TMI Blog2024 (4) TMI 542X X X X Extracts X X X X X X X X Extracts X X X X ..... ngly mentioned the fact of first floor being leased out by way of typographical error. Physical inspection was sought to be carried out by the Inspector of Income Tax on the subject mentioned property who also categorically confirmed that there is no first floor at all in the property. The mezzanine floor was constructed in AY 2012-13 by the assessee which fact is evident from pages D to Q containing the details of amounts spent at construction together with the bills thereon. Assessee also has filed an affidavit before us confirming all the aforesaid facts. When these documents are staring on us, we hold that there cannot be any addition that can be made on account of alleged rental income for first floor when factually there was no first floor at all in the subject mentioned building. Hence, the addition made on account alleged rental income for the first floor which was not in existence is hereby directed to be deleted. Accordingly, ground 1(i) raised by the assessee is allowed. Unexplained cash credit u/s 68 - assessee has shown a receipt from a concern/company but assessee has neither supplied any goods nor rendered any services to the said party and no confirmation was filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of malafide intention or fraud is proved beyond doubt, then no further concession need to be given to the assessee. In the instant case, the assessee had already obtained more than eligible relief from the ld CIT(A). Hence, the ground No. 2 raised by the assessee is hereby dismissed. Disallowance of salary u/s 40A(3) - salary paid to employee in cash - addition made as employee is related to the assessee stationed in Delhi and no business exigency of incurrence of the expenditure in cash has been demonstrated by the assessee - HELD THAT:- In the instant case, the identity of the payee is established and transaction with employee/Gaurav Babbar is hereby held to be genuine. But in order to make the assessee s case fall under the exception provided in the proviso to section 40A(3) of the Act, the assessee is duty bound to explain that the place where the payee is stationed does not have bank facilities and the assessee had pressing emergency to make the said payment in cash out of business exigencies. In the instant case, it is not in dispute that Gaurav Babbar (payee) is stationed in Delhi where bank facilities are available in every nook and corner of Delhi as rightly observed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so filed with the CIT(A). 2. The Ld. CIT(A) has erred on facts as well as in law in sustaining addition of Rs. 1,12,613/- even though the profit allowed to M/s. Rovani food Pvt. Ltd. sister concern was Rs. 19,800/- that is hardly 1.3% of purchases from it. 3. The Ld. A.O. as well as the Ld. CIT(A) have erred on facts as well as in law in making and confirming addition of Rs. 2,50,000/- u/s. 40A(3) even though there is no doubt about genuineness of transaction and is also covered by exceptional circumstances. 4. The Ld. CIT(A) has erred on facts as well as in law in sustaining addition of 1/5th of travelling expenses even though it does not involve any personal element. 5. The Ld. CIT(A) has erred on facts as well as in law in sustaining 20% of all telephones expenses, all vehicle running and maintenance expenses, interest and depreciation. At any rate it should be in respect of proprietor's personal telephone and car used by the proprietor and for all cars. Looking to turnover and extensive business and that it is the case of proprietor, disallowance should not be more than 10% of telephone and car used by him. 3. Ground No. 1(i) raised by the assessee is challenging the action ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en terrace. The basement and ground floor had been duly given on rent to the aforesaid tenant and rental income derived thereon had been duly offered to tax. The assessee also placed evidence of the schedule of property from the sale deed to prove the aforesaid contention. It was also submitted that no further construction was carried out by the assessee. The ld AO however did not agree to the aforesaid contentions and proceeded to add the alleged rental income for the first floor portion and made an addition of Rs. 60,75,000/- in the assessment. The assessee submitted the photographs of the building on record. The assessee also submitted the confirmation dated 20.08.2015 from the tenant stating that lease deed had wrongly mentioned the fact of first floor being leased out by way of typographical error. Physical inspection was sought to be carried out by the Inspector of Income Tax on the subject mentioned property who also categorically confirmed that there is no first floor at all in the property. The mezzanine floor was constructed in AY 2012-13 by the assessee which fact is evident from pages D to Q containing the details of amounts spent at construction together with the bills ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the books of the assessee during the year under consideration. It is a fact that no satisfactory explanation has been given by the assessee before the lower authorities and before us also. Hence, the said receipt of money credited of Rs. 1,90,000/- which is found credited in the books of the assessee is to be added as unexplained credit u/s 68 for the year under consideration. However, in order to avoid double taxation, we hereby direct the ld AO to delete the very sum of Rs. 1,90,000/- for AY 2014-15 which has been voluntarily offered to tax by the assessee in the return of income for AY 2014-15. Accordingly, ground No. 1(ii) raised by the assessee is disposed of in the above mentioned terms. 10. Ground No. 1(iii) raised by the assessee is challenging the disallowance made u/s 40(a)(ia) of the Act. 11. We have heard the rival submissions and perused the material available on record. During the year under consideration, the assessee paid processing charges of Rs. 6,65,936/- to Religare Bank and Rs. 6,17,078/- to M/s. Bajaj Finance Ltd as closure charges without deduction of tax at source. Similarly, the assessee had not deducted tax at source on payment of Rs. 4,05,936/- to B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere repurchased from M/s. Rovani Foods Pvt. Ltd by giving them margin of Rs. 19,000/-. Accordingly, it was pleaded that the assessee by doing purchase and sale transaction with M/s. Rovani Foods Pvt Ltd had merely enabled Rovani Foods Pvt. Ltd to earn margin of Rs. 19,800/-. The ld AO further did not agree to this contention and disallowed the purchase made from M/s. Rovani Foods Pvt. Ltd amounting to Rs. 15,01,397/- as bogus transaction. It was also submitted by the assessee that out of goods repurchased from M/s. Rovani Foods by the assessee, those goods were sold by the assessee to 3rd parties and assessee had earned a profit of Rs. 73,971/-. The assessee furnished the complete details of purchase and sales made to M/s. Rovani Food Pvt. Ltd and details of sales made to outside customers. The ld CIT(A) however, observed that the assessee had made sales to M/s. Rovani Foods Pvt. Ltd only to claim refund from custom authorities with a malafide intention. Hence, the entire loss actually incurred by the assessee on the transaction with M/s. Rovani Foods Pvt. Ltd amounting to Rs. 1,12,613/- (Rs. 15,01,397-14,81,345/-) requires to be disallowed as against the total disallowance on 15,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of salary has been accepted by the ld AO. In the instant case, the identity of the payee is established and transaction with Gaurav Babbar is hereby held to be genuine. But in order to make the assessee s case fall under the exception provided in the proviso to section 40A(3) of the Act, the assessee is duty bound to explain that the place where the payee is stationed does not have bank facilities and the assessee had pressing emergency to make the said payment in cash out of business exigencies. In the instant case, it is not in dispute that Gaurav Babbar (payee) is stationed in Delhi where bank facilities are available in every nook and corner of Delhi as rightly observed by the ld CIT(A). Further, the assessee was not able to demonstrate the business exigencies which warranted him to make payment of salary in cash. Hence, the assessee s case does not fall under the ambit of exception provided in proviso to section 40A(3) of the Act. Further, the assessee s case does not fall under any of the exceptions provided under Rule 6DD of the Income Tax Rules. Hence, the disallowances made u/s 40A(3) of the Act is hereby confirmed. Accordingly, ground No. 3 raised by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amritsar to meet M/s. Rolls Snackers Pvt. Ltd who wanted coffee machines, grinder, stick blender, slush machines, sandwich griller double, dough mixture, softy machines, mixture, meat minser, fryer double, spiral mixture and potato peeler and wanted to purchase these machines from point of view of interior decoration. She had gone on 27.04.2010 and procured order worth Rs. 10 lakhs which was supplied by the assessee by 20.07.2010 and 31.08.2010. Accordingly, it was pleaded that this travelling expenses was also meant for the purpose of business. 21. The assessee pleaded that his business activity is split over Daryaganj to two buildings in Okhla Industrial area and residence in Sainik Farms. Accordingly, the assessee submitted that the disallowance should not be more than 3% of one telephone No. 9811020270 and 10% of 1 car Mahindra Zylo for personal element. The ld CIT(A) upheld the disallowance of 20% made on account of telephone and vehicle related expenses including interest and depreciation and also restricted the disallowance on account of travelling expenses to 20% on account of personal element involved thereon. 22. We have also narrated the facts with regard to purpose of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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