TMI Blog2017 (5) TMI 680X X X X Extracts X X X X X X X X Extracts X X X X ..... s is full of doubts and cannot be accepted. In view of this facts, we are inclined to uphold the addition to the extent of ₹ 14 lakhs only by deleting the remaining the addition of ₹ 3 lakhs. In the result, the appellant gets relief of ₹ 12,35,000/- and the addition of ₹ 14 lakhs is sustained. This ground is partly allowed. Disallowance of commission expenses and audit fees - non deduction of tds - Held that:- We find merit in the submissions of the AR that the TDS was deducted from the commission payment and audit fee and duly paid in the government treasury before the due date of filing the income tax return u/s 139(1) of the Act as is evidenced by the receipt placed. In our view, the matter is requires verification at the end of the AO and therefore it would be reasonable and fair if the matter is restored back to the file of the AO for verification of claim of the assessee. Accordingly the AO is directed to allow the claim of the assessee if found correct as per law. Grounds of appeal no.2 and 3 are allowed for statistical purposes. Addition of 25% of the labour charges paid to brother of the assessee treating - addition u/s 40A(2)(b) - Held that: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee is challenging the order of ld.CIT(A)-42, Mumbai dated 4.7.2016 for the assessment year 2010-11, wherein he has taken following grounds of appeal: 1) The Learned Commissioner of Income tax (Appeals) - 42, Mumbai on the facts and in the circumstances of the case and in Law erred in confirming the addition made by the ITO 24(3)(1) u/s. 68 of the I.T.Act of ₹ 26,35,0001- being unexplained cash credits i.e. loans taken from the following parties: Name of the Party Loan Amount Meena Singh 3,95,000 Dhirendra Sinqh 5,40,000 Savitri Thakur 17,00,000 Total 26,35,000 2) The Learned Commissioner of Income tax (Appeals) - 42, Mumbai on the facts and in the circumstances of the case and in law erred in confirming the addition made by the ITO 24(3)(1) of ₹ 721,607/- being disallowance of commission expenses u/s 40(a)(ia) of the Ac well as on the round that the same were not genuine. 3) The Learned Commissioner of Income tax (Appeals) - 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant by ₹ 11,38,798/- u/s.41(1) of the LT. Act being cessation of liability as on 31/03/2010 of 10 parties. 8) Without prejudice to the ground number 7, the Learned Commissioner of Income tax (Appeals) - 42 erred in not giving relief of ₹ 5,54,887/- in the AY 2011-12, as the appellant had himself treated the same as income for the AY 2011-12. Thus, by not giving relief of ₹ 5,54,8871- for the AY 2011-12, the appellant had suffered double taxation on the said amount. 2. Grounds of appeal no.1 is against the confirmation of addition of ₹ 26,35,000/- by the ld.CIT(A) as made by the AO u/s 68 of the Income Tax Act, 1961 as unexplained cash credit from three parties i.e. Meena Singh, Dhirendra Sinqh and Savitri Thakur. 3. During the course of assessment proceedings, the AO observed that the assessee has borrowed a sum of ₹ 26,35,000/- from three parties i.e. ₹ 3,95,000/- from Meena Singh, ₹ 5,40,000/- from Dhirendra Singh and ₹ 17,00,000/- from Savitri Thakur. The AO called upon the assessee to file confirmations from these parties and return of income of all the loan creditors. However, the assessee vide letter dated 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t there was an opening cheque deposit of ₹ 2,00,0001- in the bank of the loan creditor and this amount was paid to the loan creditor as labour contract charges in the earlier previous year by the assessee. It was also argued that this cheque deposit can explain ₹ 1.5 lac out of the ₹ 3.5 lacs given to the assessee on 29.05.2009. However the claim of the assessee is not acceptable for the limited purpose also. The assessee has adduced no evidence of the genuineness of the source of the sum of ₹ 2 lakhs Moreover the assessee is required to establish the genuineness of the cash credit in the previous year under consideration. It was held in the case of ACIT vs. Expresso Investments (2006) 8 SOT 287 (Mum) as under:- The principles of res judicatta are also not applicable in income-tax proceedings particularly the cases relating to applicability of section 68. Each loan is independent in itself. In each case, the assessee has the onus to prove the identity of the creditor, his creditworthiness and the genuineness of the transaction. In some cases, the assessee might be able to prove and the authorities concerned may be satisfied with the evidence furnished ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f borrowings, and three main ingredients as envisaged by section 68 of the Act and therefore the additions sustained by the ld.CIT(A) u/s 68 were bad in law and should be reversed. The ld. AR of the assessee submitted that the assessee was required to prove source of funds raised which were adequately substantiated and not sources of source as have been held in number of judicial pronouncements. 6. The ld. DR, on the other hand, strongly objected to the arguments of the ld.AR and submitted that the assessee failed to prove the three main ingredients i.e. identity of the creditor, creditworthiness of the creditor and genuineness of transactions and in the present case the transactions are full of doubt and manipulations done by the assessee as huge cash was deposited in the kind of loan creditor before one or two days in favour of assessee and therefore the cash credit required to be added in the hands of the assessee under section 68 of the Act and finally submitted that the addition was rightly made by the AO and upheld by the ld.CIT(A) and prayed before the Bench the appeal of the assessee should be dismissed. 7. We have heard the rival submissions and perused the material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7,607/- citing the reasons that commission was paid to two persons and no TDS was deducted from the payments so made and accordingly the assessee was called upon to submit the details of TDS which was replied by the assessee by filing a copy of challan dated 18.10.2010 in respect of payment made. The AO rejected the submissions of the assessee and added the same to the income of the assessee by holding that the said payment was made after due date of filing of return u/s 139(1) of the Act. Similar is the case in respect of ₹ 82,725/-. The ld.CIT(A) also confirmed the action of the AO. 9. After hearing the rival contentions and on perusal of the material placed before us, we find merit in the submissions of the ld.AR that the TDS was deducted from the commission payment and audit fee and duly paid in the government treasury before the due date of filing the income tax return u/s 139(1) of the Act as is evidenced by the receipt placed at pages 45 and 46 of the paper book. In our view, the matter is requires verification at the end of the AO and therefore it would be reasonable and fair if the matter is restored back to the file of the AO for verification of claim of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said services rendered by the later party. In our opinion, the disallowance made by the AO on adhoc basis and confirmed by the FAA by just stating that the total labour charges are nominal in relation to the turnover of the assessee and was disallowed for want of evidence and reasonability. In our opinion, this cannot be the ground for making disallowance u/s 40(2)(b). Therefore, we are not in agreement with the findings of the ld.CIT(A) and therefore set aside his order and direct the AO to delete the same. The ground no.5 is allowed. 14. The issue raised in the grounds of appeal No.6 is regarding confirming the disallowance of ₹ 1,55,918/- by the ld.CIT(A) as made by the AO on adhoc basis in respect of various expenses to the tune of ₹ 1,67,738/-. 15. On perusal of the orders of lower authorities we find that the AO disallowed the expenses pertaining to car expenses, credit chares, hotel expenses, petrol, telephone expenses and travelling expenses and has disallowed 20% of the same without assigning any reason on the ground that the assessee could not justify these expenses. Similarly, in the appellate proceedings, the FAA reduced the same to 15%. We find that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondence or confirmation. The assessee has also not declared any transaction with this party till date and no payment has also been made so far. 2 M/s Jitendra Steel 38341 The assessee has not been able to prove that this liability existed as on 31.03.2010 through any correspondence or confirmation. The assessee has also not declared any transaction with this party and has claimed to have written back the amount on 02.04.2010. The assessee has given no explanation as to how the liability ceased on 02.04.2010. The assessee has given no explanation as to how the liability ceased on 2.4.2010. However this has no impact on the finding of cessation of liability on 31.03.2010 as per the case law discussed below: 3 M/s Nandi Tuff 260 00 Same as above. 4 M/s Rupal Glass 788 Same as above 5 M/s Sigma Punch 121259 Same as above 6 M/s Vardhman Ply 7082 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e us including orders of authorities below on the issue. We find that the assessee has shown sundry creditors and advances from sundry debtors in the balance sheet on liability side. We further find that the assessee has suomotu written back an amount of Rs. ₹ 7,04,240/- in the assessment year 2011-12 which ceased to exist for which the trading liability has extinguished. In our opinion, the action of the ld.CIT(A) in making enhancement u/s 41(1) of the Act is contrary to the provisions of law in view of the fact when the assessee himself was showing the liability as existing on the balance sheet date and the ld. FAA has no locus standi to assess the income of the assessee under section 41(1) of the Act. The case of the assessee finds supports from the decision of the Jurisdictional High Court in the case of CIT V/s Enam Securities Ltd reported in 345 ITR 64 (Bom), wherein an identical issue has been decided by the Hon ble High Court in favour of the assessee. We, therefore, respectfully following the ratio laid down in the said judgment set aside the order of the ld.CIT(A) and direct the AO to delete the addition. 19. The issue raised in the grounds of appeal no.8 is with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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