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2019 (4) TMI 1647 - ITAT DELHIInterest charged on the debit balance of the partner Shri Vinod Sharma - CIT (A) deleted the addition - HELD THAT:- Audited P&L account together with the computation of income filed before the concerned AO clearly revealed that the appellant did not pay any interest to any of its partners on its credit balances. At the same times, the over drawal by the partner Sh. Vinod Sharma, from the firm’s capital was not made out of interest bearing funds of the firm. In such circumstances any interest free advances given to its partners by the appellant firm could not be made the subject matter of addition on the ground of notional receipt in the form of interest. Amount shown as interest paid to Usha Sharma by the AO in his order in fact represented the share of profit and not interest payable to her as wrongly understood by the AO. As a result of such a mistake in reading the P&L account of the appellant an incorrect inference that the appellant firm ought to have charged interest on the debit balance of Vinod Sharma leading to the addition in the hands of the firm on account of debit balance in the books of the appellant firm which was calculated @ 12% Notional interest on interest free advances to the suppliers - CIT (A) deleted the addition - HELD THAT:- Addition so made has no leg to stand on as the facts pointed out by the appellant accorded with the claim pressed by it in the appellate proceedings that it was not liable to receive any interest on advances given to suppliers as it did not pay any such interest to its suppliers. Also it is well settled law that notional additions are not tenable in law as held by the Hon’ble Apex Court in the case of CIT vs. Excel Industries Ltd [2013 (10) TMI 324 - SUPREME COURT] as held no real income but only hypothetical income had accrued to the assessee and section 28(iv) of the Act would be inapplicable to the facts and circumstances of the case. Essentially, the Assessing Officer is required to be pragmatic and not pedantic CIT (A) violated the provisions of Rule 46A of the Rules - production of books of accounts - HELD THAT:- No specific error or mistake has been highlighted by the Ld. DR in the aforesaid factual inference other than to suggest that the books of accounts were not produced on 6.3.2013. However, having regard to the voluminous evidence enclosed with the replies and placed as part of paper book, we find no infirmity in the conclusion of the CIT (A) that once complete details in respect of books of account as above were produced and accepted there remained no valid justification for the AO to allege that books of account were not produced by the assessee firm, particularly when the trading results as declared have been accepted as such. Accordingly, we are unable to take a view different from that of the Ld. CIT (A) and dismiss ground no. 5. Addition being cash deposited in the bank by close relative of the assessee - AO noted that the partners of the assessee firm and their daughters had cash deposits in their independent bank accounts used for carrying on their businesses which sums were, thereafter, transferred to the assessee firm and, therefore, it was held that the sums transferred represented income from undisclosed sources of the assessee firm - HELD THAT:- Once the assessee firm has received money through banking channels from its partners/their daughters who have duly deposed and confirmed the transaction/s and have also supported the same with documentary evidence/s then the addition, without any evidence/s to the contrary, is absolutely without any force of law and unsustainable. It is well settled law that surmises, conjecture and suspicion can never be resorted to make addition u/s 68 of the Act. The AO has proceeded to make the addition on an assumption that the cash deposited in the proprietorship concern of the partners and their daughter is the cash of the assessee. No basis whatsoever has been stated in the order of assessment for such a farfetched assumption. - Decided against revenue Cash deposited in the two bank accounts out of the cash withdrawals made by the assessee firm - HELD THAT:- There were cash withdrawals from the bank to the extent of ₹ 2,18,20,000/- and also cash sales to the extent of ₹ 31,86,359/-. Under such circumstances, once the trading results and the cash flow statement filed during the assessment proceedings have been accepted, we find no error in the action of the CIT (A) in deleting the addition to the extent to the sum withdrawn in cash from the bank and cash sales duly declared and accepted in the order of assessment. - Decided against revenue.
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