TMI Blog2002 (5) TMI 514X X X X Extracts X X X X X X X X Extracts X X X X ..... has not been served with any ground of appeal filed by the Revenue in respect of impugned order of CIT(A). In these circumstances, we proceed to decide the appeal filed by the assessee by presuming that there is no appeal which has been filed by the revenue for the year under consideration in the case of assessee. 4. Ground No. I of assessee s appeal reads as under : "Addition on account of gross profit of Rs. 2,50,000 1.The Commissioner (Appeals) erred in retaining the addition of Rs. 2,50,000 out of the addition of Rs. 14,95,462. 2.The Commissioner (Appeals) erred in coming to the conclusion that after the date of the search the assessee firm must have sold goods outside the books of account. 3.The Commissioner (Appeals) erred in observing as under : ".....In the circumstances, the extent of unaccounted sales is to be determined for roughly half of the accounting year and not for the full year. The Assessing Officer s estimate on extra sales is, therefore, to be modified by 50%. As the disclosed GP rate is held to be reasonable addition would be necessary only with reference to extra sales....." 4.The Commissioner (Appeals) ought to have deleted the addition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,45,462. The assessee is aggrieved by the balance addition upheld by CIT(A) of Rs. 2,50,000. Ground No. 1 of the appeal relates to this grievance of the assessee. 6. The learned counsel of the assessee narrated the above mentioned facts. He contended, it is wrong for the CIT(A) to presume that the assessee had continued practice of making sales outside the books even after the date of search. He contended that there was no material with the Assessing Officer to reach a conclusion that even after the date of search the assessee had been making sales outside the books. Therefore, he contended that CIT(A) was wrong in upholding the addition of Rs. 2,50,000. He contended that CIT(A) admitted that the GP of the assessee is within acceptable limits. He contended that keeping in view this fact no part of the addition could have been sustained. He in this regard placed reliance on the decision of third Member of the Tribunal in the case of Samrat Beer Bar v. ACIT reported in 35 ITD 19 (Pune 3M). Relying on this decision he referred the following portion of Head note : "The very purpose of a search is to take the assessee by surprise and to assessee his income on the basis of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gross profit of the assessee for the entire year is within acceptable limits, there could have been no reason for making addition on account of presumption that there might be some sale which might have been made by the assessee outside of its books of account, even after the date of search. This is in accordance with the decision relied upon by the learned counsel of the assessee, in the case of Samrat Beer Bar v. ACIT ( supra ), the decision relied upon by the ld. DR 59 ITD 20 ( supra ) has no application to the facts of the case because evidentiary value, if any, attached with the submissions made during the course of search is restricted upto the period of search, particularly there being no material to draw an inference that there were some sales which were made by the assessee outside the books of account after that date of search. In this view of situation, we find no justification in the order of CIT(A) vide which the addition of Rs. 2,50,000 has been upheld. We direct the Assessing Officer to delete the same. 9. In the result, the ground No. I of assessee s appeal is therefore allowed. 10. Ground No. II of the appeal filed by the assessee raised reads as un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat it was paid during the course of continuation of business. In this regard, he referred to the pages 43 to 54 of the paper book. Referring to these papers he contended that retrenchment compensation was paid to the employees on 28-3-1989 and the change in constitution was brought only with effect from 1-4-1989, hence the decision in the case of Gemini Cashew Sales Corpn. [1967] 65 ITR 643 ( supra ) is not applicable. In this regard he referred to the decision of Bombay Tribunal in the case of Winsol Chemical Industries v. ITO in ITA No. 2125/B/87 dated 20-6-1991. He contended that as it was paid during the continuation of business the same is allowable. 14. He also referred to the decision of Hon ble Madras High Court in the case of CIT v. Srinivasa Perumal Bank Ltd. [1981] 131 ITR 692 . In this case, the assessee undertook to pay gratuity under the agreement entered with the Indian Overseas Bank with which its business was merged and so contingency to pay gratuity as undertaken, in the resolution of the Board of Directors arose and hence it came within the exception to the rule that any payment which is made at the time of or after the closure of the business cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, cannot be regarded as a part of the outgoing of the business debitable in the profit and loss account. A deduction which is proper and necessary for ascertaining the balance of profit and gains of the business is undoubtedly properly allowable, but where a liability to make a payment arises not in the course of the business, not for the purpose of carrying on the business, but springs from the transfer of the business, it is not a properly debitable item in its profit and loss account as a revenue outgoing. To be a permissible allowance under section 10(2)( xv ), the expenditure must be for the purpose of carrying on the business. Where accounts are maintained on the mercantile system, if liability to make the payment has arisen during the time the business is carried on, it may appropriately be regarded as expenditure." In the present case there was a change in constitution of the firm from 1-4-1989. Vide letter dated 15-2-1989, it was informed by the assessee firm to the employees who were retrenched from their services and to whom retrenchment compensation was paid. Thus, in the present case the liability of the assessee to make payment arose not in the course of busine ..... X X X X Extracts X X X X X X X X Extracts X X X X
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