TMI Blog2000 (7) TMI 241X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the assessee had not recorded the purchase to the extent of 731 mtrs. of grey cloth against which corresponding sales had been shown. Consequently, the AO added the cost of unrecorded purchases of Rs. 2,32,981 to the income of the assessee while finalising the order under s. 143(3). The matter was carried before the CIT(A) who deleted the said addition. 4. Aggrieved by the same, the Revenue is in appeal before us. 5. The learned Departmental Representative made an attempt to support the order of the AO and submitted that the additions made on account of unrecorded purchases are in noway connected with the additions made in the closing stock. He further submitted that both these additions have been made by the AO on the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mtrs. of grey cloth stands covered by the additions of Rs. 4,41,329 made in the closing stock on account of undervaluation of stock of grey cloth to the extent of 77,342 mtrs. We do not find any force in this contention of the learned counsel for the assessee, because both the additions have been made on different grounds. From the perusal of the assessment order, it is seen that the issue of unaccounted purchase was noticed when month-wise quantitative details of opening stock, purchases and sales were worked out by the AO and shortage in the purchase was found during the month of October, 1989. The assessee also admitted this mistake and accordingly offered the amount of unexplained purchase for taxation. It is further observed that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee on this issue is that corresponding sales in respect of unrecorded purchases have been duly recorded by the assessee in his books of account and accordingly the value of purchases including profit thereon has got declared in the income returned by the assessee and as such additions made on account of unexplained investment in such purchases would amount to double taxation. We find force in this contention of the learned counsel of the assessee, inasmuch as the entire amount of sales corresponding to the unrecorded purchases including profit thereon stands declared by the assessee and hence no separate additions on this account is warranted. Even if the additions are made on account of unexplained investment in purchase, similar amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bstantial amount to relatives and sister concerns without any business consideration and not charged interest on the same whereas, on the other hand, he has paid interest to the extent of Rs. 34,194 on the borrowed funds. Accordingly, the AO considered the same as diversion of funds and worked out interest at 15 per cent on these interest-free advances. Consequently, disallowance to that extent out of interest expenses incurred by the assessee was made by the AO. The matter was subsequently carried before the CIT(A) who deleted this addition considering that no nexus could be established by the AO between the borrowed funds and interest-free advances. Aggrieved by the same, the Revenue is in appeal before us. 10. The learned Departmental ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, contended that CIT(A) has rightly deleted the additions on this account and his order may be upheld. He also cited the following decisions in support of his contentions: (i) Secheron Electrode (P) Ltd. vs. CIT (1983) 13 Taxman 372 (MP) D H; (ii) Appollo Trade Links vs. ITO (1994) 116 CTR (Trib) (Del) 359; (iii) United Agencies vs. ITO (1990) 37 TTJ (Ahd) 374; and (iv) Hissaria Bros. vs. Asstt. CIT (1999) 22 Tax World 684 (Jp. Trib.). 12. We have considered the rival submissions and also perused the material on record, including the decisions cited by the learned counsel for the assessee. It is observed that the interest-free advances have been given by the assessee out of its own funds available in the capital accounts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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