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TMI Blog2019 (9) TMI 1232X X X X Extracts X X X X X X X X Extracts X X X X ..... s including depreciation allowance being Rs. 14,25,298/- out of total expenses disallowed by the Ld.A.O. 4) The Ld.CIT(A) has erred in law and/or facts in upholding the order of the Ld.AO of addition of Rs. 1,83,166/- of interest income. 5) The appellant craves liberty to add, amend alter or modify all or any grounds of appeal before final disposal. 2. At the outset, we note that the issue raised by the assessee in ground No. 1 and 5 are general and therefore no separate adjudication is required. Accordingly, we dismiss the same as infructuous. 3. The 1st issue raised by the assessee in ground No. 2 is that the learned CIT (A) erred in confirming the addition made by the AO for Rs. 1,09,29,037/- on account of outstanding balance of sundry creditors. 4. The facts in brief as culled out from the order of the authorities below are that the assessee in the present case is a partnership form and engaged in Cotton business. The AO during the assessment proceedings required the assessee to furnish the necessary details for the current liabilities amounting to Rs. 1,09,29,037/- as shown in the Balance Sheet as on 31st March 2012. But the assessee failed to appear before the AO and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... editors were carried forward from the earlier year. The assessee regarding the remaining sundry creditors for expenses of Rs. 10,82,141/- submitted that it includes an opening balance of Rs. 1,91,500/- which was carried forward from the earlier year. The assessee also claimed that the expenses corresponding to such sundry creditors had not been disputed. Therefore the same cannot be treated as cash credit under section 68 of the Act. The assessee also claimed that it had produced the books of accounts and supporting vouchers during the remand proceedings before the AO which were accepted without pointing out any defect therein. However, the learned CIT(A) disagreed with the contention of the assessee and confirmed the order of the AO by observing as under: "7.2. I have considered the assessment order, facts of the case and the submissions made by the appellant. During remand proceedings, the AO verified all the submissions made by the appellant and it is seen that the appellant only produced the ledger account of sundry creditors. It is seen from the submission made before me as well that no confirmed copies of sundry creditors have been produced. In fact, even the complete a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the authorities below under section 41(1) of the Act. The learned DR vehemently supported the order of the authorities below. 7. We have heard the rival contentions of both the parties and perused the materials available on record. The AO in the assessment proceedings has treated the sundry creditors amounting to Rs. 1,09,29,037 /- as unexplained and therefore the same was added to the total income of the assessee. However, the AO in the remand report submitted that the impugned sundry creditors in the absence of sufficient documentary evidence were treated as unexplained cash credit under section 68 of the Act. The 1st issue before us arises for our adjudication whether the impugned sundry creditors for the purchases and the expenses are liable to be taxed under section 41 (1) of the Act or 68 of the Act. Regarding the applicability of the provisions of section 41(1) of the Act, we note that it is applicable when the assessee has claimed deduction in respect of any loss, expenditure or trading liability and subsequently such liability ceases to exist. Indeed, the assessee in the case on hand has claimed the deduction for the purchases and the expenses incurred by it. But ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. treated the same as outstanding trade liability under the head customer advances. In the subsequent year assessee used the fund for investment purpose and earned interest income on the same. The fact of the above case is completely different from the case under observation, in current case sundry creditors are against the purchases and expenses incurred in earlier year and as well as in year under consideration. However in case of Gujtorn Electronics as per scheme it was very clear that the scheme was for 12 months and after that right of the member will be seized. Therefore in our opinion above case submitted by learned DR is not applicable to the case under observation. In case west Asia Export & Import (P.) Ltd (Supra) The assessee was earlier engaged in the business of Timber, but about 10 year back from assessment year, closed its timber business and switched over to Recruitment of manpower for sending personnel to gulf countries. However assessee was steel showing in his balance sheet sundry creditors representing timber supplier. In this case, Hon'ble Madras HC noted that the assessee has changed its business of Timber to an entirely different nature of business abou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppear before the AO to justify the genuineness of the expenses. Therefore the same was disallowed and added to the total income of the assessee. Aggrieved assessee preferred an appeal to the learned CIT (A). The assessee before the learned CIT (A) in support of its contention filed the necessary details which were forwarded to the AO for his remand report. The AO in his remand report dated 9th January 2017 submitted that the assessee has furnished the ledger copies in support of the expenses but all the supporting vouchers and bills were not filed. The assessee in response to the remand report submitted in its rejoinder dated 10th February 2017 the breakup of the expenses which is recorded on page 23 of the learned CIT (A) . The assessee also claimed that similar expenses were also claimed in the immediate preceding assessment year and no disallowance was made in the assessment framed under section 143(3) of the Act . The learned CIT (A) after considering the submission of the assessee has deleted the addition made by the AO in part by observing as under: "11.2 I have considered the assessment order, facts of the case and the submissions made by the appellant. A perusal of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew the disallowance made by the learned CIT (A) is not sustainable. Accordingly we direct the AO to delete the addition for the disallowance of the depreciation made by him. Regarding the other expenses, we note that the assessee has also claimed similar expenses in the immediate preceding area which were admitted by the Revenue in the assessment framed under section 143(3) of the Act. The copy of the assessment for the year 2011-12 is placed on pages 31 to 34 of the paper book. We further note that there is no provision under the Act to make the disallowance on ad-hoc basis and without pointing out any specific defect in the claim of the assessee. Therefore, we disagree with the finding of the learned CIT (A). However, at the same time we note that the assessee has not discharged his onus by furnishing the supporting vouchers and the bills in respect of such expenses. Therefore, we are not inclined to delete the addition made by the learned CIT (A) in its entirety. To our mind, the justice will be served to both the assessee and the revenue, if the disallowance is restricted to the tune of 10% of all the other expenses except depreciation. Accordingly we direct the AO to rest ..... X X X X Extracts X X X X X X X X Extracts X X X X
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