TMI Blog2017 (8) TMI 713X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee, therefore, we are of the opinion, that the CIT(A) has rightly deleted the addition. - Decided against revenue. Addition of travelling, conveyance and telephone expenses - Held that:- We do agree assessee that the disallowance made by the Assessing Officer are merely adhoc disallowance. The assessee is a private limited company. There cannot be personal expenses in case of an incorporated company. Our aforesaid view is duly supported by the decision of Hon’ble Gujarat High Court in the case of Sayaji Iron And Engg. Co. vs CIT [2001 (7) TMI 70 - GUJARAT High Court]. Even otherwise, we noted that the assessee has submitted before the Assessing Officer copy of the ledger account showing details of these expenses. The Assessing Officer never asked for bills/vouchers from the assessee. No cogent material or evidence was brought to our knowledge by the learned DR to prove that the Assessing Officer has given opportunity to the assessee to produce bills/vouchers in respect of the aforesaid expenses. We, therefore, confirm the order of the CT(A) and delete the disallowance.- Decided against revenue. Disallowance u/s. 14A read with Rule 8D - no satisfaction being recorded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) erred in upholding the action of the AO in making addition of ₹ 434,48,60,0007- u/s 68 of the Act without appreciating that there is no requirement to explain source of source and that nonetheless the same was explained. Addition due to AIR mismatch of ₹ 41,500/- a) The CIT(A) erred in law and facts in upholding the arbitrary addition of ₹ 41 ,5007- to the income of the Appellant solely on account of difference in the income as per the books of accounts and that reflecting in 26AS (AIR) data. The reasons given by her for doing so are wrong, contrary to the facts of the case and provisions of law. b) The CIT(A) erred in upholding the addition of ₹ 41,500/- to the income of the Appellant without any evidence of any real income accrued or received by the Appellant or there being any evidence of defect in the books of accounts. While the Revenue has taken the following grounds of appeal 1. On the fact and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of ₹ 6,67,296/- u/s. 37 of the Act, on account of repair and maintenance expenses without appreciating the fact that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant. Until and unless it is proved that the unsecured loan transaction within, group concerns are for genuine commercial transaction it cannot be allowed. Appellant has to explain the source of fund within the group entity. Merely filing the copy of ITR along with balance sheet, profit and loss account and bank statement is not sufficient especially so when and where the AO has found that the appellant has not explained or produced any evidence to justify the purpose of loan taken and utilisation of the same for business purpose. Though it is not necessary for the appellant to prove the source of source in (normal circumstances but in the circumstances as narrated above, it is necessary for the appellant to provide the source of source and complete justification for the creating of such web of transaction in the garb of unsecured loan. Therefore, the case is to be dealt with the principle of human conduct and probabilities Therefore, 1 do not find force in the submission of the appellant. Accordingly ground no 1 of the appeal is dismissed 4. The learned AR before us vehemently contended that the Assessing Officer made the addition in the hands of the assessee in respect o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loan and no addition in this regard u/s. 68 of the I T Act has been made in the case of the assessee. Attention was also drawn towards the copy of the assessment order in the case of M/s. Prime Publishing Private Ltd., which was filed during the course of hearing and it was pointed out that no addition in this regard has been made in the hands of M/s. Prime Publishing Private Ltd. even though the assessment has been made u/s. 143(3) of the I.T.Act. He vehemently contended that the assessee has discharged the onus whatever lies on it. The assessee even though is not required to prove the source of the source as laid down in the following cases has still proved the source of source : CIT vs. Bedi And Company Private Limited 230 ITR 580 (SC) DCIT vs. Rohini Builders 256 ITR 360 (Guj) 5. The learned DR, on the other hand, contended that the assessee has not proved the credit worthiness of the lender. Lender does not have own sufficient funds to advance loan. No interest has been charged inspite of the fact that the lender has negative share holder s fund and huge loss making company. The source of advancing loan is not from own funds but from web of transactions within the gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion copy of the ITR of M/s. Prime Publishing Private Ltd, its audited balance sheet, profit and loss account, copy of bank statements of M/s. Prime Publishing Private Ltd and that of the assessee. The assessee has also submitted the chart summarizing the loan taken from M/s. Prime Publishing Private Ltd as well as the chart summarizing the sources of M/s. Prime Publishing Private Ltd at pages 86 and 87 of the paper book. Not only this, we noted that the assessee has also filed analysis of the cumulative balance without opening balance, which is available at pages 88 and 89 of the paper book showing the receipt and repayment of loans from M/s. Prime Publishing Private Ltd, which gives a peak credit that only Rs. .32,81,50,000/- to prove that maximum amount received by the assessee during the impugned assessment year was Rs. 32,81,50,000/-, if both the receipts and payments are analyzed. 7. Now the question before us arises, whether the said credit can be added u/s68 of the I.T.Act to be held as unexplained cash credit. Before deciding the issue, it is necessary to look into the provisions of section 68 of the I.T.Act during the impugned assessment year, which read as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 68. The expression the assessee offers no explanation means where the assessee offers no proper, reasonable and acceptable explanation as regards the sum found credited in the books of account maintained by the assessee. The opinion of the AO for not accepting the explanation offered by the assessee as not satisfactory must be based on proper appreciation of the material and other surrounding circumstances available on record. The opinion of the AO is to be based on appreciation of the material on record. The word may used in section 68 provides discretion to the AO. In general the word may is an auxiliary verb clarifying the meaning of another verb of expressing an ability, contingency, possibility or probability. When used in a statute in its ordinary sense the word is permissive and not mandatory. But where certain conditions are provided in the statute and on the fulfillment thereof a duty is cast on the authority concerned to take an action, then on fulfillment of those conditions the word may take the character of shall and then it becomes mandatory. In section 68, we find that there are no such conditions on the fulfillment of which the AO is duty b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Prime Publishing Private Ltd. as well as the statement showing the receipt and payment of the amount has also been filed. From the copy of the balance sheet of M/s. Prime Publishing Private Ltd., which is available at pages 38 to 53 of the paper-book, it is apparent that M/s. Prime Publishing Private Ltd. has borrowed a sum of Rs. 400,00,00,000/- by issue of nonconvertible debentures and Rs. 570,02,73,000/- as inter corporate deposits from Spirit Textiles Pvt. Ltd, which is the holding company of M/s. Prime Publishing Private Ltd. From all these details, it is apparent that the assessee has proved all the three ingredients i.e. identity, credit worthiness as well as the genuineness of the transactions. This is not a case where money has been received in cash or borrowed from whom the money has been received as deposit. We do agree with the learned AR that the assessee has not to prove the source of source, in view of the decision of Hon ble Supreme Court in the case of CIT vs. Bedi And Company Private Limited 230 ITR 580 (SC). But in this case, we noted that the assessee has even submitted the evidence to prove the source of source. The Assessing Officer has not doubted or prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee has duly offered explanation, explaining the nature of source of the amount borrowed by it. In view of these facts, we set aside the order of the CIT(A) and delete the addition made u/s. 68 of the I.T.Act. 10. Ground no.2 in assessee s appeal relate to the sustenance of the addition of Rs. 41,500/-. After hearing the rival submissions and going through the order of the tax authorities below, we noted that the difference has arisen due to the mistake committed by Continental Drug Company Pvt. Ltd., which it has rectified by submitting the revised Form 26AS as contended by the learned AR. We, therefore, in the interest of justice and fair play to both the parties set aside the issue to the file of the Assessing Officer with a direction that the Assessing Officer shall look into the revised form 26As and verify the same. In case, the Assessing Officer finds that there is no difference in the revised form 26AS, the addition made shall stand deleted. 11. ITA No.3364/Mum/2017 Ground no. 1 relates to the deletion of the addition of Rs. .6,67,296 u/s. 37 made by the Assessing Officer out of repairs and maintenance account. The facts relating to this ground are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or evidence was brought to our knowledge by the learned DR to prove that the Assessing Officer has given opportunity to the assessee to produce bills/vouchers in respect of the aforesaid expenses. We, therefore, confirm the order of the CT(A) and delete the disallowance of Rs. 11,30,242/-. 15. The third ground relates to deleing the disallowance of Rs. 2,09,73,983/- u/s. 14A read with Rule 8D. The facts relating to this ground are that the Assessing Officer noted that the assessee has incurred interest expenditure amounting to Rs. .102,65,44,828/- during the year. The assessee has not earned any dividend income. The assessee was asked to furnish the details of expenses admissible u/s. 14A read with Rule 8D. The Assessing Officer noted that the assessee has disallowed a sum of Rs. 75,46,64,787/- u/s. 14A read with Rule 8D. The Assessing Officer computed the disallowance of Rs. .77,56,37,770/- and, thus, disallowed the difference of Rs. 2,09,73,983/-. The assessee went in appeal before the CIT(A). The CIT(A) deleted the disallowance by observing as under: 8.2 1 have carefully perused the assessment order and the submission of the appellant. It is seen that the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must be recorded having regard to the account of the assessee. In the instant case, we noted that the Assessing Officer without recording any satisfaction just rejected the claim of the assessee. We noted that the Assessing Officer has not recorded any dissatisfaction while disagreeing with the assessee in respect of the expenditure incurred by the assessee relating to the income not forming part of the total income. The aforesaid view is duly supported by the decision of the Hon ble Supreme Court in the case of Godrej Boyce Mfg. Co. Ltd, which confirmed the order of Mumbai High Court reported in 328 ITR 81. 17. The learned DR, even though vehemently relied on the order of the Assessing Officer, could not bring to our knowledge any satisfaction being recorded by the Assessing Officer as required/s. 14A(2) before rejecting the claim of the assessee. We, therefore, confirm the order of the CIT(A) on this issue and this ground stands dismissed. 18. In the result, the assessee s appeal in ITA No. 1835/Mum/2017 is partly allowed for statistical purposes while the revenue s appeal in ITA No. 3364/Mum/2017 is dismissed Order pronounced in the open court on 16th day of June, 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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