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TMI Blog2019 (1) TMI 933X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of the case the learned ACIT was not justified in confirming the addition of Rs. 6,82,963/- u/s. 14A. As the appellant is a stock broker and the dividend has been received by chance. 2. The ACIT has erred in law as well as on facts in confirming the addition of Rs. 2,14,43,635/- u/s 68 in spite of submission of confirmations and other required details from the respective parties. The same additions were made in assessment years 2008-09 and 2009-10 and were deleted by the CIT(A) in those years. 3. The learned CIT(A) was not justified in enhancing the addition u/s 68 amounting to Rs. 49,165/- 4. The learned CIT(A) was not justified in enhancing the addition of Legal Expenses disallowing Rs. 47,77,560/- being 50% of Legal & Professional Fees out of Rs. 95,55,123/- in spite of giving full details of the expenditure incurred for the purpose of the business. Similar additions were made in the assessment years 2008-09 and 2009-10 and was fully allowed by the CIT(A). 5. The CIT(A) was highly unjustified in confirming the addition @ 10% of various expenses as mentioned in the assessment order without specifying the particular item out of total claim of Rs. 80,15,542/- 6. The CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of unsecured loans under Sec. 68 of the Act, which thereafter had been substituted by the CIT(A) by an amount of Rs. 2,14,92,800/-. It was submitted by the Ld. A.R that during the course of the assessment proceedings the confirmations of the respective parties was placed on record of the A.O. Further, as per the Ld. A.R the complete income tax credentials of the respective parties i.e. their respective PAN numbers etc. were also furnished with the A.O. The Ld. A.R submitted that even in the course of the proceedings before the CIT(A) the assessee had placed on record the copies of the confirmation letters along with the respective bank accounts of the lender parties. In the backdrop of the aforesaid facts, it was the contention of the Ld. A.R that despite the fact that the onus cast upon the assessee was duly discharged by it, however the lower authorities had most arbitrarily assessed the aforementioned account of Rs. 2,14,43,635/- as an unexplained cash credit under Sec. 68 of the Act. Further, it was averred by the Ld. A.R that though the transactions of the assessee with the aforementioned parties was accepted by the revenue in the immediate preceding year, however, taking a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .R that the A.O had neither at any stage directed the assessee to produce the remaining vouchers, nor had pointed out any infirmity in either of the vouchers that was produced before him. The Ld. A.R submitted that the A.O without specifically pointing out as to which all vouchers were not verifiable, had thus most arbitrarily carried out an adhoc disallowance of 10% of total expenses and made a consequential addition/disallowance of Rs. 8,01,554/- in the hands of the assessee. The Ld. A.R in order to fortify his claim that all the expenses were duly vouched, therein took support of the fact that the accounts of the assessee which was a public limited listed company were duly audited, and the fact that all the expenses were vouched had duly been verified by the auditor. The Ld. A.R had further challenged the disallowance of Rs. 1,00,000/- made by the A.O out of repairs and renewal expenditure of Rs. 6,83,086/-. It was averred by the Ld. A.R that the A.O had carried out the aforesaid disallowance by observing that the expenses to the extent of Rs. 1,00,000/- were in the nature of capital expenditure. It was submitted by the Ld. A.R that as the assessee was operating from a rented p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,606/- Rs. 17,77,700/- R.J Tradelinks Pvt. Ltd. Rs. 34,16,620/- Rs. 1,33,79,409/- Rs. 73,43,029/- Rs. 94,53,000/- Zafar Y Saraswala Rs. 80,67,700/- Rs. 10,70,000/- Rs. 27,86,684/- Rs. 63,51,016/- Total Rs. 1,44,85,400/- Rs. 2,14,92,800/- Rs. 1,14,66,180/- Rs. 3,24,81,716/- On a perusal of the orders of the lower authorities, it emerges that the assessee is stated to have placed on record the confirmation letters along with the copies of the bank accounts, as well as the PAN numbers of the aforesaid parties. Further, it is the contention of the Ld. A.R that the very same cash creditors which were not accepted by the A.O while framing the assessment in the case of the assessee for A.Y. 2009-10, were however on appeal accepted by the CIT(A). It is the claim of the assessee that the aforementioned amounts were the interest free unsecured loans raised by the assessee either from its directors or from the companies in which the said persons were holding substantial interest. We find from a perusal of the order of the CIT(A), that in the backdrop of the fact that his predecessor while disposing off the appeal of the assessee for A.Y. 2009-10 had held the loan creditor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... saction. Further, we are of the considered view that though the assessee had placed on record the copies of the bank accounts of the respective lenders, however neither any effort had been put in either by the assessee to establish beyond doubt the creditworthiness of the said lenders, nor any such exercise had been embarked upon by the A.O. In the backdrop of the aforesaid facts, we are of the considered view that as the identity of the parties has been accepted by the CIT(A) and the same has not been assailed by the revenue before us, thus the same attains finality and is not dispute. However, we find that the matter as regards the creditworthiness of the respective parties from whom the assessee had received loans aggregating to Rs. 2,14,92,800/- had not been proved, thus on the said count the issue requires to be revisited by the A.O The matter is therefore set aside to the file of the A.O, who is herein directed to readjudicate the genuineness and veracity of the loan transactions under consideration after making necessary verification as regards the creditworthiness of the lender parties. Needless to say, the A.O shall afford a reasonable opportunity of being heard to the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee under the head "legal and professional fees" is a question of fact and not a question of law, thus the mere fact that the same had been allowed in the preceding year cannot form a precedent for allowing the same in a subsequent year. However, we are unable to persuade ourselves to accept the manner in which an adhoc disallowance of the legal and professional fees expenses had been carried out by the A.O, and thereafter sustained by the CIT(A). On a perusal of the orders of the lower authorities, it emerges that though the assessee had furnished the details of the legal and professional fees by placing on record the copy of the ledger account from where the complete details were discernible, however, there is nothing which could persuade us to conclude that the assessee was called upon by the A.O to place on record documentary evidence to substantiate that the said expenses were incurred in the course of its business. Rather, a perusal of the assessment order reveals that the A.O had disallowed the aforesaid expense for the reason that the assessee except for furnishing the ledger account of legal and professional fees as appearing in its books of account, had however not pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e disallowance of 10% of various expense of Rs. 80,15,542/- carried out by the A.O, on the ground that the expenses were not verifiable. On appeal, the aforesaid disallowance of expenses was upheld by the CIT(A). We find that the assessee had claimed the following expenses aggregating to Rs. 80,15,542/- : Sr. No. Particulars Amount (In Rs.) 1. Travelling Conveyance and vehicle Expenses 30,46,773/- 2. Office and other expenses 8,13,380/- 3. Printing & Stationery 5,01,197/- 4. Postage & Courier Expenses 5,26,113/- 5. Telephone Expenses 12,63,976/- 6. Website & Computer Expenses 18,64,103/- Total 80,15,542/- On being called upon to substantiate the aforesaid expenses with supporting bills/vouchers, and also to explain that the same were expended wholly and exclusively for business purposes, the assessee placed on record certain self made vouchers to support its aforesaid claim. The A.O not inspired by the aforesaid self made vouchers, observed that as the assessee had not maintained any log book/records in respect of said expenses, thus the personal element embedded in incurring of the said expenditure for want of itineraries, log books and finer det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for the reason that the assessee had failed to prove that no enduring benefit got vested with it on incurring the aforesaid expenditure. 15. We have given a thoughtful consideration and are unable to persuade ourselves to accept the observations of the lower authorities. We find that as observed by us hereinabove, the reason for making of the aforesaid disallowance is not clearly discernible from the orders of the lower authorities. Further, nothing can be gathered from the orders of the lower authorities as regards the basis for treating an amount of Rs. 1,00,000/- as a "capital expenditure" out of the total expenses of Rs. 6,83,086/- booked by the assessee under the head repair and maintenance charges. We though are in agreement with the observations of the lower authorities, that an expenditure which is in the nature of a "capital expenditure" cannot be allowed in the garb of claim of the same by the assessee as a revenue expenditure, but in the absence of any reference to any such "capital expenditure" of Rs. 1,00,000/- which had been claimed by the assessee as a "revenue expenditure", we are unable to persuade ourselves to dislodge the aforesaid claim of expenditure so rai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave perused the orders of the lower authorities, and find that the details of current liabilities and other details which were requisitioned by the A.O under Sec. 142(1) were not supplied by the assessee. Further, no details in respect of the outstanding sundry creditors was also furnished by the assessee despite specific directions by the A.O. Still further, the CIT(A) in all fairness during the course of the appellate proceedings vide his order sheet entry dated 01.07.2015 directed the assessee to file (i) confirmations from the creditors; (ii) details as regards the payments subsequently made by the assessee to the creditors with supporting evidence, bank payment statements highlighting relevant transactions; and (iii) any other submission in support of its aforesaid claim. However, as observed by the CIT(A), the assessee despite having been afforded another opportunity to substantiate its claim that there was no cessation of liability in terms of Sec. 41(1) of the Act, failed to place on record the aforesaid documentary evidence. We find that the CIT(A) taking cognizance of the aforesaid facts, thus held a conviction that the assessee had no additional documents to substantiate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee only during any such previous year in which the assessee had obtained some benefit in respect of the same by way of remission or cessation thereof. On the basis of our aforesaid observations, we are of the considered view that though a very heavy onus is cast upon the assessee to prove that there has been no remission or cessation of liability, but if he fails to so prove, then though it would be open for the revenue to assess the said amount as the deemed income of the assessee under Sec. 41(1) of the Act, however, it would be for the revenue to prove that pursuant to such remission or cessation of such trading liability the assessee had obtained some benefit during the year under consideration. 20. We are of the considered view that admittedly the assessee in the case before us had failed to prove despite having been afforded sufficient opportunities both by the assessing authority and CIT(A), that the liabilities under consideration viz. (i) current liabilities; and (ii) outstanding sundry creditors, had not ceased to exist and were outstanding. However, at the same time the revenue also had failed to provide any reasoning as to how the remission or cessation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) was highly justified in confirming the disallowance the depreciation on car amounting to Rs. 4,44,492/- as claimed by your appellant. 5. The CIT(A) was highly justified in confirming the arbitrary addition of Rs. 2,46,78,611/- u/s 68 in spite of submission of confirmations from the respective parties. CIT(A) has deleted the addition in the assessment year 2008-09 and 2009-10 as the parties are same which are carried forward from year after years. 6. The CIT(A) was highly justified in confirming the arbitrary addition of Rs. 41,65,500/- being Legal & Professional Fees out of Rs. 95,71,697/- in spite of giving full details with bills of expenditure incurred for the purpose of the business. The addition was deleted by CIT(A) in the assessment years 2008-09 and 2009-10. 7. The CIT(A) was highly justified in confirming the arbitrary addition of has wrongly disallowed 10% of various expenses Rs. 80,15,542/-. There was no disallowance under this head rather there was an additional ground of appeal which was not disposed by the learned CIT(A). The appellant further craves the leave to put in additional grounds of appeal if any at the time of hearing." Further, the assessee has also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the "due date" of filing of the "return of income" by the assessee company for the year under consideration. The Ld. A.R in support of his aforesaid contention drew our attention to Page 6-7 of the CIT(A) order, wherein the complete details as regards the payments made by the assessee in respect of the employees contribution to ESIC and PF were found mentioned. The Ld. A.R submitted that as the aforementioned amounts were deposited prior to the "due date" of filing of the return of income by the assessee, thus the same could not have been disallowed. In support of his aforesaid contention the Ld. A.R relied on the judgment of the Hon"ble High Court of Bombay in the case of CIT Vs. Godaveri (Mannar) Sahakari Sakhar Karkhana Ltd. (2008) 298 ITR 149 (Bom). Further, the Ld. A.R assailed the disallowance under Sec. 40(a)(ia) by the A.O of the transaction charges of Rs. 2,97,219/- that were paid by the assessee during the year to stock exchange. It was averred by the Ld. A.R that as the aforesaid amount had been "Paid" and was not "Payable", hence no disallowance of the said charges was liable to be made under Sec. 40(a)(ia). The Ld. A.R submitted that the CIT(A) had erred in uphol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 36(1)(va) in context of the delayed deposit by the assessee of the employees contribution towards ESIC and PF. On a perusal of the details as are discernible from the orders of the lower authorities, it emerges that though the aforementioned amounts had been deposited by the assessee beyond the time limit contemplated under the respective acts, but the same are found to have been deposited prior to the "due date" of filing of the return of income by the assessee. 29. We find that our indulgence has been sought by the assessee for adjudicating as to whether in the backdrop of the post amended Sec. 43B of the Act, the lower authorities were right in law and facts of the case in disallowing the payments made by the assessee towards employees contribution towards ESIC and provident fund, though made beyond the stipulated time contemplated under the said respective acts, but before the "due date" of filing of the return of income by the assessee under Sec. 139(1) of the Act. We find that though the assessee had made the payments towards employees contribution to provident fund and ESIC beyond the stipulated time period, however the said amounts were paid before the "due date" of fili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esaid settled position of law, the contention raised by the assessee is dismissed. The Ground of Appeal No. 3 is dismissed. 31. We shall now take up the disallowance of depreciation on car amounting to Rs. 4,44,492/-. We find that the A.O observed that a perusal of the invoice of the motor vehicle revealed that the same was purchased in the name of Mr. Uves Mohammed Younus Sareshwala, director of the company. The A.O being of the view that the assessee company was not the legal owner of the vehicle, thus declined to allow the claim of depreciation of Rs. 4,44,492/- raised by the assessee as regards the same. 32. We have given a thoughtful consideration to the facts of the issue under consideration and find that the vehicle was registered in the name of the director of the assessee company viz. Mr. Uves Mohammed Younus Sareshwala. However, at the same time the other material facts which were brought to the notice of the lower authorities by the assessee i.e. (i). that the payment towards the purchase consideration for the motor car was made by the assessee company; and (ii). the motor car was reflected as an asset in the "block of assets" of the assessee company, which duly establ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpanies in which the said persons were holding substantial interest. We find that the CIT(A) after deliberating at length on the observations of the A.O in context of the issue under consideration, has upheld the addition of Rs. 2,46,78,611/- for the reason that no additional details or submissions to substantiate the genuineness and veracity of the said loan transactions were placed on record by the assessee during the course of the appellate proceedings. 34. We have deliberated at length on the issue as regards the addition of Rs. 2,46,78,611/- made under Sec. 68 in the hands of the assessee, and are unable to persuade ourselves to accept the observations of the lower authorities as such. We find that it is a matter of record which has not been controverted by the Ld. D.R before us, that the assessee had placed on record the copies of the confirmation letters of the respective parties with the lower authorities. We are of the considered view that the assessee by placing on record the aforesaid documentary evidence had to some extent discharged the primary onus as was cast upon it. Further, we find substantial force in the contention of the Ld. A.R that as some of the creditors w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Rs. 41,65,500/- by the A.O which thereafter had been sustained by the CIT(A). On a perusal of the orders of the lower authorities, it emerges that the legal and professional fees of Rs. 41,65,500/- had been disallowed for the reason that the same pertained to the expenses incurred by the assessee in respect of its ongoing suit in the Securities Appellate Tribunal and the Hon"ble High Court of Bombay. The A.O being of the view, that as the aforementioned expense was incurred by the assessee company for the purpose of exonerating itself from an infraction of law, thus the same would not be allowable as an expenditure under Sec. 37(1) of the Act, had disallowed the same. The A.O on the basis of his conviction that the aforesaid expenditure was not incurred wholly and exclusively for the purpose of business by the assessee, thus the same would not be allowable under Sec. 37(1) of the Act. On appeal, the CIT(A) merely referring to the observations of his predecessor while disposing off the appeal of the assessee for A.Y. 2010-11, adopted the same and upheld the aforesaid disallowance. 36. The Ld. A.R assailing the aforesaid disallowance of the legal and professional fees, submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess of the assessee. In our considered view, incurring of an expenditure by an assessee for any purpose which is an offence or prohibited by law, can in no way be equated with the expenditure incurred by the assessee by way of litigation fees to safeguard its interest. We find that a similar disallowance by the A.O of legal and professional fees of Rs. 96.66 lacs that was paid for defending a criminal complaint, was deleted by the CIT(A) in the assesses own case for A.Y. 2008-09, after the A.O had in his remand report admitted that the said expenditure was allowable in the hands of the assessee. Further, on appeal by the revenue the Tribunal had upheld the order of the CIT(A) and had observed that the revenue could not show as how the claim of the said expenditure was not allowable. We thus, in terms of our aforesaid observations and the view taken by the coordinate bench of the Tribunal while disposing off the appeal of the revenue in the assesses own case for A.Y. 2008-09 viz. ACIT, Circle-4(2), Mumbai Vs. M/s Parsoli Corporation Ltd. (ITA No. 5804/Mum/2013; dated 25.11.2016), are of the considered view that the legal and professional fees expenses of Rs. 41,65,500/- incurred by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rightly declined to accept the contention of the assessee that the provisions of Sec. 73 would not be applicable in respect of the share trading loss of Rs. 14,92,784/- that was suffered by the assessee in respect of the trading of the shares that were lying with it as stock-intrade, and not as an investment. We find that the A.O rightly construing the scope of Explanation to Sec. 73 of the Act, as per the extant law, had correctly concluded that the share trading loss of Rs. 14,92,784/- was a deemed speculation loss in the hands of the assessee company. We may herein observe that the assessee had at no stage tried to bring its case within any of the exception carved out in the Explanation to Sec. 73 of the Act. Further, the reliance placed by the Ld. A.R on the order passed by the Tribunal while disposing off the appeal of the revenue in the assesses own case for A.Y. 2008-09 would in no way assist its case. We find that the Tribunal finding force in the contention advanced by the Ld. D.R, that the Explanation to Sec. 73 being a legal fiction does not differentiate between delivery based transaction and a non-delivery based transaction, had thus for consideration of the said aspe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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