TMI Blog2019 (6) TMI 1368X X X X Extracts X X X X X X X X Extracts X X X X ..... utside party in excess of ₹ 20000. From the records it can be seen that no single expenditure incurred by Mr. P. Bala Krishnan is in excess of ₹ 20000/-. All these facts were taken into consideration by the CIT(A) and has rightly given the findings by deleting the disallowance. Addition of legal and professional charges for compliance - ignoring the fact that separate auditing fees has been paid - HELD THAT:- The assessee had duly furnished supporting evidences in the form of ledger, confirmation from other part, etc. Payments were made vide banking channel. TDS was duly deducted on the said payments. The said receipts were made part of its income by the other company. All these facts and evidences were not controverted by the Assessing Officer in the remand report. The assessee also clarified before the Revenue that the services received from such party were not on account of auditing but on account of monthly accounting services and Annual Compliance Services to take care of statutory functions as mentioned in the order of the CIT(A). Thus, there is no need to interfere with the findings of the CIT(A). Addition of legal and professional charges paid to sister co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 1.17,939/- made u/s 40A(3) ignoring the fact that the payments are made in cash in excess of ₹ 20,000/. 3. Whether on the facts and circumstances of the case in law, the Ld. CIT(A) erred in deleting the addition of ₹ 11,03,000/- made on account of legal and professional charges ignoring the fact that separate auditing fees has been paid by the assessee company. 4. Whether on the facts and circumstances of the case in law, the Ld. CIT(A) erred in deleting the addition of Rs.l6,00,000/- made on account of legal and professional charges ignoring the fact that there is no written agreement with the sister concern from whom the company takes services. 5. Whether on the facts and circumstances of the case in law, the Ld. CIT(A) erred in deleting the addition of ₹ 13,41,982/- made on account of office expenses ignoring the fact that the same are not used wholly and exclusively for the purpose of the company. 6. Whether on the facts and circumstances of the case in law, the Ld. CIT(A) erred in deleting the addition of ₹ 38,91,474/- made on account of travelling and conveyance exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition of ₹ 16,00,000/- made on account of legal and professional charges, the Ld. DR submitted that the CIT(A) erred in fact that there is no written agreement with the sister concern from whom the company takes services. As regards to Ground No. 5 relating to addition of ₹ 13,41,982/- made on account of office expenses, the Ld. DR submitted that the same are not used wholly and exclusively for the purpose of business of the company. As regards to Ground No. 6 relating to addition of ₹ 38,91,474/- made on account of travelling and conveyance expenses, the Ld. DR submitted that the CIT(A) ignored the fact that the same is used by the director for his personal purposes. As regards to Ground No. 7 relating to addition of ₹ 3,07,102/- made on account of repair and maintenance expenses, the Ld. DR submitted that the CIT(A) ignored the fact that the same were not used by the assessee company for its business activity. 6. The Ld. AR submitted that all these additions were made by the Assessing Officer on ad-hoc basis and CIT(A) has rightly deleted these additions. 7. We have heard both the parties and perused all the relevant materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y incurred for business purposes. Thus the Assessing Officer made the disallowance of expenditure on ad-hoc basis. The concept of ad-hoc disallowance has been repeatedly deterred by the Hon ble High Court and addition made on such basis is liable to be set aside. The Hon ble Delhi High Court in case of CIT vs. Ms. Shehnaz Hussain 267 ITR 572 (Del) held that addition made on estimate and hypothetical grounds without any concrete material or evidence cannot be sustained. Thus, the CIT(A) has rightly deleted this addition with the proper findings. There is no need to interfere with the same. Ground No. 1 of the Revenue s appeal is dismissed. 8. As regards to Ground No. 2, the CIT(A) held as under: 14.3 I have gone through the assessment order, written submissions, paper book and remand report of the AO. The AO held that the appellant had incurred the expenditure of ₹ 5,75,916/- in contravention of provisions of Section 40(3) of the Act and the same was disallowed accordingly. In this regard, contention of the appellant is that the amount reflected in the assessment order is the amount of expenditure against which various cash payments ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erein it has been mentioned that the following compliance services have been rendered in the year under consideration for which the amount of ₹ 11,03,000/- has been charged: i. Labour Welfare fund ii. Provident Fund iii. ESIC a/c iv. Value Added Tax v. Service Tax vi. Tax Deduction at Source vii. Finalization of Accounts It has been mentioned in the confirmation that the amount of ₹ 11,03,000/- has been included in the income of the relevant financial year by M/s AARMP Co. and payment for the same has been received through banking channel only. It has been noted that the tax at source has been deducted @10% under section 194J on account of professional services. The submission of the appellant on this issue was also forwarded to the AO. The remand report of the AO is silent on this issue and submission made by the appellant in this regard. He has not controverted above facts. Since, these expenses have been incurred wholly of the purpose of the company, the same is an allowable expenditure under section 37(1) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is silent on this issue and submission made by the appellant in this regard. He has not controverted above facts. The AO in the assessment order has disallowed the amount of ₹ 16,00,000/- under section 40A(2)(a) but he has not been able to substantiate his allegation that how amount paid by the appellant was excessive or unreasonable. Simply because the two parties had sister concerns of the appellant company disallowance cannot be made under section 40A(2)(a). since, these expenses have been incurred wholly of the purpose of the company, the same is an allowable expenditure under section 37(1) of act. The AO is directed to delete the disallowance of ₹ 16,00,000/-. At the time of assessment proceedings, the assessee filed detailed reply wherein detailed description of services performed by the said parties has been provided by the assessee. From the records it can be seen that M/s Grintex Research Advanced Technologies Pvt. Ltd. has provided services to the company for identifying foreign universities and Research institutions with whom the company could potentially collaborate with regards to Research and Development for projects related to user appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t effect. The CIT(A) has rightly deleted this addition and there is no need to interfere with the findings. Ground No. 4 of the Revenue s appeal is dismissed. 12. As regards to Ground No. 6, the CIT(A) held as under: 24.3 I have gone through the assessment order, written submissions, paper book and remand report of the AO. The appellant had claimed the expenses of ₹ 51,88,632/- on account of travelling and conveyance. The AO found that most of the expenses had been incurred in the name of the director Sh. Hariharan Gautum. On the basis of the above, the AO made the disallowance of 75% of the above expenses. The contention of the appellant in this regard is that the disallowance is purely adhoc in nature and not tenable in law. It has been contended by the appellant that the expenses has been incurred on the travel of the employees of the company only for the purpose of its business. The payments made by Mr. Hari Hharan Gautam are not personal in nature. The same were on behalf of the company as he is the signing authority of the company. The appellant has submitted copy of bills and vouchers maintained in respect of sa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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