9911796707
TMI Blog2021 (6) TMI 864X X X X Extracts X X X X X X X X Extracts X X X X ..... of dust of grits on the basis of adhoc disallowances. 4. Because the learned Commissioner of Income Tax (Appeal) Allahabad was not justified to conform the adhoc disallowance a sum of Rs. 6066/- under the head interest paid on VAT. 5. Because the learned Commissioner of Income Tax (Appeal) Allahabad was not justified to conform the adhoc disallowance sum of Rs. 9980/- under the] customer entertainment exps out of the total amount debited to the P & L a/c of Rs. 49900/-. 6. Because the learned Commissioner of Income Tax (Appeal) Allahabad was not justified to conform the adhoc disallowance a sum of Rs. 5668/- under the head telephone exps out of the total amount debited to the P& L A/c Rs. 28340/-. 7. Because the appellant case is covered by the several judgment of Hon'ble ITAT in case of Chandra Confectionery Pvt. Ltd. 2003(2) MTC 1022, whether the court held that no any disallowance can be made on lump- sump basis otherwise any specific defect found in the books of accounts. 8. Because, the appellant craves for a right to raise any additional ground during the course of hearing of the case. 9. Because the order passed by the Ld. Commissioner (Appeal) is erroneous, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat allowability of claim has to be considered under Section 36(1)(iii) or Section 37 of the Act. Once the capital was not with the partnership firm during the year under consideration then the interest for the entire year on the opening balance is not allowable as per the provisions of Section 36(1) as well as Section 37 of the Act. He has relied upon the orders of the authorities below. 5. I have considered the rival submissions as well as relevant material available on record. The dispute is about the allowability of the interest paid to the partner by the assessee firm calculating on the opening balance of the capital account of the partner without considering the subsequent withdrawals made by the partner. The assessee has taken a stand that since the partnership deed provides the payment of interest on the opening balance of the capital account of the partner, therefore, the subsequent withdrawals of the amount from the capital account of the partner is irrelevant. It is pertinent to note that Section 40(b)(iv) is restrictive in nature and not a provision enabling the deduction. For the ready reference Section 40(b)(iv) is reproduced as under:- "Amounts not deductible. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure has been laid out for the purpose of business of the assessee. The residual provision of Section 37(1) rather prescribes more stringent condition that an expenditure has been laid out wholly and exclusively for the purpose of business or profession. Thus, for allowing the claim of interest paid to the partner it has to be first considered in terms of Section 36(1)(iii) or the section 37(1) of the Act and then the claim has to be restricted as per the provisions of section 40(b)(iv) of the Act. 7. In the case in hand, there is no dispute that the opening balance in the capital account of the partner, Shri Satish Kumar Agarwal was Rs. 8,72,785/- but during the year the said partner has withdrawn a sum of Rs. 8,55,587/- which means the substantial amount except a meager sum of Rs. 3,80,630/- was withdrawn by the partner and was not available with the partnership firm for its business purpose. Hence, the claim of interest for full year @ 12% is otherwise not allowable in terms of Section 36(1)(iii) or Section 37(1) of the Act as the case may be. Once the basic condition as prescribed u/s 36(1) (iii) or Section 37(1) of the Act was not satisfied regarding allowability of parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y producing verifiable vouchers and others evidence. The entire payment claimed to have been made in cash. Therefore, in the absence of necessary details and supporting documentary evidence the Assessing Officer is justified in disallowing 5% of these expenses. In support of his contention, he has relied upon the decision of the Hon'ble jurisdictional High Court in the case of Pr. CIT vs. Rimjhim Ispat Ltd., 382 ITR 152. He has also relied upon the orders of the authorities below. 11. I have considered the rival submissions as well as relevant material available on record. The assessee has claimed a sum of Rs. 10,65,600/- under the head repair and maintenance. The Assessing Officer has stated in the assessment order that the claim of the assessee is not verifiable and accordingly the Assessing Officer made disallowance of 5% of such expenses which comes to Rs. 53,280/-. The CIT(A) has confirmed the disallowance made by the Assessing Officer by recording the reasons that the assessee has not produced any record in support of the claim. There is no quarrel on the point that if the claim of expenditure is found to be genuine and incurred for the purpose of business of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal and the same had only been allowed on the ground that the turnover has increased by 5% and the expenditure has reduced. The Tribunal has lost sight of the fact that the expenditure claimed under the head manufacturing expenses, which forms part of the "profit and loss account", showing expenses made by the assessee are required to be proved by production of bills and vouchers. In the absence of production of bills and vouchers, an inference can be drawn by the Assessing Authority that such expenses shown under this head were inflated or were not supported by any bills, vouchers or any other documentary evidence, which would justify the Assessing Officer in disallowing certain portion of such expenses. 8. In the light of the aforesaid, we are of the opinion that the Tribunal committed an error in allowing the appeal of the assessee and by totally deleting the disallowance of 5%. We, accordingly, allow the Ist question of law as stated aforesaid, in favour of the appellant, i.e., the Department and against the assessee and set aside that part of the order of the Tribunal on this aspect and restore the order of the Ist Appellate Authority. In our opinion, the disallowance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd relevant material available on record. There is no dispute that the assessee has not maintained the quantitative details of the stock of dust of stone chips but the closing stock is value at lump-sump of Rs. 1,90,200/-. The Assessing Officer in the assessment order has made an adhoc addition of Rs. 50,000/- to the closing stock of dust without even considering the volume or any other para meters for such adhoc valuation. Even the Assessing Officer has not tried to estimate by wild guess work but the addition is purely on adhoc addition without any reasonable basis. Once the Assessing Officer is not satisfied about the valuation of the closing stock of the dust then it is incumbent upon the Assessing Officer to conduct a proper enquiry and to apply proper criteria or basis for valuation of the closing stock. The wrong valuation of the closing stock on the part of the assessee does not authorized the Assessing Officer to make a wrong addition. Therefore, even if the valuation of the closing stock made by the assessee is not found to be correct the Assessing Officer has to make the valuation on some proper guidance and criteria. In the absence of any basis the adhoc addition made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer is restricted to 5%. This ground of the appeal is partly allowed. 23. Ground No.6 is regarding disallowance of telephone expenses, the Assessing Officer has made disallowance @ 20% of telephone expenses on the ground of personal use of partners. 24. I have heard the rival submissions and considered the relevant material on record. The Assessing Officer made the disallowance on the ground of personal use in respect of telephone expenses. However, the Assessing Officer has not discussed anything about the personal use of telephone. Hence, except the suspicion of the Assessing Officer regarding the possible personal use of telephone by the partners nothing has been brought on record by the Assessing Officer to substantiate such suspicion of personal use. Further, since the telephone expenses are fully verifiable and supported by the bills and other details therefore, once the assessee has claimed the telephone expenses based on actual payment/due then the disallowance on the ground of personal use cannot be allowed without bringing some tangible material or facts on record. Accordingly, the disallowance made by the Assessing Officer on account of telephone expenses is n ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
