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TMI Blog2023 (12) TMI 626X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act on account of unsecured loans." 4. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the disallowance of PMS fees of Rs. 2,37,697/." 5. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in restricting the disallowance of Rs. 8,40,255/- to Rs. 2,52,128/- u/s 14A of the I.T. Act and read with Rule 8D of IT, Rules. 6. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the increase in the Director's remuneration of Rs. 53,90,000/- 7. "The appellant craves leave to add, amend or forego any ground(s) of appeal at any time before or during the hearing of this appeal." 3. Brief facts of the case are that, the assessee filed return of income declaring income of Rs. 1,42,61,740/-, the case was selected for complete scrutiny, the assessment u/s 143(3) of the Act came to be passed on 09/12/2018 by making following additions:- "i. Addition of Rs. 20,00,37,558/- u/s 41 of the Act; ii. Addition of Rs. 2,27,64,303/- by disallowing 50% of handling charges. iii. Addition of Rs. 2,45,00,000/- u/s 68 of the Act. iv. Addition of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been received from Moscow. Therefore, the opening outstanding of Rs. 15,70,40,563/- has been treated as income u/s 41 of the Act. Aggrieved by the same, the assessee preferred an appeal before the CIT(A), the Ld. CIT(A) while deleting the above addition held as under:- "4.2 I have considered the facts of the case and the submission made by the AR. It has been contended that the appellant is having running accounts with these parties and has furnished the ledger accounts for previous and subsequent years having transactions with these parties. It is also submitted that the AO did not confront anything to the appellant after the preliminary details were furnished and the AO did not make any independent enquiry. The AR has also filed the copies of the assessment orders for AYS 2013- 14 to 2015-16 in which the transactions with all these parties have been duly accepted. On perusal of the complete details filed by the AR and the assessment order, it is observed that the AO has not brought on record any material or reason before making the addition. The AO has simply added back the opening balances of the trade payables without making any verification from the parties and has also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her liability to pay to these creditors, where is the question of a quasi judicial authority to intervene & to say on behalf of sundry creditors or on behalf of the appellant that amount is not payable by the assessee? Here there is not even unilateral act, let alone the bilateral act, Therefore also, action of AO in holding the liabilities ceased to exist may please be reversed. 6.4 Even in law, the addition is not sustainable for more than one reason. Section 41(1) of the Act is a deeming fiction according to which an amount which does not have any trace of income is treated as income liable to suffer the brunt of tax. Therefore, as per the established canons of law, the burden to prove that a particular amount falls within the four corners of section 41(1) is on the shoulder of the Assessing Officer without which the addition cannot be made and if made is liable to be deleted. 6.5 The first pre-requisite for the applicability of section 41(1) is there must be a trading liability in respect of which the deduction has been claimed and allowed and burden to prove the twin conditions to the effect of the above facts, it goes without saying, is on revenue. There is not even an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discharge the primary onus and has made the addition in a summary manner. In view of the complete facts and the legal position as discussed above, the addition made by the AO is deleted." 7. It was canvassed before the CIT(A) by the assessee that the Assessee was having running accounts with the above parties and has furnished the ledger accounts for previous and subsequent years to prove the transactions with those parties. The A.O. did not confront anything to the assessee after preliminary details were furnished and A.O. has also not made any independent enquiry. The assessee had filed copies of the assessment orders for Assessment Years 2013-14 to 2015-16 in which the transactions with all the parties have been duly accepted, further in the absence of the A.O. bringing any material or reasons before making any addition, simply added back the opening balances of the trade payables without making any verification from the parties. The A.O. has also ignored the fact that part of the payment have been made in current/subsequent year and there is a running account with these parties held by the assessee. The Ld. CIT(A) has relied on various decisions of Apex Court as well as vari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in this regard and has not rejected the books of account also which are duly audited. In view of these facts, the addition made on ad- hoc basis by the AO is deleted and the ground of appeal is allowed." 11. Since, the Assessee was following Mercantile System of Accounting and not on cash basis, the expenses cannot be disallowed merely on the basis of nonpayment to the vendors. It has been observed by the CIT(A) that the A.O. has not brought on record any material or evidence to show that the expenses claimed are not genuine or the expenses have not been incurred for the purpose of business. Further, the A.O. has not made any enquiry also from the assessee on this regard. The A.O. without rejecting the books of account which was duly audited made the above disallowance of 50% of handling charges which has been rightly deleted by the CIT(A). Thus, we find no merit in Ground No. 2 of the Revenue, accordingly, we dismiss the Ground No. 2 of the Revenue. 12. Ground No. 3 is regarding deletion of addition of Rs. 2,45,00,000/- made by the A.O. u/s 68 of the Act on account of unsecured loans. The Ld. Departmental Representative relying on the assessment order, submitted that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns. The said disallowance has been deleted by the CIT(A) on the ground that the assessee shown the shares in the balance sheet as stock-in-trade, therefore, the expenses are allowable as business expenses. The interest on TDS is also compensatory in nature and is not penal and therefore, the same is allowable. We find no error or infirmity in the order of the CIT(A) in granting the relief to the assessee by deleting the addition accordingly, we dismiss the Ground No. 4 of the Revenue. 18. Ground No. 5 is regarding restricting the disallowance of Rs. 8,40,255/- to Rs. 2,52,128/- u/s 14A of the Act. The Ld. Departmental Representative by relying on the assessment order, sought for allowing the Ground No. 5 of the Revenue. Per contra, the Ld. Departmental Representative relied on the order of the CIT(A). 19. Heard. The A.O. observed that the assessee had made various investments from which earned income which is exempt u/s 10(34) of the Act. Therefore, by invoking the provision of Section 14A read with Rule 8D made disallowance of Rs. 8,40,255/-. In the appeal, the said disallowance u/s 14A was restricted to the amount of dividend income i.e. Rs. 2,52,128/- and balance disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AR has very well explained the reason for increase in the remuneration of the directors which is mainly due to the increase in the rent paid by the appellant company in respect of the rent free accommodation provided to the directors. In view of these facts, the addition made by the AO is deleted and the ground of appeal is allowed." 22. It is found that the assessee had given no explanation before the A.O. regarding increasing the remuneration of Directors but during the first appellate proceedings, the assessee made elaborate submission and the CIT(A) observed that there is an increase of Directors' remuneration as the Directors have been given rent free accommodation and the landlord has increased the rent during the year and the perquisite value of the land free accommodation has been duly shown in ITR filed by the Directors. The said fact has not been brought to the notice of the A.O. and the same has been left without examining by the A.O. Therefore, we remand the issue involved in Ground No. 6 to the file of the A.O. for fresh adjudication with a direction to the assessee to substantiate its claim by providing the evidence. Accordingly, the Ground No. 6 of the Revenue i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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