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2016 (4) TMI 1158 - ITAT MUMBAI

2016 (4) TMI 1158 - ITAT MUMBAI - TMI - Unre-conciled difference between the books of account with the AIR information- Held that:- As decided in Shri S Ganesh V/s ACIT [2010 (12) TMI 851 - ITAT, Mumbai ] in absence any record contrary to the fact, the revenue authorities could not make any addition on account of AIR information. - Addition u/s 35D - expenditures pertained to increase in authorized capital and issue of share capital - Held that:- Where the assessee is a person other than a .....

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uly signed and verified by such accountant and setting forth such particulars as may be prescribed. After perusing the provisions of section 35(2)(iii) of the Act as above, we find that the expenses incurred for increasing the size of the authorized capital specifically mentioned in the said section to be admissible expenses. We, therefore, find no infirmity in the order of the ld. CIT(A) and dismiss the ground raised by the revenue. This ground of revenue stands dismissed. - TDS u/s 194A - .....

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assessee did not deduct any tax at source and consequently, the AO during the course of scrutiny found that these payments are covered under the provisions of section 40(a)(ia) of the Act and added the same to the income of the assessee. In the appellate proceedings, the ld. CIT(A), the addition was confirmed on the ground that the payments were to be subjected to TDS which the assessee had failed to. Thus, the addition has rightly been made by the AO as is clear from the facts before us as the .....

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st of loans and ₹ 4,26,138/- for various expenses - Cross-Objection No 247/Mum/2014 (Arising out of I.T.A. No. 5556/Mum/2013 ) - Dated:- 11-4-2016 - SHRI AMIT SHUKLA, JM AND SHRI RAJESH KUMAR, AM Revenue by :Shri Navin Gupta Respondent by :Shri S C Tiwari O R D E R PER RAJESH KUMAR, AM : The appeal by the revenue and cross-objection thereto by the assessee are directed against the order dated 14.6.2013 by the ld. CIT(A)-14, Mumbai and relate to the assessment year 2008-09. Since issues inv .....

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tisfactory explanation in respect of the above entries except stating that 100% reconciliation is not possible and the un-reconciled entries are pertaining to the notices not responded by the parties. 2. Whether on the facts and circumstances of the case and in law, the Ld CIT{A} erred in allowing the appeal of the assessee and directing the AO to treat the expenditure of ₹ 15.00 lakhs as revenue expenditure whereas the said expenditure has been actually incurred as consultancy charges pai .....

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the said expenditure has actually been incurred as ROC payment in connection with the raising of equity capital and not incurred for registration of company . 4 Whether on the facts and circumstances of the case and in law, the Ld CIT{A} erred in allowing the appeal of the assessee and directing the AO to delete the addition of ₹ 39,75,OOO/- made u/s.69 of Income Tax Act 1961, being unaccounted cash payment made by the assessee for the acquisition of a commercial property, by holding that .....

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ed cash payment made by the assessee for the acquisition of a commercial property, by holding that the principles of natural justice has been violated by the AO without appreciating the fact that during the intervening period of 35 months between the date of survey on 29.02.2008 and date of assessment on 24.12.2010, the assessee has never filed a written petition asking the AO to provide him a copy of the incriminating material being the letter dated 24.10.2007. 6. Whether on the facts and circu .....

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outside the books is the norm rather than the exception and cash consideration was paid by the assessee in this case also. 7 Whether on the facts and circumstances of the case and in law, the Ld CIT(A}erred in allowing the appeal of the assessee and directing the AO to delete the addition of ₹ 39,75,OOO/- made u/s.69 of Income Tax Act 1961, being unaccounted cash payment made by the assessee for the acquisition of a commercial property without appreciating the fact that the Hon'ble Su .....

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nating evidence can not be true to the extent it suits the assessee ( two payments by cheque) and untrue to the extent it incarcerates (bind) the assessee (cash payment of ₹ 39.75 lakhs for purchase of commercial property for which two payments are by cheque) 3. Grounds of cross-objection are reproduced below: ― 1. That on the facts and in the circumstances of the case of the cross-objector and in law, the ld. CIT(A) has erred in upholding the disallowance u/s 40(ia) of the Act of am .....

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4,26,16,170/-. The case was selected for scrutiny. The notices under section 143(2) and 142(1) were issued and served upon the assessee. The assessee was engaged in the business of transport and logistics business and having its income during the year from transport business. A survey was conducted on 20.2.2008 at the business premises of the assessee, i.e. head office and its branches. Ultimately, the assessment was completed under section 143(3) of the Act vide order dated 24.12.2010 at an inc .....

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4/- out of which ₹ 1,45,43,421/- was not reconciled with the books of account of the assessee. The AO observed that the TDS certificates as produced by the assessee during the course of assessment proceedings were not tallying with details as per AIR and there was a difference of ₹ 1,45,43,421/- which the assessee was asked to reconcile. The assessee submitted before the AO that there were several reasons for such un-reconciled entries such as there were some persons which were runni .....

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nted the same as per mercantile system of accounting whereas our customer may have booked the purchase in AY 2008-09 while making the payment. Lastly, in the business of the assessee, the assessee executed business through CHA s (Clearing House Agents). In the said transactions there would be three parties involved viz. Consignor, consignee and agent and billings were done as per the agent s instructions but sometimes the payment was received and TDS was deducted either by consignee or by consig .....

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assessee received the payments and contract receipts. Aggrieved by the decision of the AO, the assessee preferred an appeal before the ld. CIT(A) who vide para 4.7 of the appellate order held as under : 4.7 I have considered the submissions of the Appellant. The issue in question is of addition of Non-reconciled amount of ₹ 1,45,43,421/- of the AIR information to the total income of the appellant for the relevant year. The facts which are not in dispute are already outlined in earlier par .....

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ther to the appellant or the Department. The appellant had requested the department to summon the ledger accounts of such parties through notice u/s 133(6), but such efforts made by the AO have not succeeded. However in absence of their ledger account, it is obviously not possible for the appellant to reconcile the AIR information. • The Appellant's receipts from its operations are more than the AIR figure i.e. the total receipts of the Appellant for the year are ₹ 2,42,06,01,170/ .....

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e considered the rival submissions and perused the material on record. The ld. DR submitted before us that the assessee was not able to re-concile the difference between the books of account with the AIR information and therefore, the addition was rightly made. Per contra, the ld. AR submitted before us that reconciliation of AIR data is not possible with the books of accounts as the information in the AIR were not put into the computer by the assessee but by those parties who deducted the TDS f .....

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onciled the entries amounting to ₹ 46,97,07,933/- meaning thereby that 97% of the AIR entries were reconciled by the assessee. The difference mismatch might be due to faulty return filed by the 3rd party. The ld. AR further submitted that in order to verify the un-reconciled items of AIR information, the AO has sent notice under section 133(6) to various parties on the addresses provided in the AIR information twice but all the notices were returned back undelivered to the department which .....

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rd contrary to the fact, the revenue authorities could not make any addition on account of AIR information. We find from the above, that the case of the assessee is squarely covered by its own decision in M/s. BLR India Pvt. Ltd (supra) the relevant findings of the said order are reproduced below : ― 2.4. We have heard the rival submissions and perused the material before us. We find that the assessee had shown higher income than the income reported in the report received by the AO. It rec .....

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snt the AO. We therefore, following the decision of the co-ordinate bench of the Tribunal uphold the order of the ld. CIT(A). This ground of appeal is dismissed and the AO is directed accordingly. 7. Issue raised in the ground No.2 relates to the deletion of addition of ₹ 15 lakhs by the ld. CIT(A) by directing the AO to treat the same as revenue expenditure whereas the said expenditure was actually incurred as consultancy charges paid to M/s Tower Capital and Securities Pvt Ltd. for raisi .....

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Bom) and CIT V/s Sesa Goa (India) Ltd (Bom) 282 ITR 197) came to the conclusion that the said expenses was capital in nature and added the same to the total income of the assessee along with other items of expenses of ₹ 5,05,585/-. The ld. CIT(A) deleted the same by holding that ₹ 15 lakhs paid to M/s Tower Capital and Securities Pvt Ltd for examining the financial and other structure of the assessee and make suitable suggestions/recommendations for restructuring the assessee and thu .....

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not have permitted the assessee to enter into a fresh collaboration agreement with the UK parent company, which was needed to run the business of the assessee more profitably and thus held that the facts of the assessee s case were squarely covered by the said decisions and directed to delete the addition of ₹ 15 lakhs. 8. We have carefully considered the rival submissions and perused the material placed before us. We find that the assessee had clearly stated in para 6 of the statement of .....

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para 6 of statement of facts filed by the assessee before FAA:- ―During the year, the Appellant issued 32,21,222 equity shares to Reliance Capital Ltd. and incurred Legal & Professional Charges for consultancy charges for raising capital and due diligence charges amounting to ₹ 20,05,0587/-.The Appellant submit that where the object of enhancement of the capital was to have more working funds for the Appellant to carry on its business and to earn more profit and that in such a c .....

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( Ltd supra that if the expenditure of ₹ 15 lakhs was incurred in order to examine the capital structure of the company and in connection with due diligence the same should be allowed to the assessee. We, therefore, direct the AO to examine the assessee s claim and allow the expenses of ₹ 15 lakhs if found correct. We, therefore, restore the matter back to the file of the AO with the direction to examine the issue afresh in the light of above facts. This ground is allowed for statist .....

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. Upon perusal of the details furnished by the assessee, the AO found that some amounts included in the said write-off pertained to increase in authorized share capital and issue of shares capital, the details thereof were incorporated at page 11 of the assessment order. The AO relying on the decision as referred to in para 10.1 and 10.2 of the assessment order held that the expenditures pertained to increase in authorized capital and issue of share capital and same would not be eligible for de .....

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₹ 1,63,842/- were paid to Registrar of Company as fee for increase in authorized shares capital of the company and submitted that the same was not covered by the provisions of section 35(2)(iii) and (4) of the Act and therefore the order of the AO be upheld by setting aside the findings of the ld. CIT(A). 12. Per contra, the ld. AR drew our attention to the provisions of section 35D (2)(c) (iii) of the Act which specifically provides for admissibility of the expenses incurred on increase i .....

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ified in any one or more of the following clauses, namely :- (a) expenditure in connection with- (i) preparation of feasibility report; (ii) preparation of project report; (iii) conducting market survey or any other survey necessary for the business of the assessee; (iv) engineering services relating to the business of the assessee : Provided that the work in connection with the preparation of the feasibility report or the project report or the conducting of market survey or of any other survey .....

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any; (ii) on printing of the Memorandum and Articles of Association; (iii) by way of fees for registering the company under the provisions of the Companies Act, 1956 (1 of 1956); (iv) in connection with the issue, for public subscription, of shares in or debentures of the company, being underwriting commission, brokerage and charges for drafting, typing, printing and advertisement of the prospectus; (d) such other items of expenditure (not being expenditure eligible for any allowance or deductio .....

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of income for the first year in which the deduction under this section is claimed, the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed. After perusing the provisions of section 35(2)(iii) of the Act as above, we find that the expenses incurred for increasing the size of the authorized capital specifically mentioned in the said section to be admissible expenses. We, therefore, find no infirmity in the .....

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of survey was shown to Mr.Ashok Goyal and asked him to explain the contents of pages 75 to 80. Mr. Goyal replied that the pages 75 to 80 comprises of comprises Memorandum of Understanding (MOU). The AO added the same to the total income of the assessee u/s 69 of the Act as unexplained investment on the basis of letter as found by the survey team dated 24.10.2007. Though the payment of cash was specifically denied by the Managing Director of the Company. Aggrieved by the order of ld.AO, the asse .....

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since it was subsequently found that the property was in dispute, no further transactions took place. However, the most important fact in this regard to be noted is that the alleged document where such facts were allegedly said to have been recorded, had neither been shown to the appellant by the AO during the course of assessment proceedings, nor its copy had been provided to the appellant. Therefore, such addition, which is based on a document, which has neither been' shown to the appella .....

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claim of the appellant (that such document was neither shown to the appellant, nor any copy of the same was provided) in the remand reports. Therefore, it is evident that the addition of ₹ 39,75,0001- made by the AO under the provisions of section 69 of the Act is not sound and the same is liable to be deleted. I order accordingly. 11.4 This ground of appeal is allowed. 16. Aggrieved by the order of the ld. CIT(A), the revenue is in appeal before us. The ld. DR relied on the order of the .....

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pecifically mentioned that a sum of ₹ 39,75,000/- was paid to the builder in cash notwithstanding denied by Mr. Goyal two times in his statement recorded by the survey team u/s 131 of the Act and thus strongly supported the order of the AO. Per contra, the ld. AR submitted before us that the payment of ₹ 39,75,000/- was specifically denied during the course of survey by Managing Director Mr. Goyal and also submitted that the assessee was not allowed access of the said letter thereby .....

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tatement recorded u/s 131 of the Act. The AO did not allow an opportunity of being heard to the assessee to rebut the contents of the letter by furnishing a copy of the same to the assessee and also failed to collect the third party evidences such as statement of the builder to corroborate the contents. In view of the above facts we are of the opinion that the ld. CIT(A) has rightly deleted the addition and accordinly we uphold the order of ld.CIT(A) by dismissing the ground of revenue. CO No 24 .....

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in the said payments was claimed by the assessee as business expenses. The AO during the course of scrutiny proceedings found that the assessee had not deducted TDS on the interest payment thus came to the conclusion that the same was liable to be disallowed u/s 40(a)(ia) of the Act and accordingly disallowed the entire amount of interest ₹ 9,11,683/-. Similarly, the second issue raised in the cross objection was with respect to the disallowance of ₹ 4,26,138/- which was upheld by th .....

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29,182/- 7 Furniture making labour charges Shiv Shanti Interior (Goregaon) 10,820/- Excluded 8 Electrical repairs Yadav electrical (Goregaon) 24,510/- 9 Office cabin repairs Abhishek engineering (Mumbai) 24,301/- 10 Godown repairing N J Bhoir 128,325/- Total 436958/- Item no.7 10,820/- Rs.426,138 19. We have considered the rival submissions and perused the relevant materials placed before us and find that the assessee had made payment to four companies on account of repayment of finance borrowd .....

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