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2015 (2) TMI 53 - AT - Income TaxAccommodation entry - bogus purchases - whether CIT(A) has erred in deleting the addition of ₹ 1.40 crore without fully appreciating the fact that the MD/Chairman of the assessee company, surrendered this amount of ₹ 1.40 crore as undisclosed income - Held that:- At the time of survey it was clearly noted by the I.T. Authority conducting survey that the amount of RS.1 ,40,00,000/- was not reflected in the books of account although the cheque payment has been made by the appellant company. This fact has been mentioned by the AO in the order itself. Time and again it has been reiterated by the appellant, its Accounts Manager and it's Chairman/MD during the time of survey and during assessment proceedings also that the payment under reference made to B.T.Technet Ltd is advance only. This clearly means that the same has not been debited in the profit and loss account. (From perusal of the assessment order it appears that AO has not bothered to see the P&L account and b/s of the appellant.) Even final printed balance sheet has also been produced before the undersigned and on going through the P&L account, it is seen that amount of ₹ 1.40 crores has not been debited in the P&L account; rather the same has been shown as advance in the balance sheet and grouped under the sub head 'Loans and advances' in the asset side. [Thus as per principle of accountancy also an amount which is appearing as advance could not have been debited in the P&L account.] Thus, though on the day of survey this invoice was not recorded in the books of the appellant company (the intention of the appellant might be to claim this sum as bogus expenditure but in view of the survey conducted by the department on 27.12.2006, in the final books of accounts which is finalised as on 31;10.2007, this amount has not been claimed as an expenditure and therefore shown as advance) but subsequently when the books are finalised, the payment made against this invoice has been shown as advance. The reasons for the same may be the survey conducted by the Department, but the facts remains that this amount has not been debited in the P&L account; rather it has been directly shown as advance. (Based on this P&L Account and balance sheet the appellant has re-revised its return on 29th March 2008.) Therefore, an amount which has not been debited in the P&L account and therefore not claimed as expenditure cannot be disallowed even though the invoice may be in the nature of accommodation entry. Therefore without commenting on the correctness or otherwise of the conclusion of the AO that this invoice is in the nature of accommodation entry, the addition made by the AO cannot be upheld. We further find that Ld. CIT(A) has further observed that this amount has not been capitalised also as if it is capitalised then it will not appear in the balance sheet as 'advances'. Even otherwise no addition is found in the schedule of fixed assets during the year corresponding to this payment. Thus no depreciation has also been claimed. Thus there is no case of any disallowance of depreciation also. We find that Ld. CIT(A) has observed that there is no revenue effect in the case of the assessee based on this invoice. Therefore, he rightly held that the addition so made by the AO is, therefore, directed to be deleted. In view of the above, we are of the view that no interference is called for in the well reasoned order passed by the Ld. CIT(A), hence, we uphold the same by dismissing the appeal filed by the Revenue. - Decided in favour of assessee.
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