TMI Blog2013 (1) TMI 1001X X X X Extracts X X X X X X X X Extracts X X X X ..... prior year adjustment of ₹ 1,63,761/-. Profit before tax had been computed at ₹ 37,01,16,728/-. 3. The Assessing Officer completed the assessment, inter-alia, making following additions/ disallowances: - i) addition on account of provision for gratuity ₹ 3,62,096/-; ii) addition on account of cash loss during a fire ₹ 6,86,253/-; iii) addition u/s 41(1) ₹ 3,54,201/-; iv) addition u/s 14A ₹ 16,13,623/-; v) disallowance of bad debts ₹ 2,04,091/-; vi) foreign travel expenses of Director s wife ₹ 2,90,020/- being 10% out of foreign traveling expenses of Managing Director and Export Marketing Managers. 4. The assessee preferred appeal before ld. CIT(A), who partly allowed the assessee s appeal. 5. Being aggrieved with the order of ld. CIT(A), both assessee and department have filed cross appeals before us. 6. First we take up the Department s appeal vide ITA No. 2113/D/12. The Department has taken following grounds of appeal: - 1. On the facts and in the circumstances of the case and in law the ld. CIT(A) has erred in deleting the addition of ₹ 3,62,096/- made on account of disallowance being pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee explained that cash in hand as per cash book was immediately reduced after fire. The AO disallowed the assessee s claim, inter-alia, observing that no documentary evidence was filed in support of claim of loss of cash. 14. Before ld. CIT(A), it was, inter-alia, submitted that mostly the notes were completely burnt in fire except the few notes parts of which were recovered from fire. The assessee produced the half burnt notes before ld. CIT(A) along with the burnt cash box. It was also submitted that the AO did not raise any query in regard to cash loss. The assessee further submitted that the physical verification of cash was made after fire and the cash loss was computed after making adjustments of sales/expenses in the opening cash available on the said date. Ld. CIT(A) admitted the details/additional evidences under Rule 46A(4) because these evidences were produced in response to various queries made during the course of appellate proceedings. Ld. CIT(A) allowed the assessee s claim, inter-alia, observing that no adverse inference was brought on record by the AO to negate the contention of the assessee. 15. We have considered the submissions of both the parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the details of such creditors aggregating to ₹ 3,54,201/-. The AO made an addition of this amount u/s 41(1) treating this to be remission of trading liability. The AO relied on the following two decisions: - i) T.V. Sundram Aiyangar Sons , 222 ITR 344; ii) ACIT vs. Pheonix Mills Ltd. (2002), 83 ITD 65 (Bom.). 22. Ld. CIT(A) confirmed the addition, inter-alia, observing that as per Explanation 1 of section 41 it has been found by AO that this was a case of remission or cessation of trading liability, which was claimed as expenditure in earlier years. 23. Ld. Counsel for the assessee referred to page 3 4 of the assessment order to demonstrate that the sum of ₹ 3,54,201.23 comprised of several accounts. He submitted that assessee had not returned back these amounts and there was no basis for treating these amounts as remission or cessation of trading liability of assessee. He submitted that AO has made this addition merely on presumption basis. With regard to the decision of Hon ble Supreme Court in the case of T.V. Sundram Aiyangar Sons, ld. Counsel pointed out that in the said case assessee itself had written back the amounts in the Profit Loss Acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t mere entry in the books of account of the debtor, made unilaterally, without any act on the part of the creditor, will not enable the debtor to say that the liability has come to an end. In the present case, since assessee had not written back these amounts, therefore, there was acknowledgment of debt by assessee as on the date of balance sheet. Under such circumstances, it could not be said that there was remission or cessation of liability. We, therefore, set aside the order of ld. CIT(A) on this issue. 29. In the result, this ground is allowed. 30. Brief facts apropos ground no. 2 are that during the relevant previous year the assessee company had shown dividend income of ₹ 1,37,18,624/-. The AO computed the disallowance u/s 14A as per Rule 8D at ₹ 16,13,623/- which was confirmed by ld. CIT(A). At the time of hearing, ld. Counsel for the assessee filed before us computation of expenditure inadmissible u/s 14A read with Rule 8D as per which the disallowance should have been ₹ 13,68,231/-. He submitted that the matter may be restored back to the file of AO for verification of quantification of disallowance. 31. Having hard both the parties, we restore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore the said amounts were written off. The list mentions the names or the heads from which the amount was recoverable, e.g., Brix, Cascades and Caraway, Gourment Shop, Grand Caf are the restaurants and coffee shop of the hotel from whom the amount was receivable on account of sales made by them. However, due to fire, the said amount cannot be recovered. Since the income had already been recorded in the accounts but the amount was not recoverable, the same was claimed as bad debts. Rooms, Minibar and Sales and Marketing represent the amount recoverable under these heads. Clearing account and Guest long stay Reco. Prog. Are also ledger heads in the books of account. The money outstanding under these heads was written off since not recoverable. Meals Mod Dhi is the name of restaurant. 6.3 In this case, it is an undisputed fact that the amount under these heads was booked as income and shown as receivable under various heads as the AO has not challenged this fact. The only reason for disallowing the bad debt written off was that name of the parties was not submitted. Only the nomenclature of an item should not be considered but the substance of the transaction has to be seen. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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