SANJAY AHUJA,NEW DELHI vs. ITO, NEW DELHI

ORDER The Assessee has filed the present appeal against the impugned Order dated 02/12/2015 passed by the Ld. Commissioner of Income Tax (Appeals)-17, New Delhi on the following grounds:-

1. That the ITO has erred both on facts and in law while framing assessment u/s. 143(3) of the Act.

2. That proper and meaningful opportunity was not provided to the assessee while framing assessment u/s. 143(3) of the Act. Thus order framed is unjustified, illegal and void. 3. That the disallowance of Rs. 1,91,308/- for bad debts written off by the assessee is illegal and is on surmise basis without referring the facts of the case and law thus illegal and unjustified. 4. That the addition of Rs. 56,529/- is without referring the facts of the case thus unjustified and liable to be deleted. 5. That the addition of Rs. 44,073/- is on surmise basis thus, illegal and void. 6. That the addition of Rs. 28,369/- is also on surmise basis thus, illegal and void. 7. That the addition of Rs. 14,177/- for short and excess balance written off are in the nature of bad debts and its disallowances is bad in law and unjustified. 1

8. That the assessee craves leave to add, alter, modify and to delete any ground of appeal

before or at the time of hearing. Your honour are therefore prayed that the additions made by the AO are since on surmise basis thus be deleted for justice.”

2. The brief facts of the case are that the return furnished on 18.9.2012 declaring total income of Rs. 3,99,620/-. The case was selected for scrutiny under CASS. Notice u/s. 143(2) issued on 06.8.2013 fixing the case for 21.8.2013. In response thereto, relevant information / documents were furnished and the same was examined by the AO. Thereafter, the income of the assessee was computed at Rs. 23,53,052/- and assessment was completed u/s. 143(3) of the I.T. Act, 1961 and made various additions.

3. Against the order of the AO, assessee appealed before the Ld. CIT(A) who vide his impugned order dated 02.12.2015 has partly allowed the appeal of the assessee.

4. Aggrieved with the aforesaid order of the Ld. CIT(A) assessee is in appeal before the Tribunal.

5. Ld. Counsel of the assessee stated that the additions in dispute are based on surmises and without referring the facts of the case and law, hence, the same may be deleted.

However, during the assessment proceedings, the AO found that the assessee failed to prove the justification of the bad debt, therefore, he added the total income of the assessee. On appeal Ld. CIT(A) has observed that the assessee failed to prove the fact that the impugned amount of Rs. 1,91,308/- was taken into account while computing the total income of the earlier years as provided u/s. 36(2) of the I.T. Act.

Therefore, the Ld. CIT(A) has rightly observed that except the claim of bad debt with regard to M/s Ramesh & Co., the bad debts with regard to other parties was found to be in order. Hence, he rightly restricted the addition of Rs. 1,91,308/- and the balance addition was accordingly deleted, which does not need any interference on my part, hence, I uphold the decision of the Ld. CIT(A) on this issue and dismiss the ground no. 3 raised by the assessee.

7.1 With regard to ground no. 4 relating to addition of Rs. 56,529/- is concerned. The addition in dispute was made by the AO for cash payment of Rs. 56,529/- against the purchase made by the assessee on same day i.e. on 28.4.2011, which the Ld. CIT(A) has upheld. I find considerable cogency in the assessee’s counsel that assessee was to make the urgent supply of specific goods which was only available with the party. The party has denied to accept the cheque due to unfavourable attitude and huge outstanding balance of Rs. 18.56 lakhs against the assessee. Hence, the assessee has made the payment in cash to procure the material for immediate supply for the business purposes. Hence, the addition in dispute is hereby deleted and accordingly, the ground no. 4 is allowed.

7.2 With regard to ground no. 5, 6 & 7 relating to additions of Rs. 44,073/- on account of 20% of car expenses; Rs. 28,369/- on account of 10% staff welfare/telephone/conveyance and Rs. 14,177/- on account of short and excess balance are concerned. I find that addition of Rs. 44073/- on estimate basis being 20% of car expenses is concerned, I find considerable cogency that residence of the assessee at West Patel Nagar, New Delhi and the godown is at Nawada near Uttam Nagar and the car was used only for business purposes and there is no element of personal use. I also find that AO has not found any justified reason why 20% of car expenditure be disallowed for personal, however, the same is on surmises, which is not sustainable in the eyes of law, hence, the addition of Rs. 44,073/- is hereby deleted. I further find that addition of Rs. 28369/- on account of 10% of the expenses on staff welfare (Rs.

1,02,360); Telephone (Rs. 57,676/-) and Conveyance (Rs. 1,23,650) are also for the business purpose only, hence, the estimation disallowance 4 thereof @10% is not sustainable in the eyes of law, the addition in dispute is also deleted. As regards addition of Rs. 14,177/- on account of short and excess balances is concerned, I find that the said addition for short and excess balance is no longer required debited to the Profit and loss account and are in the nature of of section 36(1)(vii) of the Act. The said adjustments are made by the assessee either for negligible balances, no longer required or for small outstanding balances not recoverable, thus written off during the year. Hence, the addition on this account is not sustainable in the eyes of law, therefore, the same is deleted and accordingly, the grounds no. 6, 7 & 8 are allowed.

Order pronounced in the Open Court on 09/03/2017.