TMI Blog2018 (10) TMI 422X X X X Extracts X X X X X X X X Extracts X X X X ..... not be any personal expenses incurred by the assessee company on account of car running and telephone expenses. It appears to be an adhoc addition made by the A.O. without pointing out any specific inadmissible expenses incurred by the assessee. In this view of the matter, we set aside the Orders of the authorities below and delete the entire addition. Addition on account of fabrication charges - complete desired details were not submitted - Held that:- In the absence of any specific defect pointed-out in the maintenance of the books of account, there were no justification for the A.O. to disallow the entire amount of fabrication charges. The assessee has given a certificate in the paper book that all the documentary evidences were filed before A.O, which have not been rebutted through any evidence or material on record by the Revenue. CIT(A) also verified the details and the books of account and came to the finding that the assessee has maintained proper books of account and that there are no violation of TDS provisions. CIT(A) on proper appreciation of facts and verification of the record and the books of account produced by the assessee, correctly deleted the addition. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these expenses were filed and perused by the A.O. It revealed that most of the expenses have been incurred for purchase of tube rods, electrical wires, condensers, capacitors etc. The A.O. noted that these items are of enduring nature and cannot be termed as consumables and rather in the nature of capital items. The A.O. allowed 10% depreciation on the same and made the addition of ₹ 1,37,765/-. The Ld. CIT(A) confirmed the addition. 5. After considering the rival submissions, we are of the view that the addition is wholly unjustified. Considering the nature of business of assessee, these expenses are incurred on electrical repair and maintenance, which are in nature and consumable expenses. The assessee has rightly treated the same as revenue expenditure. The A.O. has not pointed-out as to which capital have been generated by the assessee for purchasing tube rods, electrical wires etc. In the absence of any specific finding against the assessee, we set aside the Orders of the authorities below and delete the addition of ₹ 1,37,765/- made by the A.O. Ground No.1 of cross-objection is allowed. 6. On ground No.2, the assessee challenged the addition of ₹ 1,81 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment stage on 16.03.2015, in which, the assessee in response to query of the A.O. submitted several details before him i.e., details of the stock, details of fall in gross profit, copy of ITR, computation of income and balance sheet of M/s. Shivam International Ltd., details of employees, note on role for fabrication in business activities, party-wise details of fabrication charges, copy of the cash book, copy of the purchase bills and details of the expenses. Learned Counsel for the Assessee, therefore, submitted that since books of account of the assessee produced before A.O, therefore, no additional evidence has been considered by the Ld. CIT(A). 13. We have considered the rival submissions and do not find any justification to entertain the submissions of the Ld. D.R. The assessee has filed reply before A.O. as referred to above in which several details as per the query of the A.O. were furnished at assessment stage including copy of the cash book. Therefore, all the details were furnished before A.O. including production of the books of account Learned Counsel for the Assessee also contended that no additional evidence was filed before Ld. CIT(A). The Ld. D.R. has not point ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b of Panel knitting, Linking of palla (stitching) etc., Hand embroidery and bead etc., and Crocheted work etc., and other related work is also done to complete the above job. The A.O. however, noted that complete details are not provided to substantiate the claim. It was also noticed that fabrication charges were not subjected to TDS and all the expenses were made in cash. The reason of exigency for making payments to fabricators in cash was also not provided. The assessee merely stated that fabrication charges has been paid in course of business and were below the threshold limit prescribed for TDS provisions. The A.O, therefore, noted that assessee engaged services of 3600+ fabricators in order to justify its claim of fabrication charges. Even the cash book reveals that expenses have been incurred in cash and are below ₹ 20,000/-. Thus, devised a method not to deduct tax. The A.O. also noted that assessee has also claimed expenses of wages and salary and dyeing expenses. The assessee was asked to produce the monthly trading account and reconcile the same with fabrication charges and wages paid along with electricity charges. The assessee provided details of only one month s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are maintained. The payments are made by cheque as well as in cash. Tax has also been deducted on part of the payments. The assessee, therefore, produced complete details to satisfy the payment on account of fabrication charges. The assessee engaged only 1555 fabricators and not 3600 wrongly calculated by the A.O. Complete details have been maintained along with details of wages and salaries. All the details are verifiable. The assessee maintained regular books of account which are duly supported by bills and vouchers and subjected to check. The details of fabrication charges of earlier year were also filed to justify the payment of fabrication charges. 17. Ld. CIT(A) considering the explanation of assessee in the light of material on record, deleted the addition. His findings in pages 13 and 14 of the impugned order are reproduced as under : Ground No.2: I called books of account of the appellant company like cash book ledger book and vouchers which the AR produced before me with the accountant of the company. I verified the books of accounts and found that books are maintained in computer and printed ledger was produced before me for verification. The appellant compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Ld. CIT(A) for passing the order afresh. 19. On the other hand, Learned Counsel for the Assessee, reiterated the submissions made before the authorities below and submitted that complete details on account of fabrication expenses under various heads and supported details are filed from pages 66 to 159 of the paper book. It contains names of the fabricator and his address. PB- 160 is the chart of fabrication charges for preceding three years in proportion of sales and average rate of fabrication charges. Learned Counsel for the Assessee submitted that in assessment year under appeal, the average rate of fabrication charges have increased as compared to earlier year. Similarly, the average sale per packet of manufacture and sale also increased substantially as compared to earlier year. Books of account of the assessee have not been rejected. No addition have been made for any TDS violation. PB-10 is P L A/c and PB-19 is details of expenses which includes fabrication charges. He has submitted that fabrication charges is essential expenses for conduct of the business to earn income. Therefore, entire amount could not have been disallowed by the A.O. He has submitted that en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter in issue to the file of the Ld. CIT(A) for fresh examination as is argued by the Ld. D.R. We have also noted above that there is no reason for invoking Rule 46A in the matter. Therefore, no further interference is required in the matter. Ground No.2 of appeal of Revenue is dismissed. 21. On ground No.3, Revenue challenged the order of Ld. CIT(A) in deleting addition of ₹ 1,44,95,000/- made under section 68 of the I.T. Act. The A.O. noted that during the year assessee-company received loan of ₹ 1,44,95,000/- from M/s. Shivam International Limited. The assessee-company was asked to produce copy of the income tax return, copy of the balance-sheet and bank account to justify the genuineness and creditworthiness of the loan. In response to the above, assessee-company has produced the copy of the ITR and the balance-sheet of the lender. On perusal of the balance-sheet of the lender company, it emerges that Share Capital is of ₹ 73.86 lakhs, Reserve and Surplus (-) ₹ 15 lakhs, Long Term borrowings ₹ 2.26 crores, Trade Payables ₹ 2.46 lakhs and the income returned is zero. The A.O, therefore, noted that from these financial statistics, creditworth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.73.86 lakhs Reserve Surplus - (-) ₹ 15.00 lakhs Long Term Borrowings - Rs.2.26 crores Trade Payables - Rs.2.46 lakhs Income returned during the A.Y. 2012-13 - 0 (zer0) From this he concluded that the creditworthiness of the lender was not proved and money is transferred from the balance sheet of the lender company to the appellant company. However, the AO is directed to send this information to the Assessing Officer of the lender company i.e ITO Co. Ward 8(2)/NWR/W/038/02 having its office at D-6, NDSE, Part-I, South Extension, New Delhi-110001 . The office is located in Delhi but A.O is in N.W.R which is suspicion in the jurisdiction. The AO is directed to refer the matter to concerned A.O and pass on the information along with this assessment order and appeal order, for necessary action at the other end of the A.O. Therefore, the addition made by A.O of ₹ 1,44,95,000/- is deleted in the appellant s case and this ground of appeal is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o carry his suspicion to logical conclusion by further investigation and therefore addition under s.68 was not sustainable. 25.3. The Hon ble Delhi High Court in the case of CIT vs. Vrindavan Farms Pvt. Ltd., etc., in ITA.No.71 of 2015 vide Order dated 12.08.2015, held as under : The sole basis for the Revenue to doubt their creditworthiness was the low income as reflected in their return of income. It was observed by the ITAT that the AO had not undertaken any investigation of the veracity of the documents submitted by the assessee, the departmental appeal was dismissed by the Hon ble High Court. 25.4. The Hon ble Delhi High Court in the case of CIT vs. Value Capital Services Pvt. Ltd., (2008) 307 ITR 334 (Del.) in which it was held as under : Dismissing the appeal, that the additional burden was on the Department to show that even if the share applicants did not have the means to make the investment, the investment made by them actually emanated from the coffers of the assessee so as to enable it to be treated as the undisclosed income of the assessee. No substantial question of law arose. 26. Considering the facts of the case, evidence on record a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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