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TMI Blog2018 (5) TMI 500X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA No. 2818/Kol/2013. 3. The grounds raised by the assessee per its appeal are as under:- "1. For that the Ld. Commissioner of Income Tax (Appeals) erred both in law and in fact by confirming the following expenses, which were incurred exclusively for the purpose of business in spite of the fact that the Ld. Assessing Officer in his remand report does not raise any objection against all these expenses, though the assessment was made ex parte u/s. 144 of the I Act, 1961. a) Freight - Rs. 31,400/- b) Power & Fuel - Rs. 55,600/- c) Salaries, wages & bonus - Rs. 1,98,500/- d) Travelling expenses - Rs. 28,780/- 2. For that the Ld. Commissioner of Income Tax (Appeals) erred both in law and in fact by confirming 50% of material expenses amounting to Rs. 1,52,719/- whereas total miscellaneous expenditure debited in the profit & loss account was Rs. 11,650/-. Hence, it is prim facie wrong and without any basis. 3. For that the Ld. Commissioner of Income Tax (Appeals) erred both in law and in fact by reducing the agricultural income by Rs. 2,40,000/- only instead of Rs. 16,68,430/-. 4. For that the Ld Commissioner of Income Tax (Appeals) erred both in law and in fact by enh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 1,98,500.00, freight, power & fuel, conveyance/travelling, I find that these expenses are incurred mainly for the agricultural activity, income of which is exempt. Hence, I am of the view that the AO was perfectly correct in disallowing the said expenses. Hence, the disallowances made under these heads of expenses claimed are confirmed." Being aggrieved by this order of Ld. CIT(A) assessee has come up in an appeal before us. 7. Ld. AR for the assessee before us filed two sets of paper book which is running pages from 1 to 18 (1) and 1 to 95 (2) respectively and submitted that the assessee besides agricultural has also declared other taxable income which was accepted by the Revenue. Ld. AR in support of assessee's claim drew our attention on audited profit and loss account which is placed on page 10 of the paper book (1). Ld. AR also submitted that assessee being a body of corporate has to incur certain expenses in order to keep its status active. Therefore, disallowance of all the expenses cannot be made. On the other hand, Ld. DR vehemently relied on the order of Authorities Below. 8. We have heard the rival contentions of both the parties and perused the material availab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h has nexus with the business activity of the assessee is eligible for deduction. Thus in the absence of the information we are of the view that all the expenses incurred by the assessee cannot be treated as business expenses. Therefore in our view after considering the entire facts of the case the justice shall be served if the disallowance made by the AO is restricted to the reasonable extent. Hence, in the interest of justice & fair play we are inclined to restrict the disallowance of the expenses to the tune of 50% of the expenses claimed by the assessee. In view of above we restrict the disallowance to the extent of 50% of the expenditure as discussed above. Accordingly, AO is directed. Thus, the part ground regarding salary, wage & bonus of appeal of assessee is partly allowed. 9. Next issue raised by assessee in ground No.2 is that Ld. CIT(A) erred in restricting the disallowance of miscellaneous expenditure from Rs. 3,05,438/- to Rs. 1,52,719/- only. The assessee in the year under consideration has claimed miscellaneous expenses of Rs. 3,05,438/- but during the course of assessment proceedings, failed to furnish the supporting evidence. Therefore, the AO disallowed the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in ground No.3 is that Ld. CIT(A) erred in reducing the agricultural income to Rs. 2.40 lakh instead of Rs. 16,68,430/-. 14. The assessee in the year under consideration has shown its agricultural income of Rs. 16,68,430/- but during the course of assessment proceedings assessee failed to furnish the supporting evidence to justify that it has earned income from agricultural activities. Therefore, the AO treated the entire agricultural income as "income from other source". 15. Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before Ld. CIT(A) submitted that supporting evidence to justify the earning of agricultural income was shown during assessment proceedings. The assessee also contended that similar income was also shown in the earlier year which was accepted by the Department. The assessee also submitted that it has incurred expense in connection with agricultural income which needs to be set off to determine the correct agricultural income. Therefore, the entire amount cannot be treated as "income from other source". The Ld. CIT(A) called for remand report from AO who submitted that assessee failed to furnish the name, address of the persons to whom t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not the entire of such sale proceeds. I also find force in the argument of the A/R that since the appellant company owned 12 Acres of agricultural lands in a place where the agricultural income shown by the husband of one of the directors is accepted by the Department, the claim of agricultural income of the appellant should not have been doubted. I have considered the enquiry findings of the AO while he was trying to ascertain the veracity of the claim of the appellant regarding the extent of agricultural income. I have also gone through the judgements of the case laws relied upon by the appellant. In view of the above and after considering the entire facts and circumstances of the case, I am of the considered view that the AO was not justified in treating the entire sale process of the agricultural produce as income of the appellant. Therefore, the AO is directed to work out the net income (A) shown by the appellant under this source by deducing the related expenses from the total sales proceeds. Moreover, considering the location, productive capacity/fertility of the land, the reported yielding and earning capacity of the neighbouring owners as well as the past history of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ural income of Rs. 10,25,000.00 in the AY 2003-04 in respect of the aforesaid land which was allowed by the Hon'ble ITAT in the case of ITO Vs. Shri Deb Kumar Sinha in ITA No. 2101/Kol/2006 vide order dated 30-04- 2007. The relevant extract of the order is reproduced below:- "10. We have given our careful consideration to the rival submissions mad before us and have perused the orders of tax authorities. In this case, the AO has disallowed the claim of the assessee observing that the assessee has not claimed such agricultural income in the immediately preceding year and has failed to file the details of the buyers of such agricultural trees. However, the ld. CIT has given a categorical finding that the assessee has shown agricultural income in the previous year also and the Department has accepted the same. Apart from the above fact, we have also considered the remand report by the AO in which he has not controverted the evidences filed by the assessee before the ld. CIT(A) and the Inspector deputed by him has confirmed the ownership f 4.5 acres of agricultural land with the assessee. We, therefore, considering the above facts do not see any reason to interfere with the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e argument put forward on behalf of the appellant. The facts of the case laws relied upon by the appellant are distinguishable from the facts of the appellant. Moreover, I do not find any merit in the explanation offered by the appellant regarding the shortage of cash in the cash book on the different dates from 24.09.2005 to 25.02.2006 even though the appellant made investment in the property in question during the period. Therefore, I agree with the findings of the AO that the reply of the appellant indicates that its audited books of accounts were not correct as incorrect entries were made in the cash book. Even if the statement of the assessee is taken to be true, the assessee company did not explain how it had negative cash balance of Rs. 3,78,525/- on 27/01/2006. In view of the above discussion and finding, the explanations offered by the appellant either before the AO or before me are not found to be convincing and acceptable and the negative cash balances are nothing but cash credits carried by the appellant company from undisclosed sources. Hence, the said sum of Rs. 3,78,525/- added back to the total income of the appellant." Being aggrieved by this order of Ld.CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal and it is only in this background and in this context that the words relating to vacating the order of the Appellate Assistant Commissioner and restoring of the appeal must be read. It is true that read by itself the last sentence of the order would suggest that the Appellate Assistant Commissioner was being directed to deal with the entire appeal on its own merits. The order of the Tribunal must, however, be read and understood in the proper context and in the light of all that is stated in the order itself and if we do so, as indeed we should do so, there is considerable force in the submission on behalf of the assessee that the order must be read as restricting the scope of the inquiry by the Appellate Assistant Commissioner only to the question of merits affecting the claim for relief from super-tax. We must, however, observe that there is in this case scope for the contention very strongly pressed before us by Mr. Joshi. On a consideration of the matter, we prefer to take the view that the order of the Tribunal required the Appellate Assistant Commissioner to inquire only into the matter of relief from super- tax on its merits." We also find support and guidance f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts and in law of the case the Ld. CIT(A) erred in deleting the addition made by the AO under the head liabilities amounting to Rs. 14,90,887/- and provisions amounting to Rs. 28,259/- ignoring the Asst. Order as well as Remand Report made by the AO. 2. That is the facts and in law of the case the Ld. CIT(A) erred in deleting the addition made by the AO under the head secured loans amounting to Rs. 65,00,000/- though the assessee was unable to prove identity, authenticity & creditworthiness of the loan creditor." 24. First issue raised by Revenue in ground No.1 is that Ld. CIT(A) erred in deleting the addition made by the AO for Rs. 14,90,887/- and Rs. 28,259/- on account liability and provision respectively. 25. The assessee in its balance-sheet has shown liabilities and provisions of Rs. 14,90,887 and Rs. 28,259/- only. But during the year assessee failed to furnish the details of liability and provision as discussed above. Therefore, the AO disallowed the same and added to the total income of the assessee. 26. Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before Ld. CIT(A) submitted that the liability of Rs. 14,90,887/- includes opening balanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion has been deleted by Ld. CIT(A) on the basis of additional evidence which was accepted in contravention to the provision of Rule 46A of the IT Rules, 1962. Accordingly, Ld. DR prayed before the Bench to restore the matter before AO for fresh adjudication in accordance with law. On the other hand, Ld. AR for the assessee submitted that merely non-finding the company at the given address cannot be the basis of making the addition in the hands of the assessee. The AO erred in not considering the confirmation furnished by CSIL. He further reiterated the same arguments that were made before Ld. CIT(A) though he relied on the order of Ld. CIT(A). 28. We have heard the rival contentions of both the parties and perused the materials available on record. It is not disputed that the current liabilities of Rs. 14,90,887/- was inclusive of the opening balance of Rs. 8,90,887/- which was brought from the previous assessment years. Therefore there is no question for making the addition in respect of the amount brought forward from the earlier years. Similarly the assessee has received a sum of Rs. 6 Lacs from Csystem India Private Limited (for short CSIPL) during the year under considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 175 lakh was sanctioned to SM. Shri Asit Roy has not denied the transaction of loan in his statement furnished u/s. 131 of the Act. The assessee also submitted that all the transactions were routed through banking channel of the assessee as well as SM. The Ld. CIT(A) after considering the submission of assessee deleted the addition made by the AO by observing as under:- "4.5.5 Decision: I have carefully considered the submission put forth on behalf o the appellant along with the supporting details/documents furnished, case laws relied upon, perused the facts and case records including the findings of the AO in the impugned assessment order and other materials brought on record. It is contended by the A/R of the appellant that the genuineness of the identity, genuineness of the transaction and creditworthiness of the loan creditor, Shri Asit Roy cannot be doubted simply because the said creditor stated to the AO that he has not signed the confirmation. The A/R also stated that the loan amount has not been repaid till date due to some litigation been started between the husband of one of the Directors and the loan creditor. However, he never denied that he ha s given the loan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is stated that from thee two bank statements filed along with the other evidences, it would be revealed that both the partnership bank account as well as the proprietorship bank account of Shree Mudranalaya were maintained by Shree Mudranalaya in the same bank branch i.e. UCO Bank, Carnawalis Street Branch, Kolkata. the account numbers are 2836 of the proprietorship and 4294 of the partnership, which was opened on 29.042006. Therefore, it is argued that it cannot be said that only the firm's account in the UCO Bank was operated. Here it is proved that both the accounts of the firm i.e. partnership and the proprietorship were operated by the proprietor / partner of M/s Shree Mudranalaya. Therefore, it is proved beyond any doubt the identity of the creditor, creditworthiness of the creditor and the genuineness of the transactions. After going through the documents and bank statement furnished by the appellant, it appears that the above contention of the appellant is correct. In the light of the above discussion and findings, considering the entire facts of the case, I am of the view that the ape has brought sufficient material evidence to prove the identity of the creditor, genui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ancial year. This fact was accepted by Shri Asit Roy in his statement under section 131 of the Act. 2. It was also confirmed by the manager of UCO bank vide letter dated 25.3.2006 that shree Mudalaya was sanctioned a loan of Rs. 175 lakhs in the form of cash credit limit. 3. The amount of loan received by the assessee is reflected in its bank account as well as in the account of loan creditor. In view of above we note that the identity, credit worthiness and genuineness of the transactions was established beyond doubt therefore no additions on account of unexplained cash credit as specified under section 68 of the Act can be made in the given facts and circumstances. 33.1 We also note that there is no adverse comment by the AO regarding the transactions of loan through banking Channel. The argument of the learned DR that the additional evidences have been admitted by the CIT(A) in contravention to the provisions of Rule 46A of Income Tax Rules does not hold good as the same has not been challenged by the Revenue in the grounds of appeal. Moreover, we note that the learned CIT-A adjudicated the issue after calling for the remand report from the AO and considering the submiss ..... X X X X Extracts X X X X X X X X Extracts X X X X
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