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2017 (4) TMI 907 - ITAT MUMBAI

2017 (4) TMI 907 - ITAT MUMBAI - TMI - Disallowance out of Business Promotion and Misc. Expenses claimed - Held that:- The assessee was not able to furnish the relevant details and supporting documents evidences in respect of the claim of the aforementioned expenses before the Assessing Officer (‘AO’) in the course of assessment proceedings. We find from the record that even in appellant proceedings, and also before us, except for raising the ground, the assessee was not able to bring on record .....

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ebts owed to them have been extinguished or that there was remission or cessation of liability, despite the extension of the period of limitation by acknowledgement of the creditors in the assessee’s balance sheet as on 31/03/2007. We, therefore, hold that the addition of ₹ 10,38,403/- upheld by the Ld. CIT(A) is not sustainable and direct the A.O to delete the same. See CIT vs. Sugauli Sugar Works (P) Ltd.(1999 (2) TMI 5 - SUPREME Court ) - Decided against revenue. - ITA No. 879/MUM/2014 .....

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f ₹ 2,77,566/- The return was processed u/s 143(1) of the Income Tax Act, 1961 (in short the Act ) and the case was subsequently taken up for scrutiny . The assessment was completed u/s 143(3) of the Act vide order dt. 30/12/2009, wherein the assessee s income was determined at ₹ 60,05,730/- in view of the following additions/disallowances:- (i) Disallowance u/s 40(a)(ia) - ₹ 5,27,067/- (ii) Addition u/s 41(1) - ₹ 50,33,230/- (iii) Disallowance of Business Promotion Expen .....

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on u/s 41(1) of the Act was sustained to the extent of ₹ 10,38,403/- (iii) he upheld the disallowance of ₹ 25,635/-, being 10% of Business Promotion Expenses claimed; and (iv) upheld the disallowance of ₹ 1,42,230/-, being 10% of Misc. Expenditure claimed. 3. Aggrieved, by the order of the CIT(Appeals)-6 Mumbai dt. 29/10/2013 for Asst. year 2007-08, the assessee has preferred this appeal raising the following grounds :- 1. The CIT(A) erred in upholding the addition in respect o .....

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at Sr. No. 3 being general in nature, and not being urged before us is dismissed as infructuous. 5. Ground no. 2:- Disallowance out of Business Promotion and Misc. Expenses claimed. 5.1 In this ground, the assessee has assailed the impugned order of the Ld. CIT(A) as being erroneous in upholding disallowances of ₹ 25,635/- out of business promotion expenses and ₹ 1,42,230/- out of repairs and maintenance, security maintenance, computer and mobile expenses, petrol and telephone expen .....

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oceedings, and also before us, except for raising the ground, the assessee was not able to bring on record any material evidence to establish the claim of the aforementioned expenses. In this view of the matter, we find that the disallowance made by the AO of 10% of the aforementioned expenses to be reasonable in the factual matrix of the case and consequently uphold, the aforesaid disallowances of ₹ 25,635/- out of business promotion expenses and ₹ 1,42,230/- out of the Misc. expens .....

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sessee to file confirmations in respect of all the aforesaid creditors and since the required confirmations were not filed, the A.O came to the view that either the creditors were not genuine or that the liability in respect of these creditors has ceased to exist. In that view of the matter he proceeded to add the entire amount of ₹ 50,33,230/- (viz- 44,88,000/- + 5,45,230/-) to the income of the assessee as cessation of liability u/s 41(1) of the Act. 6.1.2 On appeal before the Ld. CIT(A) .....

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e s case for Asst. year 2003- 04, addition in respect of balance Sundry Creditors amounting to ₹ 25,36,874/- may be sustained by the Ld. CIT(A). In response to the AO s remand report, the assessee contended that the AO s proposal to confirm the disallowance in respect of the balance creditors at ₹ 25,36,874/- is incorrect since the A.O has neither verified the confirmations, from the creditors submitted by the assessee as additional evidence nor given his comments in this regard and .....

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nsequently sustained the addition of ₹ 10,38,403/- which is before us for adjudication. 6.2.1 In this ground, the assessee has assailed that impugned order of the Ld. CIT(A) in sustaining the addition u/s 41(1) of the Act to the extent of ₹ 10,38,403/-. At the outset of the hearing, the Ld. AR informed the Bench, that subsequent to the passing of the impugned order, the Ld. CIT(A) vide letter dt. 07/03/2014 had proposed rectification of the same u/s 154(3) of the Act, in order to red .....

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ding balance of the parties/sundry creditors involved appear as outstanding in the assessee s Balance Sheet as on 31/03/2007. This fact, the Ld. AR contends, clearly establishes /indicates that there is no cessation of liability on the part of the assessee or the creditors in those cases. Rather, it is acknowledgement by the assessee of an existing debt it owes to its creditors and therefore the additions made /confirmed u/s 41(1) of the Act by the authorities below is unsustainable. It is submi .....

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hat since the A.O has not brought on record any evidence or material, including any statement after examining the creditors that the debts had been extinguished and that the liability of the assessee to pay them has ceased, despite the fact that the assessee has acknowledged the Sundry Creditors debts in its Balance Sheet at the end of relevant year i.e. as on 31/03/2007, the provisions of Section 41(1) of the Act cannot be invoked. In support of this proposition the Ld. AR placed reliance on th .....

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were shown as outstanding in the Balance Sheet as on 31/03/2007. As the assessee failed to file required confirmations, the A.O came to the view that the entire creditor/sundry creditors balances were not genuine and has ceased to exist and proceeded to bring the amount of ₹ 50,33,230/- to tax in the assessee s hands u/s 41(1) of the Act as cessation of liability. On appeal, the Ld. CIT(A) who called for remand report from the A.O on the additional evidences in the form of confirmation de .....

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be sustained to the extent of ₹ 10,38,403/-. On subsequent examination thereof, the Ld. CIT(A) vide letter dt. 07/03/2014 has further proposed to reduce the addition u/s 41(1) of the Act to ₹ 6,00,417/-. 6.4.2 According to the Ld AR for the assessee, even the additions u/s 41(1) of the Act to the extent of ₹ 10,38,403/- or ₹ 6,00,471 cannot be sustained since the outstanding balances of the creditors / parties involved appear as acknowledged outstanding creditors in the a .....

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back in the assessee s accounts but stood reflected in the assessee s Balance Sheet as on 31/03/2007, clearly establishes that there was no cessation or remission of liability. On the contrary, it is an acknowledgement by the assessee of existing debts it owes to its creditors. Except for the fact that the said creditors balances were outstanding, no material was brought on record by the A.O to show that there was remission or cessation of liability. When the A.O was of the view that there was r .....

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