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TMI Blog2012 (8) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer compliances were made by the appellant and written submissions and documents were filed from time to time. The Assessing Officer has however noted that no books of accounts were produced despite issue of notice u/s.142(1) on 30.11.2010. The AO has thereafter examined the issue of claim of deduction of partnership remuneration and status of the appellant and as per detailed findings recorded on page 3 to 6 of the assessment order, it has been held that the status of appellant has to be taken as AOP and that claim of deduction of remuneration to partners and interest aggregating Rs.2,56,628/ has been disallowed. The AO in his concluding paras on the issue, has noted that no proper compliances were made by the appellant and initially the bank account of the so called partnership firm was opened up as a propreitory concern, Mr. Mohd. Zakir Hussain one of the partners and later on only it was converted 'into a partnership firm by a partnership deed executed on 12.01.2008. Apart from other non compliances about sources of deposits in bank account, the appellant failed to produce books of accounts. Thus the AO for detailed reasons recorded came to the conclusion that during the yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contentions raised by the AR are found to be totally generalized, vague and unsubstantiated. The AO is found to have maintained a detailed order sheet about issue of notice u/ s.143(2) and adjournments sought thereafter and position of non-compliances made besides issue of notices and letters calling for information u/s.133(6) from Bank of India, Indore Municipal Corporation and ample opportunity was given to the AR to present the appellant's case and even statement of the Auditor who signed audit report of the partnership firm was recorded. The AO has prima facie made various additions on the basis of details and documents collected by issuing statutory letters u/ s.133(6) and after confronting the appellant for detailed and specific reasons recorded and hence the contentions raised in this behalf in ground no. 1 and 2 are without any merit whatsoever and both the grounds are accordingly rejected 4. 2 Coming to ground no.3 directed against AO's action in treating the status of the appellant as AOP and disallowing remuneration to partners at Rs.2,12,170/- and interest to partners at Rs.44,458/- totaling Rs.2,56,628/-, the only contention raised in this behalf by the appellant tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch prima facie appear to be duplicate in nature as will be revealed by the detailed discussion made hereinafter. The AO one hand, made addition based on income & expenditure account and balance sheet which has prima facie found to be wrong and not supported by regular books of accounts and on the other hand, he has made addition for difference between the outstanding amount from Indore Municipal Corporation (in short IMC) at Rs.77,71,154/-. 4.3.1 The AO has noted in para 6 of the assessment order, issued summon to Tax Auditor Shri Sohail Anwar and recorded his statement on 27.12.2010, in which the Auditor in reply to the questions submitted broadly admitted that no books of accounts and bank statements were ever produced before him. He categorically stated that the entire books were given to him in tally software in CD form besides TDS certificate, copy of partnership deed and part of the expenses voucher etc, it was maintained before the auditor that the bank statement could not be obtained on account of faulty' printer and apparently the Auditor signed such report in a hurried manner and he admitted that he was preoccupied with his marriage ceremony fixed on 30.08.2008. A specif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 36,04,994/- being the unexplained funds introduced to explain the so-called expenses incurred. 4.3.3 A careful analysis of the original Balance sheet filed with the return of income and the revised balance sheet reveal that except for the change in figure of the amount received from IMC at Rs.84,44,675/- against Rs.8, 77 ,465/- disclosed in original Balance sheet all other figures for senting material, auzar, cash and bank balance remain the same. Whereas on the liabilities side, the partner's capital balance stand at the same figure of Rs.6,85,112/- and sundry creditors amount also remain the same at Rs.4,60,205/against the same names appearing in the original balance sheet. The AR while required to establish the outstanding sundry creditors expressed his inability to do so claiming that proper books of accounts were not maintained and it was also submitted that such amount has not been disputed or adversely commented by the AO. Besides this, the sundry creditors and capital account and balancing figure of miscellaneous receipts of Rs.36,04,994/-, the following amount of unsecured loans appear in balance sheet : i. Jeevanlal Kadwa Rs.5,00,000 ii. Premlal Bhaugi Karoda Rs. 5, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of much significance. Now once this is taken as a consolidated position, the liability which needs to be deducted therefrom firstly stands at Partner's capital account at Rs.6,81,112/- which is found to be verifiable and not adversely commented upon by the AO in any manner. Further, out of unsecured loans claimed at Rs.40,20,000 /-; the amount of Rs.20,00,000/- coming from partner Mr. Mohd. Zakir has to be necessarily accepted as the identity of the partner is established and the amount has come through the banking channel from his bank account. In view of the decision of Hon'ble MP High Court in the case of CIT v. Metachem Industries 245 ITR 160 (MP) 4.4.2 But the remaining liabilities claimed in the name of the four so-called farmers namely Shri Jeevalal Kadwa Premlal Bhaugi, Ramkumar bai and Laxminarayan cannot be accepted as except rin pustika and voter ID card nothing has been brought on record to establish their identity for incometax purposes like the PAN allotted and in any case it cannot be accepted that all the four farmers living in different places were in a position to advance an amount of Rs.5 lakhs each to the appellant. In fact no serious attempt has been made by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut this addition cannot be made over and above the other additions made by the AO in view of the discussions made above. No further observations or findings are considered necessary except the fact that in the state of affairs of appellant's account, the distinction made by the AO in revenue expenditure and capital expenditure was perhaps not fully justified. It may also be observed that if the real execution of contract work was done, the amount spent on tools, auzar, takadi, etc, is broadly considered to be revenue nature only as these are items of consumable natire and not capital asset in the strict sense of the term having durable nature. 4.4.9 Thus, all the grounds of appeal raised are disposed in terms of discussion made and the total income is directed to be assessed at Rs.60,85,200/- in place of Rs.l,57,94,180/and the appellant shall be entitled to consequential relief." 4. Against the above order, both the assessee and the revenue are in appeal before us. 5. We have considered the rival submissions of the parties, gone through the material available on record and find that the assessee was in the business of civil construction and supplying of material to the Governmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the addition made on account of loan received from the partner. 6. As the assessee could not fulfill the criteria of genuineness of transaction and credit worthiness in respect of the loan of Rs. 5 lacs each received from Jivanlal, Premlal, Ramkumar and Laxminarayan, we do not find any reason to interfere with the findings recorded by the lower authorities in confirming the credit received from these persons, accordingly, the ground raised by the assessee is dismissed. 7. With regard to the disallowance of claim of expenditure on account of details of Tools, Auzar and Tagari on the plea that the expenditure was capital in nature, we do not find any justification in the order of the Assessing Officer for treating such expenses as capital insofar as they are the consumables used in the business of construction life of which is less than one year. This expenditure is essentially required to be allowed as revenue expenditure. Accordingly, we do not find any justification in deleting the disallowance of expenditure incurred on tools, Auzar, Tagari, etc. 8. After giving detailed findings with regard to the unexplained source of capital, the learned Commissioner of Income Tax (App ..... X X X X Extracts X X X X X X X X Extracts X X X X
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