TMI Blog2020 (4) TMI 754X X X X Extracts X X X X X X X X Extracts X X X X ..... n - amount remitted to non-resident - HELD THAT:- Submissions made by the assessee that no tax was liable to be deducted at source as per Article 14 of the DTAA with UAE on account of payment to non-resident for services rendered outside India need re-examination by the AO. Therefore, we set aside the order of the Ld. CIT(A) on the above issue and restore the matter to the file of the AO to make an order afresh after giving reasonable opportunity of being heard to the assessee. We direct the assessee to file the relevant documents/evidence before the AO. Thus the 2nd ground of appeal is allowed for statistical purposes. Addition u/s. 69 on account of unexplained expenses - HELD THAT:- We find merit in the observation of the Ld. CIT(A) that when on the same set of papers, more than one entry is made and one such entry is recorded in the books of accounts, it was for the assessee to prove that the other entries were not in respect of unexplained expenditure/investment because the entire document as such has to be either taken as true or dumb. Expenditure confirmed by the Ld. CIT(A) need to be re-examined on the basis of evidence of such expenditure to be filed by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... represent any income or expenditure and it was prepared by the accountant to record the results of trial run taken for the purposes of shifting from Foxpro accounting software to Tally. The assessee at the year-end has drawn final accounting on the basis of regular account which included the transactions in the said two rough trial balances. - ITA No. 4582/MUM/2016 - - - Dated:- 19-2-2020 - Shri Saktijit Dey (Judicial Member) And Shri N.K. Pradhan (Accountant Member) For the Assessee : Mr. Pradip Kapasi, AR For the Revenue : Mr. Nitin Waghmode, DR ORDER PER N.K. PRADHAN, A.M. The captioned appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-24, Mumbai (in short CIT(A) ) and arises out of the assessment order passed u/s 143(3) of the Income Tax Act 1961, (the Act ). 2. The 1st ground of appeal Addition/ Disallowance of ₹ 38,319/- 1. The learned CIT(A) erred in law and all facts in holding that an amount of ₹ 38,319/- (out of the purchases of ₹ 3,06,555, disallowed/added by AO) being 12.5% of the said amount of ₹ 3,06,555 represented suppressed profit element embedded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in CIT v. Simit P. Sheth (2013) 38 taxmann.com 385 (Guj); Bholanath Polyfab Pvt. Ltd . 355 ITR 290 (Guj) estimated the suppressed profit to the extent of 12.5% of the purchases made from the bogus entities. Further, observing that the suppressed profit element are embedded in such purchases, the Ld. CIT(A) held that it would go to reduce the closing WIP in view of the project completion method followed by the assessee. 2.3 Before us, the Ld. counsel for the assessee submits that during the course of assessment proceedings, the assessee had furnished the details and explanations sought for by the AO and had produced the books of accounts along with vouchers. Thus it is stated that the AO violated the provisions of natural justice. Further, it is stated that the AO made addition to the income of the assessee without providing the evidence on which reliance was placed by him viz. the statement of Shri Tushar Ruparel, supposedly taken on oath and the evidence relied on by the AO in making the addition u/s 68 and 69 of the Act. On the other hand, the Ld. Departmental Representative (DR) supports the order passed by the Ld. CIT(A). 2.4 We have heard the rival submissions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion No. 9 that the assessee was liable to make investment of ₹ 15,00,000/- towards consultancy charges to M/s Modern Line Distribution LLC, Dubai and has confirmed that no TDS has been deducted on the said payment. In response to the query raised by the AO to explain as to why the above sum of ₹ 15,00,000/- should not be added back to the total income on the basis of proviso to section 40(a)(i), the assessee filed a reply stating that : As per Ariticle-14, of Indo-UAE treaty, not TDS is to be deducted on the said amount as the professional receiving the money has to pay tax in his own Country. Hence under Section 195(6) of the Act, the company filed certificate to the effect and consequently no TDS has been made as there was no such liability. Consequently no disallowance can be made u/s 40(a)(i). However, the AO was not convinced with the above explanation of the assessee for the reason that once the income is chargeable tax in India and provisions of section 195 are applicable; in terms of section 40(a)(i), the amount remitted to non-resident would not be allowable deduction so long as tax is not deducted at source. Thus she made a disallowance of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions in as much as they do not indicate any date, names, debits or credits, receipts or payments, etc. and it was presumptuous on part of A.O to assume that they represented payments that were accounted. c The appellant appreciates that CIT(A) has accepted the fact that said allowance would result in reduction in WIP leading to the higher profit in the year of completion of project. d The appellant pleads that the addition made to the year of completion of project of ₹ 7,63,365 be deleted. 4.1 During the course of assessment proceedings, the AO noticed that the entries in the impounded books of account at page 88 to 90 of Annexure A-1 related to cement and tiles purchased from Alankar Mineral, Bikshu Enterprises and Tulsi Enterprises. In the remand proceedings, the AO stated that the assessee s representatives had submitted details worth ₹ 3,06,353/- along with the proof of payment which was verified from the bank statements. However, the AO reported that no details in respect of the balance transaction of ₹ 8,94,667/- were submitted. When the matter was remanded by the Ld. CIT(A) to the AO it was reported that while arriving at an amount of ₹ 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is allowed for statistical purposes. 5. The 4th ground of appeal Disallowance of ₹ 55,00,000 on account of payment made to Shri Sai Prerna Charitable Trust a The Ld. CIT(A) erred in law and on facts in confirming the disallowance of payment of ₹ 55,00,000 given to Shri Sai Prerna Charitable Trust claimed by the appellant mentioned on page 100 of Annexure A-1 impounded during survey. b The appellant submits that the payments were made to Sai Prerna Charitable Trust on 05.09.2007 through account payee cheque of ₹ 25,00,000 and on 30.11.2007 through account payee cheque of ₹ 30,00,000. c The appellant appreciates that CIT(A) has accepted the fact that said disallowance would result in reduction in WIP leading to the higher profit in the year of completion of project. d The appellant pleads that the addition made to the year of completion of project of ₹ 55,00,000 be deleted 5.1 The above ground relates to disallowance of ₹ 55,00,000/- paid as donation to Shri Sai Prerna Charitable Trust. Admittedly, the assessee vide i ts letter dated 17.12.2010 replied as under in respect of entry showing ₹ 25,00,000/- and ₹ 30,00, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perused the relevant materiasl on record. If the taxpayer is able to eatablish a nexus between the donation and the business, it would be held to be for the purpose of the business and allowable u/s 37(1). In the instant case the assessee has failed to establish it. In the instant case, the assessee has made a donation of ₹ 55,00,000/- to Shree Sai Prerna Charitable Trust. As observed by the Ld. CIT(A), the assessee failed to explain the purpose of making the donation and as to how it was related to assessee s business. Moreover, it failed to explain that the said Trust was having tax exemption certificate based on which deduction could be claimed by the assessee-company. In such a scenario, the Ld. CIT(A) has rightly observed that as the assessee is following project completion method, the said disallowance would result in reduction of WIP to the extent of ₹ 55,00,000/- leading to a higher profit in the year in which the project is completed and offered to tax. Thus we uphold the order of the Ld. CIT(A) on the above ground of appeal. 6. The 5th ground of appeal Addition u/s 69 of ₹ 1,27,999 of purchases from Satya Narayan Marble a The Ld. CIT(A) has a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot payable at all. In such a situation, the addition of ₹ 1,27,999/- confirmed by the Ld. CIT(A) cannot be sustained. Therefore, we delete the above addition of ₹ 1,27,999/- and allow the 5th ground of appeal. 7. The 6th ground of appeal Addition of ₹ 5,00,000 u/s 68 on account of tentative buy price, of flat to R.A. Chug a The appellant appreciates that the CIT(A) has partly allowed the ground but the CIT(A) has erred in law and on facts by confirming the part addition u/s 68 mentioned on rough page 90 of annexure A-4 impounded during survey. b The appellant submits that no amount of whatsoever nature has been received from the said Shri R.A. Chug towards the said ₹ 45,00,000 at any point of time; before recording in the said loose paper, at the time of recording thereof or any time thereafter. c The appellant also submits that the notings on the said loose papers did not represent any unexplained or unaccounted or undisclosed income or expenditure or investment for the year under consideration or for any other year. d The appellant pleads that the addition made u/s 68 be deleted. 7.1 The above ground of appeal relates to the order of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of ₹ 40 lacs is shown and again further amount of ₹ 5 lacs is added to it. We find that the accountant in his statement recorded on 17.10.2014 mentions that the said amount pertains to booking of R.A. Chaug, wherein an amount of ₹ 45,33,916/- was receivable from him towards two flats, after adjusting an amount of ₹ 5,33,196/- towards 285 sq. ft., the balance amount of ₹ 40,00,000/- was recoverable from him and he had promised to pay an amount of ₹ 5,00,000/- by 24.09.2007. A copy of recovery letter dated 10.06.2008 for ₹ 45,00,000/- was submitted by the assessee before the AO vide letter dated 13.01.2014. It is found that the same is a rough document containing no details of nature or date of transaction, signature etc. Having considered the above facts, we are of the considered view that the addition of ₹ 5,00,000/- cannot be sustained. Thus deleting the above addition, we allow the 6th ground of appeal. 8. The 7th ground of appeal Addition of ₹ 2,66,393 being alleged discrepancy in cash in hand a The Ld. CIT(A) erred in law and on facts in confirming the addition of ₹ 2,66,293 as unexplained deficit in cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of survey, how could the assessee find out the same afterwards, the Ld. CIT(A) confirmed the addition of ₹ 2,66,393/- made by the AO. 8.3 Before us, the Ld. counsel for the assessee reiterates his submission before the Ld. CIT(A). On the other hand, the Ld. DR supports the order passed by the Ld. CIT(A). 8.4 We have heard the rival submissions and perused the relevant materials on record. We find substantial force in the argument of the Ld. counsel that the difference in cash of ₹ 2,66,393/- was explained by way of cash lying at sites viz. Plot 448 (H.O.) : ₹ 25,517/-, Plot 448 Khare (H.O.) : ₹ 1,87,599/- and Plot : ₹ 53,709/-. A perusal of the above explanation which was furnished during the course of survey and also before the ADIT (Inv.) and the AO is further corroborated by the books of account. On a consideration with the above, we delete the addition of ₹ 2,66,393/- and allow the 7th ground of appeal. 9. The 8th ground of appeal Addition u/s 68 of ₹ 16,77,178 on account of alleged untallied trial balance a The Ld. CIT(A) erred in law and on facts in confirming the addition of ₹ 16,77,178 as unexplained cash cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee reiterates his submission before the Ld. CIT(A). On the other hand, the Ld. DR supports the order passed by the Ld. CIT(A). 9.3 We have heard the rival submissions and perused the relevant materials on record. We find merit in the submissions of the Ld. counsel that the difference in rough trial balance was due to incomplete accounts on the date of survey. A perusal of the documents clearly indicate that the addition made on the basis of pages 83 to 86 of Annexure A-1 is nothing but a result of trial run taken for the purpose of shifting from Foxpro software to Tally software. Further, the assessee has maintained regular books of accounts which have been duly audited. In the instant case, the AO has not rejected the books of accounts. There is nothing on record brought out by the AO to prove that the transactions were not accounted and included in the books of accounts. All the more the said excel sheet does not represent any income or expenditure and it was prepared by the accountant to record the results of trial run taken for the purposes of shifting from Foxpro accounting software to Tally. The assessee at the year-end has drawn final accounting on the basis of r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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