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Before: SHRI MAHAVIR SINGH & SHRI ASHWANI TANEJA
O R D E R Per ASHWANI TANEJA, AM
This appeal has been filed by the assessee against the order of ld. Commissioner of Income-tax (Appeals)-1, Mumbai (hereinafter called ‘the CIT”) passed against order u/s 143(3) dated 05-12-2008 for the assessment year 2006-07, on the following grounds :
“1. The Learned taxing authorities had erred in disallowing Rs.102719/- out of freight and transportation expenses at 10% of expenses on estimated basis. Considering the facts of the case and provisions of law, the expenses be allowed in full. Just and proper relief be granted the appellant.
2 ITA No.,8115 /Mum/2010 2. The Learned taxing authorities had erred in disallowing Rs. 389098/- out of field tour expenses at 10% of expenses on estimated basis. Considering the facts of the case and provisions of law, the expenses may be allowed in full. Just and proper relief be granted to the appellant.
3 The Learned taxing authorities had erred in treating the unsecured loans of Rs.1165500/- as unexplained cash credit U/s 68 of the IT Act, 1961 and making addition to total income of the assessee. Considering the facts of the case and provisions of law, the addition made may be deleted. Just and Proper relief be granted to the appellant.”
2. During the course of hearing, arguments were advanced by Shri Vishwas S Mehendale on behalf of the assessee and Miss Bharti Singh on behalf of the revenue.
3. Grounds 1 & 2 : In these grounds, the assessee has challenged the action of lower authorities in making disallowance out of freight and transportation expenses @10% of the total expenses, on estimated basis. During the course of hearing the ld. Counsel for the assessee submitted that the assessee had submitted all the details and documentary evidences in support of the expenses and that under these circumstances, the Assessing Officer could not have and should not have resorted to the action of making disallowance on adhoc or estimate basis and that too without specifically pointing out what more was required to be done to substantiate these expenses. He submitted that these issues can be sent back to the Assessing Officer to examine these expenses meticulously and to make specific disallowances, if at all required, for want of specific evidences.
3 ITA No.,8115 /Mum/2010 4. Per contra, the ld.DR submitted that since complete evidences were not submitted, the assessing officer resorted to make disallowance on estimate basis. She did not raise any objection for sending these issues back to h Assessing Officer.
We have gone through he orders of the lower authorities as well as submissions made by both the sides before us. It is noted from the perusal of the orders that the assessee had submitted the details and documents as were required by the Assessing Officer. Thereafter some discrepancies were noticed by the Assessing Officer and in consequence to the same he made adhoc / estimated disallowances. The assessee has desired that no adhoc disallowance should be made as he is ready to substantiate the expenses in the best possible manner, in the given circumstances. Under these circumstances, we find it proper to send both the issues back to the file of the Assessing Officer with the direction to give adequate opportunity of hearing to the assessee to substantiate these expenses. The Assessing Officer shall take into account all the facts and circumstances of the case and shall make only specific disallowance, if required under the given facts and circumstances of th case. The assessee is free to raise all factual and legal issues before the Assessing Officer. The Assessing Officer shall take into consideration all the details and evidences on objective basis before passing fresh assessment order on these issues. Thus, with these directions, ground 1 & 2 are sent back to the file of the Assessing Officer and may be treated as allowed, for statistical purpose.
4 ITA No.,8115 /Mum/2010 6. Ground 3 : In this ground, the assesse has challenged the action of lower authorities in making addition u/s 68 for an aggregate amount of Rs.11,65,500 being the amount received from following three parties :
Shantanu Enterprises Rs. 2,40,000
Shri Jayant Padalkar Rs.5,00,000
Nikhant Shriram Sadavarte Rs.4,25,500
Total .... Rs.11,65,500 It is noted from perusal of the orders of authorities that these amounts were added on the ground that the assessee failed to substantiate these amounts in terms of setion 68. According to the lower authorities, the assessee could not prove the creditworthiness of these three parties and these loans remained unconfirmed.
During the course of hearing before, the ld.counsel has drawn our attention on various pages of the paper book showing that these loans were received through banking channels, interest was paid and TDS was also deducted. It was further shown that these loans were subsequently repaid in subsequent years by the assessee by account payee cheques and through banking channels.
5 ITA No.,8115 /Mum/2010 8. On the other hand, the ld.DR submitted that since assessee could not properly substantiate these amounts, the addition has rightly been made u/s 68 of the Act and requested to uphold the orders of the lower authorities on this issue.
We have gone through the submissions made by both the sides as well as details and documentary evidences shown to us. With regard to first two parties, viz. Shantanu Enterprises and Nikhant Shriram Sadavarte, it is noted by us that the amount of loan was received through account payee cheques. We have examined the bank statements of both the persons and found that no cash was deposited prior to issuance of cheques to the assessee. We have also examined the TDS certificate issued by the assessee on account of deduction of TDS on the amount of interest paid on these loans. It is further noted by us that these loans had been subsequently repaid to these persons. Copy of confirmations containing complete addresses are also on record. Under these circumstances, if the Assessing Officer had any doubt, then, he was free to make further verification with these persons. In our considered view, the assessee has discharged its burden u/s 68 of the Act. The Assessing Officer had made the addition on the basis of presumption and guess work which is not permitted under the law. We direct the Assessing Officer to delete the addition with respect to these two persons.
With respect to loan received from Shri Jayant Padalkar it was informed by the ld.counsel that inadvertently the bank statement of the relevant period could not be brought on record. He submitted that it happened due to oversight. It was further submitted by him that he can bring requisite details on record, if an opportunity was given to him. Thus, after taking into account
6 ITA No.,8115 /Mum/2010 of the facts and circumstances we find it appropriate to send the issue of loan received from Shri Jayant Padalkar back to the file of the Assessing Officer, who shall give sufficient opportunity to the assessee to submit requisite documentary evidences on record to substantiate the said loan. The Assessing Officer shall decide this issue after taking into consideration all the details and documentary evidences as has been submitted by the assessee to substantiate this loan amount in terms of section 68 of the Act. This ground may be treated as partly allowed.
In the result, the appeal filed by the assessee is treated as partly allowed.
Order pronounced in the court on 25th May, 2016.