TMI Blog2023 (3) TMI 397X X X X Extracts X X X X X X X X Extracts X X X X ..... wages were bogus expenses, when these bogus expenses were debited in the books of accounts, how the money was taken out and how such money was utilized for the purposes of renovations and repairs. No books of accounts have been maintained for such undisclosed transactions. In the absence of any such co-relation between the inflation of wages and unexplained expenditure disclosed on account of renovations and repairs, the claim of telescoping does not arise. Also in the case of Bhagwandas D. Vachhani [ 2015 (4) TMI 269 - GUJARAT HIGH COURT] has clearly held that it is burden upon the assessee to give sufficient explanation for the source of the amount. After considering all materials, statement or the record or when no record of books of account is produced or when no transactions by showing co-relation are demonstrated by the assessee and the opinion is to be formulated by the A.O. cannot be disturbed. Thus the submissions made by the assessee does not hold it good with proper evidences and the same is rejected - the alternative claim of depreciation on the assets capitalized on Renovation and Repair expenditure of Rs. 2.5 crores on Kerala Property Fire Safety Institute at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c. There was a survey action u/s. 133A of the Act on 06.12.2010 by the Investigation Wing in Several premises of the assessee. Various incriminating papers/documents, diaries including pocket diaries etc. were found and impounded as per impounding orders. Statement of the Managing Director of the assessee company was recorded wherein he admitted voluntarily undisclosed of Rs. 27 crores on various Heads for different assessment years. 2.2. In that Rs. 17 crores is relating to the present assessment year 2011-12 namely Renovation and repair expenses of Rs. 2.5 crores, Misc. receivables of Rs. 1.5 crores and Inflation/Bogus expenditure under the head salary/wages of Rs. 13 crores. However the assessee in the Return of Income filed has not offered the Renovation and Repair expenses and Misc. receivables. The assessee explained that the Renovation and Repair expenses of Rs. 2.5 crores and Misc. receivables of Rs. 1.5 crores are included in the undisclosed income of Rs. 13 crores offered by the assessee. Thus the sum of Rs. 4 crores represent application of undisclosed income. Since the undisclosed income has already offered for tax, again taxing a sum of Rs. 4 crores being a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. The Assessing Officer after going through the details of the submissions found that a sum of Rs. 97,51,105/- is relating to the current year and the balance of Rs. 5,92,43,933/- pertains to the earlier years. Further perusal of the records shown only the list of names of so called debtors has been provided by the assessee which is not sufficient to identify/verify such debtors. It is also a peculiar fact that the assessee has not shown bad debts written off under the separate head, but shown under deduction from customers which raises doubts on the intention of the assessee company. Without deep scrutiny, one cannot find the fact that actually, bad debts has been written off. Therefore the sum of Rs. 5,92,43,933/- is added back to the total income of the assessee as the same is not allowable under the provisions of section 36(1)(vii) of the Act. 2.6. On the balance amount of Rs. 97,57,105/- pertaining to the present Assessment Year, the Assessing Officer disallowed 30% namely Rs. 29,25,332/- on account of unverifiable expenditure and added the same as the income of the assessee. 2.7. Further as per information available with the Assessing Officer total receipt of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant has not produced any evidence to show that the unexplained expenditure on account of renovations and repairs and the miscellaneous receivables were made out of the inflated wages. The Hon'ble Jurisdictional High Court in its decision in the case of [2015] 56 taxmann.com 284 (Gujarat), Bhagwandas D. Vachhani, has held as follows: 22. The aforesaid shows that the burden would be upon the Assessee to give explanation and the Assessing Officer has to consider the explanation reasonably. The relevant aspect is that so far as the H.U.F. is concerned, it is not at all maintaining any books of account. Therefore, deposit of the amount in the respective bank accounts of the H.U.F. may be required to be considered by showing the corresponding entry as that of under invoicing or over invoicing of the capital goods or over invoicing of the expenses etc. if any. No evidence whatsoever is produced by the /Assessee before the A.O. Mere statement of the partners is too vague and too general that the money credited in the respective bank accounts of the HUFs. is earned out of under invoicing of the sales and over invoicing of the expenses and over invoicing of the capital goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laim of telescoping and has made separate additions on account of renovations and repairs and miscellaneous receivable as disclosed during the course of the survey proceedings. 4.2.3 As a matter of fact, by accepting that only the amount of Rs. 1.5 crores remained as miscellaneous receivable not shown in the books of accounts as on the date of survey, the appellant has got the right to credit this amount only in its books of accounts. But it is seen that the appellant has credited the amount out of the inflated wages, which remained as balance after the claim of telescoping of such inflated expenses against miscellaneous receivables and repairs and innovations disclosed during the course of the survey, in its books of accounts. Hence in subsequent assessment yeas also, the AO is directed to verify the fact as to whether 'any amount out of such miscellaneous receivable, which could not have been credited in the books of accounts, has been credited back in the books of accounts of the appellant in order to explain certain expenses. The nature of such credits will remain unexplained only. 3.1. Regarding the claim of bad debts and unverifiable amount of deduction from cust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t only. The entire bill for sales raised by the appellant had been accounted for in the profit and loss account. Once a part of such sales is not paid by the clients, it takes the nature of bad debts though it may be regarded as deductions made by the clients in the books of accounts. Moreover, the provisions of section 36(l)(vii) read with section 36(2) makes it clear that even a part of the income accounted for in the current year also can be claimed as a bad debt. Once the deduction made by the clients account is debited and the clients' accounts are credited, the conditions laid down by these sections are fulfilled and such amounts are allowable as a bad debt in the computation of total income. The appellant is not required to establish that such debts have actually become bad before writing off the same in its books of accounts. Accordingly the AO is not correct in making ad hoc disallowance out of the deductions made by the clients during the current year itself. The appellant's explanation are legally and factually correct and hence the disallowances made by the AO are directed to be deleted and both of these grounds of appeal are allowed. 3.2. Thus the Ld. CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apparent on the record and that the CIT(A) ought not have restored to enhancement of income. (c) without prejudice to above it is submitted by your Appellant that employees Provident Fund of Rs. 4,30,96,567/- and Employees ESI payment of Rs. 80,31,826/- is not liable to be disallowed/added as held by various High Courts and to Supreme Court of India and that CIT(A) ought to have followed the judgment of Supreme Court of India and he should not have enhanced the Income of your Appellant. It is therefore submitted that relief claimed above be allowed and the order of the Assessing Officer be modified accordingly. ITA No. 103/Ahd/2016 (By Revenue) 1. On the facts and in the circumstances of the case and in law, the Ld.CIT(Appeals) erred in by deleting addition on the issue of bad debts by approving and holding assessee's contention correct and held that there is no discrepancy in the amount of bad debt claimed by the assessee without appreciating merits and findings of the case by Assessing Officer . 2. On the facts and in the circumstances of the case and in law, the Ld.CIT(Appeals) erred in by deleting addition on the issue of Unverifiable amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit of telescoping at the time of survey, cannot be a ground to deny such benefit. If the facts of the case is being taken up in correct perspective, rather than taking a hyper technical view thus both the A.O. and Ld. CIT(A) ought to have deleted the above additions. 5.2. In fact, the Assessing Officer is duty bound to advise the assessee to claim reliefs even though not claimed in the Return as per Board s Circular dated 11th April, 1955 which were referred by the Jurisdictional High Court in the case of CIT vs Ahmedabad Keiser-E-Hind Mills Co. Ltd. 128 ITR 486 (Guj.) and Chokshi Metal Refinery vs. CIT 107 ITR 63 (Guj.) Alternatively, the Ld. Sr. Counsel claimed that at least depreciation may be allowed on the amount of expenses capitalized in the books of accounts. 5.3. Regarding ground no. 2 addition of Rs. 4,58,60,861/- in respect of alleged suppressed sales, the same is being deleted by the Assessing Officer while giving effect order dated 15.02.2019. Hence is not pressed ground no. 2. 5.4. Regarding ground no. 3 addition of Rs. 34,98,571/- added as alleged suppressed sales for the Assessment Year 2011-12. This ground has not been dealt by the Ld. CIT(A) which wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 2,86,532/- and allow the assessee s ground. 6. Regarding ground no. 4 namely addition of Rs. 5,11,28,393/- on account of delayed payment of PF and ESI. This issue is now covered against the assessee by the Hon ble Supreme Court in assessee s own case in Civil Appeal No. 2833 of 2016 dated 12.10.2022. Therefore the same is also not pressed. 7. Per contra, the Ld. CIT-DR Shri A.P. Singh appearing for the Revenue submitted that if the contentions of the assessee had been true then the entire inflated wages ought to have been disclosed as Misc. receivables at the time of recording statement of the Managing Director itself and there is no need to make a separate disclosure of Rs. 2.5 crores on Renovation and Repair and Rs. 1.5 crores as Misc. receivables on the date of survey. Or at least the same would have been claimed to have been set off against the inflated wages. Nothing of this sort was claimed while in the course of statements recorded during survey and post survey proceedings. 7.1. Further answer to the question no. 4 during the recording of statement namely what is the modus operandi of booking bogus expenses? The Managing Director answered that there is no sy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies. The assessee having its offices all over India and no evidence has been given as to which particular wages were bogus expenses, when these bogus expenses were debited in the books of accounts, how the money was taken out and how such money was utilized for the purposes of renovations and repairs. No books of accounts have been maintained for such undisclosed transactions. In the absence of any such co-relation between the inflation of wages and unexplained expenditure disclosed on account of renovations and repairs, the claim of telescoping does not arise. 8.1. Further the Hon ble Jurisdictional High Court in the case of Bhagwandas D. Vachhani (cited supra) has clearly held that it is burden upon the assessee to give sufficient explanation for the source of the amount. After considering all materials, statement or the record or when no record of books of account is produced or when no transactions by showing co-relation are demonstrated by the assessee and the opinion is to be formulated by the A.O. cannot be disturbed. Thus the submissions made by the assessee does not hold it good with proper evidences and the same is rejected. However, the alternative claim of depreciati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le at page nos. 251 to 257 of the Paper Book. Therefore following the principle of consistency, the disallowance of bad debts made by the Assessing Officer is unwarranted for the preset assessment year 2011-12. 12.2. Further the assessee has already written-off the amount in question in the books of accounts as bad debts . But however under different nomenclature namely Deductions from customers . However the nature of expenses does not change. Therefore following Hon ble Supreme Court Judgment in the case of TRF Ltd. the claim of bad debts is allowable under the provisions of law, thereby the Ld. A.R. pleaded to dismiss the appeal filed by the Revenue. 13. We have given our thoughtful consideration and perused the materials available on record. It is seen that the assessee during the course of assessment proceedings, the assessee had submitted full details of bad debts on account of lower payments made by its clients, while settling the dues. Further the entire bill for sales raised by the assessee had been accounted for in the profit and loss account. Once a part of such sales is not paid by the clients, it takes the nature of bad debts. Further the provisions of section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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