TMI Blog2022 (1) TMI 786X X X X Extracts X X X X X X X X Extracts X X X X ..... ts were never looked into by ld. CIT(A) before granting relief to the assessee as there are no observations whatsoever on these critical issues and merely cryptic, unreasoned and non speaking order is passed by ld. CIT(A), and hence the appellate order passed by ld. CIT(A) on this issue cannot be sustained and we are inclined to set aside and restore this issue back to the file of ld. CIT(A) for fresh adjudication on merits in accordance with law, and ld. CIT(A) is directed to pass reasoned and speaking order. Assessee has set up a claim of deduction of Rent in the year under consideration which was not provided in the books of accounts of the year under consideration viz. fy: 1996-97, and which was claimed to be debited in the books of accounts for subsequent year viz. fy:1997-98, and claimed as deduction for ay:1997-98 by filing revised return of income with Revenue on 29.12.1998. We have observed that there is no discussions whatsoever by ld. CIT(A) on this issue in its order and he has merely accepted the contentions of the assessee. There is no investigation of facts by ld. CIT(A) as to the premises in connection with which Rent was paid and whether the said premises was us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvoking provisions of Section 43B - unpaid liability towards interest payable on various loans - HELD THAT:- The provision of Section 43B stipulates that evidence of payment is to be enclosed with return of income in the first proviso to Section 43B. However, the assessee has not enclosed evidence of such payment along with return of income, but the factum of mention of interest paid to IIBI is found in tax audit report. In our view, to claim the extended period benefit u/s 43B, the mandatory requirement is the substantial compliance of making payment by assessee before the due date for filing of return of income u/s 139(1), while the second condition as stipulated under the first proviso to Section 43B of enclosing evidence of such payment along with return of income is directory in nature, and even if the said challan evidencing that payment is made before due date prescribed u/s 139(1) is produced at appellate stage, the assessee will be entitled for getting extended period benefit u/s 43B. The assessee is directed to produce evidence of payment of interest and working thereof in correlating with the existing loan liability before ld. CIT(A), as we are also remitting this issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng income chargeable to tax for those earlier years, and even before us it could not be shown that there is any claim made by any of these depositors/lenders for reviving their claim of debt/loan or assessee has acknowledged its debt towards these unclaimed deposits/loans, that the aforesaid amount as unclaimed deposit/loan and interest payable thereon on these unclaimed deposits/loans were rightly added by AO to the income of the assessee and we uphold the view of the AO and set aside the appellate order passed by ld. CIT(A) on this issue. Unpaid liabilities towards sale tax payable on molasses - assessee submitted that unpaid liability towards sales tax on molasses has been discharged by making actual payment on 17.04.1997 and the assessee claimed to have filed challan before ld. CIT(A) evidencing such payment - HELD THAT:- To claim the extended period benefit u/s 43B, the mandatory requirement is the substantial compliance of making payment by assessee before the due date for filing of return of income u/s 139(1), while the second condition as stipulated under the first proviso to Section 43B of enclosing evidence of such payment is directory in nature, and even if the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es granted by Dinners Club and actual usage of facilities for business activities or business promotion. In the absence of any evidence on record, we are afraid these expenses cannot be allowed as business/revenue expenses. Even, before us no evidence is filed or brought to our notice to justify that these expenses are business expenses incurred wholly and exclusively for the purposes of business of the assessee. Thus, we reverse the appellate order passed by ld. CIT(A) and uphold the addition as was made by AO. Addition to the income of the assessee on account of short credit of income in the P L Account - HELD THAT:- Instead of giving reasons for acceptance or rejection of assessee s contention, ld.CIT(A) simply accepted the assessee s contentions without giving its own reasons or results of verification conducted by him. The powers of ld.CIT(A) are co-terminus with powers of the AO. The claim submitted by assessee that the differential amount was refund of insurance premium which was included in the sum of ₹ 9,30,576.28 already credited in other income under the head Sundry Receipts, requires verification and investigation into facts to unravel truth, and hence we are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grounds of appeal in memo of appeal filed with the Income Tax Appellate Tribunal, Allahabad, U.P.(hereinafter called the tribunal ), in ITA no. 227/Alld/2016 for ay:1997-98, as under:- 1. That the Ld. CIT(A) has erred on facts and in the law in deleting the disallowance of ₹ 92,00,536/- on a/c of expenses relating to earlier years, without appreciating the Assessing officer s observation that the expenses will be allowable in the year when such liability has been quantified or paid. 2. That the Ld. CIT(A) has erred on facts and in law in deleting the disallowance of ₹ 94,93,016/- on a/c of interest accrued and due, without appreciating the Assessing officer s finding that the assessee did not file any proof of payment. 3. That the Ld. CIT(A) has erred in deleting the disallowance of ₹ 46,39,150/- on a/c of interest payable on loans, without properly appreciating the facts and law. 4. That the Ld. CIT(A) has erred in deleting the disallowance of ₹ 39,000/- on a/c of unclaimed deposits/loan and ₹ 1049/- on a/c of interest thereon, without properly appreciating the facts and law. 5. That the Ld. CIT(A) has erred in dele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elying upon the submissions of the assessee without examining and analyzing the facts of the case. The ground no. 10 raised by Revenue in its appeal filed with tribunal is reproduced hereunder once again at the cost of repetition:- 10. That the ld. CIT(A) has erred in deleting the additions made by the Assessing Officer by simply relying upon the submissions of the assessee without examining and analyzing the facts of the case. We have carefully gone through the appellate order dated 05.07.2016 passed by ld. CIT(A) on all the issues adjudicated by ld. CIT(A) on merits of the issue, and found substance in the ground raised by Revenue. We have reproduced in the succeeding para s of this order, the operative part of decision of ld. CIT(A) on all the issues on merits and have observed that cryptic, un-reasoned and non-speaking order is passed by ld. CIT(A) without investigating into the facts of the case wherein merely submissions as were made by the assessee before ld. CIT(A) were accepted in to-to by ld. CIT(A), and the appeal of the assessee stood decided in favour of the assessee, without recording reasons based on facts and law which went into decision making process ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peaking order by ld. CIT(A) will ensure transparency and fairness in decision making, and will also at the same time avoid arbitrariness in arriving at decision by ld. CIT(A). Moreover, if reasons are recorded and speaking order is passed by ld. CIT(A), then the aggrieved party will also come to know why the decision has gone against it and what weighed in the mind of ld. CIT(A) while adjudicating the issue against it, so that the aggrieved party can set up its defense at higher appellate forum. Recording of reasons and passing of speaking order is also of utmost importance for higher judicial forum viz. ITAT to know what weigh in the mind of ld. CIT(A) while adjudicating an issue. It will also enable the higher judicial forum to know what evidences were considered by ld. CIT(A) while adjudicating anissue whether relevant and material evidences were considered appropriately or not given due weight and whether irrelevant and extraneous material and evidences weigh in the mind of ld. CIT(A) while adjudicating an issue before it. Reference is drawn to decision of Hon ble Apex Court in the case of Kranti Associates Private Limited v. Masood Ahmed Khan Ors. (2010) 9 SCC 496, wherein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be doubted that transparency is the sine qua non of restraint on abuse of judicial powers. Transparency in decision making not only makes the judges and decision makers less prone to errors but also makes them subject to broader scrutiny. (See David Shapiro in Defence of Judicial Candor (1987) 100 Harward Law Review 731-737). n. Since the requirement to record reasons emanates from the broad doctrine of fairness in decision making, the said requirement is now virtually a component of human rights and was considered part of Strasbourg Jurisprudence. See (1994) 19 EHRR 553, at 562 para 29 and Anya vs. University of Oxford, 2001 EWCA Civ 405, wherein the Court referred to Article 6 of European Convention of Human Rights which requires, adequate and intelligent reasons must be given for judicial decisions . o. In all common law jurisdictions judgments play a vital role in setting up precedents for the future. Therefore, for development of law, requirement of giving reasons for the decision is of the essence and is virtually a part of Due Process . Thus, on careful analysis of the appellate order dated 05.07.2016 passed by ld. CIT(A)(operating decision part o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial year 1997-98 under the Head Exp. Relating to earlier year and the same has been added to the Company s income vide I.T. Return Asst. year 1997-98, we have claimed the same in the year under assessment in accordance with the case law of M/s Kedarnath Jute Mills V. CIT-82 ITR 363(SC). The AO observed from the certificate furnished by Auditor dated 15.12.1998 filed along with Revised Return of income that it only certifies that ₹ 92,00,536/- shown as expenses relating to earlier years in the Tax Audit Report of 1997-98 relates to accounting year 1996-97 and the same were not accounted for in the accounts of the financial year 1996-97. The AO observed from the details furnished by the assessee that for such a huge payment of cost of cane @ ₹ 8/- per quintal on total cane of 11,35,201 quintals have been ignored by the company while accounting for purchases and other liabilities. The AO observed that decision of Hon ble Apex Court in the case of Kedarnath Jute Manufacturing Company Limited(supra) has no applicability as this decision was rendered by Hon ble Apex Court when tax-audit u/s 44AB was not introduced. The AO was of the view that if any such lapses had t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he next financial year viz. 1997-98. It was submitted that based on the debit entry, the amount of interest short charged by SBI was accounted for in the books of accounts of the company for the year ended 31.03.1998. Thirdly, the assessee submitted before ld. CIT(A) that a sum of ₹ 27,500/- on account of rent payable to one Mrs. Hamida Khwaja for the period May, 1996 to March, 1997 had been paid in subsequent year. It was submitted that no provision for payment of rent was made by the assessee in its books of accounts for the financial year 1996-97. It was also submitted by assessee before ld. CIT(A) that while finalizing the companies accounts for the financial year ended March, 1998, the auditors had classified these liabilities as expenses relating to earlier years, as could be verified from Annexure D-2 (page 86/paper book) which is part of the tax-audit report in form No. 3CD for the year ended 31.03.1998(Page 75 to 89/paper book). It was submitted by assessee before ld. CIT(A) that based on the auditors report, the aforesaid expenses were excluded in computing the taxable income of the assessee for ay:1998-98. It was submitted by assessee before ld. CIT(A) that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that these expenses to the tune of ₹ 92.01 lacs were not claimed in the original return of income filedby assessee with Revenue under Section 139(1) of the 1961 Act. It was submitted by ld. Sr. DR that these expenses were claimed only in the revised return of income filed by the assessee, and claim is made that these expenses pertain to year under consideration. Our attention was drawn to para 4 of the assessment order passed by AO. It was submitted that claim is made that the rate of cane was enhanced in the year under consideration. It was also submitted by ld. Sr. DR that books of accounts of the assessee were audited under Companies Act as well tax-audit was conducted for financial year 1996-97, but these expenses were not accounted for by assessee in its book of accounts nor these expenses were certified by tax auditors conducting taxaudit u/s 44AB of the 1961 Act, and hence the AO rightly disallowed these expenses. Our attention was drawn to the Assessment order passed by the AO. Our attention was also drawn to Page No. 74 of the paper book, wherein voucher dated 30.11.1997 for ₹ 90,81,606.80 is placed and it was submitted that the assessee is claiming that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Hon ble Supreme Court in case of Kedar Nath Jute Manufacturing Company Limited (supra). Our attention was drawn by ld. Counsel for the assessee to page no. 67 of paper book, wherein the revised computation of income for ay: 1997-98 is placed, and it was submitted that ₹ 92,00,537/- was claimed as liability of cane price not provided in books of accounts by relying on Hon ble Supreme Court decision in the case of Kedar Nath Jute Manufacturing Company Limited(supra). It was submitted that these expenses pertain to previous year 1996-97, which were not provided in the books of account for the year under consideration viz. financial year 1996-97, while the same were accounted for in the books of accounts for the financial year 1997-98. It was submitted by ld. Counsel for the assessee that there is no tax effect by claiming the said expenses in the year under consideration as these expenses were not claimed in the subsequent year. The ld. Counsel for the assessee prayed that order passed by ld. CIT(A) be upheld. 4.6 The Ld. Sr. DR submitted in rebuttal that there are expenses also on account of interest on loans as well rent expenses which were claimed in this year althoug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... JV-2284/ 31.3.1998 Voucher Particulars Amounts Reference C/o Cane Season 1996-97(15.11.96 to 23.2.97) @ ₹ 8.00 per qtl. debited to P L Account. 90,81,606.80 JV-266/30.09.97 Being amount of Interest on Cash Credit Account short charged in 1996-97 debited by SBI. 91,430.00 JV- 442A/31.3.98 Being Amount of arrear rent paid to Mrs. Hamida khwaja for the months from May 96 to March 07 @₹ 2500/- per month 27,500.00 Total: 92,00,536.80 The said tax-audit report is placed in paper book filed by assessee and is placed on record in file(refer pb/page 86). The AO rejected the claim of the assessee for deduction of aforesaid expenses because in the opinion of AO once no deduction is claimed in the audited accounts both under the Companies Act(assessee is a company) as well in tax-audit under the 1961 Act for financial year 1996-97, the assessee cannot claim the same in the return of income filed for ay:1997-98. Further, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see through revised return of income. For relying on state advised price of sugarcane for the financial year 1996-97, the assessee has placed on record comparative rate chart of state advised cane prices announced by various States(page 71-73), but copy of notification / order issued by U.P. State Government notifying sugarcane purchase rate @₹ 70 per quintal is not filed by assessee and is not available on record. Even, there is no mention of the year in the said comparative chart of State advised cane prices filed by the assessee. We have observed from Reports of the Commission for agricultural Costs and Prices for the Crops Sown during 1998-99 Season of Department of Agricultural and Co-operation, Ministry of Agriculture. Government of India, that the Minimum Support Price of Sugarcane for season 1996-97 was ₹ 45.90 per quintal linked to recovery of 8.5% (placed on record in file). There were also premium stipulated for higher recoveries. It is for the assessee to have brought on record copy of notification/order of the U.P. State Government directing/mandating that State Advised price for U.P. for 1996-97 season was ₹ 70/- per quintal which is compulsorily p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financial year 1997-98, and later on which was claimed as deduction by assessee for ay:1997-98(fy:1996-97) by filing revised return of income filed with Revenue for ay:1997-98 on 29.12.1998. Thus, these huge inconsistencies/anamolies in submissions of the assessee before the authorities vis-avis facts reflected in its audited books of accounts, ought to have triggered investigation and enquiry by ld. CIT(A) before allowing the aforesaid claim. Further, ld. CIT(A) ought to have verified whether sugarcane purchase tax was paid on the entire amount claimed to be state advised purchase price of sugarcane and the persons to whom and when such payments were made in discharge of its liability for purchase of sugarcane. The powers of ld. CIT(A) are co-terminus with powers of the AO. The ld. CIT(A) also ought to have looked into the fact that the said amount of deduction which is provided in the audited accounts of financial year 1997-98, is not claimed as deduction while filing return of income for ay:1998-99 to avoid duplication of claim of deduction. All this aspects were never looked into by ld. CIT(A) before granting relief to the assessee as there are no observations whatsoever on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e contentions of the assessee. There is no investigation of facts by ld. CIT(A) as to when the interest was debited by SBI, and whether the said loans were used for regular business of the assessee and whether there was compliance of Section 43B. Further, there is no evidence whatsoever available on record on this issue to give any conclusive finding by us on this issue. These aspects were never looked into by ld. CIT(A), and hence the appellate order passed by ld. CIT(A) on this issue cannot be sustained and we are inclined to set aside and restore this issue back to the file of ld. CIT(A) for fresh adjudication on merits in accordance with law, and ld. CIT(A) is directed to pass reasoned and speaking order. Needless to say that ld. CIT(A) shall give proper opportunity of being heard to the assessee in set aside remand proceedings and evidences/explanations submitted by the assessee in its defense shall be admitted by ld. CIT(A) and adjudicated on merits in accordance with law. We order accordingly. 5.The second issue agitated by Revenue in this appeal concerns itself with the disallowance of an amount of ₹ 94,93,016/- by the AO towards interest accrued and due which wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crued and due, the Revenue has come in appeal before the tribunal.The ld. Sr. DR submitted that there was accrued and due interest to the tune of ₹ 94,93016/- which was payable to loans raised from Government of Uttar Pradesh, against which no proof of payment is submitted by the assessee and since these loans were not paid as provided u/s 43B, the AO has rightly made the additions. Our attention was drawn to para 5 of the assessment order passed by the AO. The ld. Sr. DR drew our attention to page 33 of paper book,, wherein Schedule 3-Loan, attached to Balance sheet is placed. Our attention was also drawn to page 67/paper book by Ld. Sr. DR and It was submitted that the assessee has itself disallowed interest provided and remaining unpaid on Sugar Development fund by invoking provision of Section 43B, but interest accrued and due on State Government Loan was not disallowed by assessee. Thus, ld. Sr. DR submitted that the assessee erred in not disallowing the interest accrued and due on State Government Loans. Prayers were made to uphold the assessment order passed by AO on this issue. 5.5The Ld. Counsel for the assessee, on the other hand, submitted that section 43B has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 23.03.1996(₹ 2.0 crores) and 15.06.1996(₹ 1.0 crore). The ld. CIT(A) accepted the contentions of the assessee by holding as under: 3.2 Decision I agree with the assessee s contention that interest payment to the government was not covered u/s 43B of the 1961 Act. Accordingly, this addition so made is deleted. As could be seen from above that the ld. CIT(A) passed a non-speaking, cryptic and unreasoned order. The ld. CIT(A) failed to see that the assessee has claimed that it was sanctioned term loan of ₹ 3 crores by U.P. State Government but the said loan was disbursed only in March/June 1996 and the provision for interest accrued and due was ₹ 94,93,016/- for the year under consideration viz. financial year 1996-97 which translates to interest rate of more than 30% p.a. for one year from Term Loans claimed to be raised from State Government. The ld. CIT(A) failed to make any enquiry as to how such an exorbitant rate of interest could be charged by State Government. There is no working/details/breakup/bifurcation submitted by assessee as to the various loans claimed to be raised from Government and corresponding interest payable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .03.2016 in the case of Ramala Sahkari Chini Mills Ltd. Meerut v. ACIT, to support its contentions, no other contrary decision has been brought to our notice by Revenue. We have also perused the provisions of Section 43B as it stood at relevant time and the bar it created on interest payable under clause(d) to Section 43B, which refers to the interest payable on any loan or borrowing from any public financial institution or a state financial corporation or a state industrial investment corporation and further by virtue of clause (e) to Section 43B which refers to any interest on any term loan from a scheduled bank, wherein the deduction for such interest shall be allowed in the previous year in which such sum is actually paid by the assessee. However, vide first proviso to Section 43B, it is provided that in case any such sum is paid by assessee on or before the due date of furnishing of return of income u/s 139(1) in respect of previous year in which liability to pay such sum was incurred as aforesaid under clause (d) of Section 43B and evidence of such payment is furnished by the assessee along with return of income, the said sum shall be allowed in the year in which liability wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 35,80,396/- ₹ 46,39,150/- It was observed by the AO that these are unpaid liabilities and are covered u/s 43B of the 1961 Act. The AO further observed that the loan to the company from Sugar Development fund is financial loans and hence interest liability which is not paid shall be hit by Section 43B of the 1961 Act, and the said facilities and interest on such facilities cannot override the provisions of the 1961 Act. Hence, the AO disallowed the interest liability to the tune of ₹ 46,39,150/- and added the same to the income of the assessee, vide assessment order dated 31.01.2000 passed by AO u/s 143(3) of the 1961 Act. 6.2 Aggrieved by the addition as was made by the AO, the assessee filed first appeal before Ld. CIT(A) and submitted as under: 4. Addition of ₹ 46,39,150/- 4.1 Break up of ₹ 46,39,150 as has been added back by the learned Assessing Officer by invoking of provisions of sec 43B of the Income Tax Act is as under: (RS.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought forward 7,98,000 Add: Provisions made for interest Payable during the year 2,43,260 10,41,260 Less: Amount paid during the year 4,56,519 Balance carried forward 5,84,741 The provisions of ₹ 2,43,260/- made for the year under consideration has been added back by ourselves in computing our total income for the Assessment Year 1997-98 as is duly verifiable for the statement showing computation of (Page 67 of PB) no further disallowance is called for because the sum of ₹ 5,84,741/- as has been added back by the learned Assessing officer relates to earlier year(s). Similarly, the provision of ₹ 35,80,396/- as mentioned as item no.( c) above is in respect of interest payable on 2nd tranch of loan taken from Sugar Development Fund of U.P. Government which had been utilized in purchase of plant and machinery etc. under the expansion pregame of the company. As the borrowed funds have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein Neoli Sugar Factory (Project) A/c is debited and interest paid account is credited. Our attention was further drawn by ld. Counsel for the assessee to page 67 of paper book and it was submitted that ₹ 2,43,260/- is the interest payable on sugar development fund which was not paid and hence added back to the income of the assessee u/s 43B of the 1961 Act by assessee of its own in the revised return of income filed with the Revenue by the assessee. Our attention was also drawn to the appellate order passed by ld. CIT(A). On being asked by the Bench, that the amount capitalized in the Balance Sheet in Neoli Sugar Factory and Head Office is a meager sum of ₹ 2,60,590/- as per audited accounts for financial year 1996-97(paper book/page 34) in the Fixed Asset Schedule, the ld. Counsel for the assessee claimed that the sum of ₹ 35,80,396/- is capitalized by debiting to Capital Work in Progress , and an amount of ₹ 3,86,94,450/- is outstanding as at 31.03.1997 under the head Capital Work in Progress . 6.6 We have considered rival contentions and perused the material on record.We have observed that there is an unpaid liability towards interest payable o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed in the year in which liability was incurred. Thus, clearly interest payable to IRBI( Industrial Reconstruction Bank of India later called as Industrial Investment Bank of India (IIBI) after being converted into a company) which is a public financial institution are clearly hit by Section 43B(d) of the 1961 Act. Thus, the interest at S.No. 1 to 4 above in chart in para 6.6, aggregating to ₹ 4,74,013/- payable to IRBI is hit by provisions of Section 43B(d) of the 1961 Act. The assessee has claimed that it paid the said amount of interest payable of ₹ 4,74,013/- on 15.07.1997 and reference is drawn to tax-auditor report (page 56/pb). The provision of Section 43B stipulates that evidence of payment is to be enclosed with return of income in the first proviso to Section 43B. However, the assessee has not enclosed evidence of such payment along with return of income, but the factum of mention of interest paid to IIBI is found in tax audit report. In our view, to claim the extended period benefit u/s 43B, the mandatory requirement is the substantial compliance of making payment by assessee before the due date for filing of return of income u/s 139(1), while the secon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted. On being asked by the Bench, that the amount capitalized in the Balance Sheet in Neoli Sugar Factory and Head Office is a meager sum of ₹ 2,60,590/- as per audited accounts for financial year 1996-97(paper book/page 34) in the Fixed Asset Schedule, the ld. Counsel for the assessee submitted that the sum of ₹ 35,80,396/- is capitalized by debiting to Capital Work in Progress , and an amount of ₹ 3,86,94,450/- is outstanding as at 31.03.1997 under the head Capital Work in Progress . These contentions of the assessee will require verification which needs investigation and enquiries into the factual aspects to unravel the truth, as also adjudication of legal issue as to applicability of Section 43B in such a scenario as ultimately, the assessee will be claiming depreciation u/s 32 of the 1961 Act on the interest being capitalized, even though presently as claimed by assessee, the interest is capitalized by debiting to Capital Work in progress and not debited presently to P L Account(which also requires verification ). Since, all these aspects were never looked into by ld. CIT(A), and hence the appellate order passed by ld. CIT(A) on this issue cannot be sustain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Waqf Hazi 498 25,000/- Bhikkan 01.04.1980 The assessee submitted before ld. CIT(A) that these amounts can be verified from books of accounts and other records of the assessee maintained by assessee in regular course of business. The assessee also submitted before ld. CIT(A) that since no allowance or deduction has been claimed in respect of any of the assessment years for any loss, expenditure or trading liabilities incurred by assessee, nor does any benefit obtained in case or in any other manner whatsoever, any amount in respect of such loss or expenditure or any benefit in respect of such trading liability by way of remission or cessation thereof, the same does not constitute its income. Thus, the assessee prayed before ld. CIT(A) that there is no justification for treating the deposits remaining unclaimed by the depositors as its income unless and until the same was appropriated by it in its books of accounts. The ld. CIT(A) was pleased to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25,000/- Bhikkan 01.04.1980 Thus, it could be seen that the assessee has raised these deposit/loans in the year 1975, 1977 and 1980, and presently we are concerned with previous year 1996-97( ay:1997-98 ), so these loans were raised almost 16-22years back. The assessee has admitted in its audited financial statements that these are unclaimed deposits/loans. There is also an interest payable of ₹ 1049/- existing in the assessee s books of accounts on these unclaimed deposits/loans, as at 31.03.1997. The assessee has claimed interest on these deposits/loans as deduction on revenue account while computing income chargeable to tax in the earlier years, and hence it could not be said that the assessee has not obtained any benefit out of these loans/deposit and clearly Section 41(1) is applicable. Now, these loans/deposits have remained unclaimed and are more than 16-22 years old. There is no evidence brought on record even before us to establish that any of the aforesaid parties have come forward to claim these amounts after such a lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed the said amount and added the same of the income of the assessee, vide assessment order dated 31.01.2000. 8.2 The assessee being aggrieved by aforesaid addition to the income of the assessee by the AO, filed first appeal with ld. CIT(A). The assessee submitted that unpaid liability towards sales tax on molasses has been discharged by making actual payment on 17.04.1997 and the assessee claimed to have filed challan before ld. CIT(A) evidencing such payment(page 101-103 of paper) and prayers were made to delete the disallowance as were made by the AO since payments were made before the due date of filing of return of income u/s 139(1), by invoking first proviso to Section 43B. The Ld. CIT(A) was pleased to delete the disallowance by holding as under, vide appellate order dated 05.07.2016:- 6.2 Decision In view of the fact that the payment had actually been made, the addition so made is hereby deleted. 8.3 Aggrieved by the deletion of disallowance by ld. CIT(A), the revenue has filed an appeal with tribunal. The Ld. Sr. DR submitted that disallowance was made by AO as the liability towards sale tax was unpaid as at year end and since no proof for p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y paid by the assessee. However, vide first proviso to Section 43B, it is provided that in case any such sum is paid by assessee on or before the due date of furnishing of return of income u/s 139(1) in respect of previous year in which liability to pay such sum was incurred as aforesaid under clause (a) of Section 43B and the evidence of such payment is furnished by the assessee along with return of income, the said sum shall be allowed in the year in which liability was incurred. The provision of Section 43B stipulates that evidence of payment is to be enclosed with return of income in the first proviso to Section 43B, the assessee has not enclosed the evidence of payment along with return of income. The assessee has claimed that it paid the said unpaid liability towards sales tax on 17.04.1997 and challans were filed before ld. CIT(A). In our considered view, to claim the extended period benefit u/s 43B, the mandatory requirement is the substantial compliance of making payment by assessee before the due date for filing of return of income u/s 139(1), while the second condition as stipulated under the first proviso to Section 43B of enclosing evidence of such payment is directory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10.09.1996 Sept. 1996 ₹ 11,444/- 09.11.1996 Oct. 1996 ₹ 12,910/- 03.12.1996 -Do- ₹ 9,615/- 03.12.1996 Jan. 1997 ₹ 440/- 03.12.1996 -Do- ₹ 1013/- 21.02.1996 E.P.F. April, 1996 ₹ 55,000/- 21.05.1996 ₹ 91,508/- 9.2 Aggrieved by an assessment framed by AO, the assessee filed first appeal with ld. CIT(A). The assessee submitted before ld. CIT(A) that this payment has to be made within 15 days of end of the month in which wages/salaries have been paid. It was submitted that there is no question of deposited the said amount unless and unti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd, for different months along with actual dates of payments made by the assessee, as under: Month Amount Date of payment P.F. July, 1996 ₹ 1,086/- 10.09.1996 Sept. 1996 ₹ 11,444/- 09.11.1996 Oct. 1996 ₹ 12,910/- 03.12.1996 -Do- ₹ 9,615/- 03.12.1996 Jan. 1997 ₹ 440/- 03.12.1996 -Do- ₹ 1013/- 21.02.1996 E.P.F. April, 1996 ₹ 55,000/- 21.05.1996 ₹ 91,508/- The ld. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... additions to the tune of ₹ 1042/- was made by AO to the income of the assessee by disallowing the said amount being not related to the business of the assessee, vide assessment order dated 31.01.2000 passed by AO u/s 143(3) of the 1961 Act. 10.2 Aggrieved by assessment framed by AO., the assessee filed first appeal before ld. CIT(A), and submitted that ₹ 1,042/- was paid to Dinner Club for membership of club was for promoting business of the assessee company. The assessee submitted before ld. CIT(A) that the aforesaid sum was laid out wholly and exclusively keeping in view legitimate business needs of the assessee company and no disallowance is called for. The assessee prayed that the disallowance as was made by AO be deleted. 10.3 The ld. CIT(A) accepted the contentions of the assessee and deleted the disallowance as was made by the AO,vide appellate order dated 05.07.2016 passed by ld. CIT(A), by holding as under: 8.2 Decision In view of submissions made, the addition made is hereby deleted. 10.4 Aggrieved by the relief granted by ld. CIT(A) to the assessee, the Revenue has come in appeal before the tribunal. The ld. Sr. DR relied up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O adding ₹ 49,310/- to the income of the assessee vide assessment order dated 31.01.2000, the assessee filed first appeal before CIT(A) and submitted that the assessee company as per tax-audit report in para 9(b) as reported by tax-auditor has received income of earlier years aggregating to ₹ 3,73,724/-, whereas in schedule 13 of other income as annexed to Balance Sheet s at 31.03.1997, the amount of income relating to earlier years credited stood at ₹ 3,24,414/- only. It was submitted that differential amount of ₹ 49,310/- was refund of insurance premium which was included in the sum of ₹ 9,30,576.28 already credited in other income under the head Sundry Receipts. The assessee submitted that these can be verified. The Ld. CIT(A) accepted the contentions of the assessee and deleted the additions to the tune of ₹ 49,310/- as was made by AO, vide appellate order dated 05.07.2016 passed by ld. CIT(A), by holding as under:- 9.2 Decision: In view of the factual position narrated above, the addition so made cannot survive and is, therefore deleted. 11.3 Aggrieved by appellate order passed by ld. CIT(A) granting relief to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anations submitted by the assessee in its defense shall be admitted by ld. CIT(A) and adjudicated on merits in accordance with law. We order accordingly. 12. The next issue concerns itself with the deletion by ld. CIT(A) of disallowance of ₹ 18,333/- on account of entertainment expenses, which was earlier added by AO to the income of the assessee by invoking provisions of Section 37(2) of the 1961 Act. The AO observed during the course of assessment proceedings that the assessee has debited ₹ 46,666/- towards Entertainment expenses out of which it deducted 25% i.e. ₹ 11,667/- allocated for expenses for employees and against balance of ₹ 35,000/- the assessee claimed ₹ 22,500/- as business deduction. The AO did not accepted the claim of the assessee and by following the provisions of Section 37(2), allowed firstly ₹ 10000/- out of total expenses of ₹ 46,666/- and for the balance amount remaining of ₹ 36,666/-, the AO allowed 50% of the remaining amount, wherein ₹ 18,333/- stood allowed by the AO, and the balance amount of ₹ 18,333/- was disallowed which stood added to the income of the assessee by the AO, vide assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to employees of the assessee. The assessee has relied upon the decision of Hon ble Delhi High Court in the case of CIT v. Expo Machinery Limited(supra) to justify its stand that it will be entitled for deduction on account of its employees accompanying customers @ 25% of the total Entertainment Expenses being attributable to said employees. We have observed that in aforesaid judgment passed by Hon ble Delhi High Court in Expo Machinery(supra), there is a finding of fact recorded by ld. CIT(A) that employees accompanied customers and the employees have also taken food along with customers. This finding of fact recorded by ld. CIT(A) in the case of Expo Machinery(supra) was later confirmed by tribunal and estimate was made by tribunal @35% of the total Entertainment Expenses being attributable to employees taking food and eatables along with customers. This estimate was upheld by Hon ble Delhi High Court in the case of Expo Machinery(supra) on the ground that the estimate is reasonable. While in the instant case before us, the ld. CIT(A) has simply accepted the contentions of the assessee and granted relief to the assessee by passing a cryptic, non speaking and unreasoned order, w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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