no details were provided by the assessee in respect of fresh loans taken from the promoters in the present year. Before CIT(A .....

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, it is seen that for none of the loan creditors, the assessee has furnished any evidence regarding the creditworthiness of the loan creditor and except one loan creditor, no confirmation has been filed by the assessee. Under these facts, we find no infirmity in the order of learned CIT(A) on this issue. Accordingly, ground No. 2 is rejected. 7. Ground No. 3 is as under: "3. Because the learned first appellate authority ought not to have sustained addition of ₹ 27,107/- in respect of .....

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ng Officer considered the amount of FD at ₹ 31.51 lac as against actual of ₹ 21.51 lac but in the remand proceedings, the Assessing Officer has accepted this mistake and therefore, CIT(A) has granted relief to that extent. He further submitted that the Assessing Officer has estimated the interest amount @10% of the closing balance of the FD but the assessee has accounted for the interest on actual basis and the difference is very small of ₹ 27,107/- as against income already ac .....

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ent order, the Assessing Officer wrongly proceeded with the amount of FDR at ₹ 31.51 lac saying that this is the amount of FDR balance as on 31/03/2007 i.e. but this is the closing balance of the preceding year and at the end of the present year, the amount of FD balance is ₹ 21,51,446/- and not ₹ 31,51,446/-. Relief is already allowed by CIT(A) to this extent and he has allowed relief of ₹ 1 lac being 10% of ₹ 10 lac extra FDR considered by the Assessing Officer in .....

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very much close to even the estimation by the Assessing Officer and CIT(A) in the absence of details and this is the claim of the assessee that interest income was accounted for by the assessee on actual basis, we hold that in the facts of the present case, the addition upheld by CIT(A) is not justified. We, therefore, delete the same. Ground No. 3 is allowed. 11. Ground No. 4 & 5 are as under: "4. Because the learned first appellate authority ought not to have sustained addition of &# .....

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nder the head "Current Liabilities" over the last year." 14. It was submitted by Learned A. R. of the assessee that on page No. 161 of the paper book is the detail of the amount of ₹ 3,39,700/- being the amount of increase in security deposit. He also submitted that the copy of written submissions filed before the CIT (A) is available on pages 13 to 18 of the paper book and in particular, our attention was drawn to page No. 15 where in it was explained that in normal course .....

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the previous year relevant to assessment year 2008-09. He submitted that under these facts, the addition made by Assessing Officer and confirmed by CIT(A) is not justified. 15. Learned D. R. of the Revenue supported the orders of the authorities below. 16. We have considered the rival submissions. We find that as per the details available on page No. 161 of the paper book, fresh security deposit of ₹ 5.52 lac was received during present year including ₹ 5 lac from Shiva Steel and &# .....

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77; 5 lac and there is journal entry on 16/04/2007 as per which, the said credit balance is transferred to Shiva Steel customer account. On pages 169 to 170 is the copy of ledger account of Shiva Steel, Lucknow customers with opening debit balance of ₹ 1,25,939/- and there is no corresponding credit entry available in its customer account on account of transfer from Shiva Steel security deposit on 16/04/2007. Hence, it is noted that this contention that security deposit is transferred to t .....

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nder these facts, we are of the considered opinion that the addition made by the Assessing Officer in respect of this security deposit from Madhyeshiya Traders is not justified because the assessee could show that the security deposit of the present year was adjusted in the customer account of next year. Therefore, this addition of ₹ 50,000/- is deleted. In respect of third party i.e. Anil Kumar Mishra, we feel that for this small amount of ₹ 2,000/-, it cannot be said that the asses .....

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that as per page No. 17 of the order of CIT(A), the disallowance was confirmed by him on the basis that the assessee could not produce books of accounts, bank statement and other relevant documents. In this regard, he submitted that on pages 85 to 88 of the paper book is copy of written submissions filed before the CIT(A) and in the same, complete details have been given by the assessee regarding the claim of interest and finance charges of ₹ 1,15,52,163.35 which are including ₹ 94, .....

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C account. He also submitted that the disallowance was made u/s 43B but the assessee has furnished evidence that the interest was already paid and in support of this, ledger account of interest on PNB CC account is available on page 96 to 99 of the paper book and ledger account of interest on Gateway Leasing Ltd. ICD is available on page No. 100 of the paper book. The ledger account of other interest accounts are available on pages 101 to 103 of the paper book, and that of discounting charges ar .....

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interest to others also, ₹ 1,18,588/- is outstanding but for this interest on ICD, section 43B is not applicable and therefore, no disallowance is called for u/s 43B out of these expenses. 19. Learned D. R. of the Revenue supported the orders of the authorities below. 20. We have considered the rival submissions. We find that as per Para 7 of the assessment order, it is stated by the Assessing Officer that under the head interest and financial charges, the assessee has claimed expenses of .....

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find that out of interest claimed by the assessee, there is no outstanding amount except interest on ICD ₹ 1,18,588/- but for interest on ICD, section 43B is not applicable. Similarly, regarding discounting charges paid to various parties, there is some outstanding amount also. For instance ₹ 33,534/- being discounting charges of Ketan Mehta available on page No. 105 of the paper book and ₹ 20,726/- being discounting charges payable to Jitendra M. Shah HUF available on page No. .....

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t of some ad hoc disallowance and therefore, these are decided together. These grounds are as under: "8. Because the learned first appellate authority ought not to have confirmed disallowance of ₹ 18,33,669/- being 25% of the expenses on repair & maintenance of plant & machinery, building and others. 9. Because the learned first appellate authority ought not to have confirmed addition of ₹ 2,43,63,252/- being 40% of the expenses under the head "Salary, wages and Bon .....

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purpose of deciding these grounds. 23. Learned D. R. of the Revenue supported the orders of the authorities below. 24. We have considered the rival submissions. Regarding ground No. 8 i.e. disallowance of ₹ 18,33,669/- being 25% of the expenses on repair & maintenance of plant & machinery, building and others, we find that this disallowance was made by observing in Para 8 of the assessment order that regarding the expenses of repairs of ₹ 73,34,678/-, no details have been fi .....

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lowance under this head. This is also submitted that the expenses are fully vouched. In spite of this submission of the assessee before CIT(A), there is no finding given by CIT(A) in his order that the ledger account of these expenses are not produced for verification and that the expenses are not vouched and he has simply confirmed the assessment order on this issue by stating that even during appellate proceedings, the assessee has not satisfactorily explained the genuineness of expenses incur .....

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ed before CIT(A) as per written submissions dated 25/03/203 that the ledger accounts of expenses under this head are being produced and in the earlier year, there was no disallowance under this head and all the expenses are vouched but there is no finding given by CIT(A) that these assertions of the assessee in the written submissions are incorrect. Hence, ad hoc disallowance under this head is not justified. We, therefore, delete the same. Ground No. 8 is allowed. 25. Regarding ground No. 9 i.e .....

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regard, it was submitted by the assessee before CIT(A) that the Assessing Officer has already disallowed an amount of ₹ 240.47 lac on account of gratuity vide Para 5 of the assessment order. He has also submitted that the expenses under the head employees remuneration and benefits, salary, wages and bonus are inclusive of this amount and if it is excluded then the expenses under this head will be ₹ 368.86 lac only, which is less than the last year's expenses. Hence, no disallowan .....

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assessment order, the claim under this head was ₹ 609.08 lac but this is the explanation of the assessee before CIT(A) that this amount included the amount of provision of gratuity which has been separately disallowed by Assessing Officer as per Para 5 of the assessment order and after excluding this amount, the claim under this head is almost equal to the claim under this head in the preceding year. There is no other reasoning given by the Assessing Officer for making these disallowances .....

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; handling charges etc., we find that it was explained before CIT(A) that the total claim under these four heads in the present year is less than the preceding year. The said chart is on page No. 17 of the paper book, which is reproduced below: Head of account A.Y.07-08 A.Y.06-07 Power & fuel 48927370 58836956 Effluent Treatment expenses 1463528 2017361 Misc. expenses 9391691 8294137 Freight, transport & handling charges 1675472 1270913 Total 61458061 70419367 26.1 From the above chart o .....

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631/- being the expenditure under the head "Contribution to Provident and Other Funds". 12. Because the learned first appellate authority ought not to have confirmed addition of ₹ 1,21,52,262/-. 13. Because the learned first appellate authority ought not to have confirmed inclusion of Rs. ₹ 49,30,942/- being Extraordinary income to the total income of the assessee." 28. Ground No. 11 & 12 were not pressed by Learned A. R. of the assessee and therefore, these ground .....

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