TMI Blog2012 (12) TMI 517X X X X Extracts X X X X X X X X Extracts X X X X ..... recluded from making any enquiry to find correctness of the claim made out by the assessee. However, principles of natural justice demands the assessee must be informed about the result of such enquiry and may be given a fair chance of rebutting it - set aside this issue to the file of AO who shall make proper enquiry and come to a conclusion after affording an opportunity of being heard to the assessee in this regard. Disallowance of notional interest received on loan advances - Held that:- It is seen from the balance-sheet of the assessee having enough capital to advance the loan amount of Rs.30 lakhs, and the unsecured loans were all taken in the earlier years and no fresh loan has been taken in the current assessment year hence there is no nexus between the borrowed capital and loan advanced by the assessee - addition towards notional interest cannot be sustained - in favour of assessee. Monies collected as a part of the assessee’s monthly gold scheme lucky draw - Held that:- It is seen from the terms and conditions of the scheme that under no circumstances, cash will be refunded to the member and only gold ornaments will be issued. Therefore, the inference to be made is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reopened u/s 147 of the Act. In course of reassessment proceedings, the AO found that the assessee had shown an amount of Rs.36,61,-16/- as sundry creditors in the balance sheet. The assessee explained that he has floated a lucky draw, monthly gold scheme consisting of 250 members and the scheme is for duration of 20 months. Every member of the scheme participating in this scheme pays an amount of Rs.250/- per month for 20 months and at the end of the completion of the scheme, every member is entitled to gold jewellery worth Rs.5,000/-. The assessee explained that this amount received from the members which have been shown as sundry creditor. The AO rejected the explanation of the assessee on the finding that the assessee had not furnished details of the scheme and the scheme is also not registered with the concerned authorities. The AO also held that the sundry creditors is nothing but the advances received for purchase and making of jewellery. On the aforesaid conclusion, the AO added the amount of Rs.36,61,060/- as undisclosed cash credit of the assessee us/ 68 of the Act. The AO also disallowed the scheme loss of Rs.3,86,880/- on the aforesaid consideration. The assessee cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order of the CIT (A) in deleting the addition made u/s 68 of the Act. So far as scheme loss is concerned, the CIT (A) after examining the accounting entries adopted by the assessee, deleted the addition by observing in the following manner:- Further, I find that with respect to the accounting entries, the appellant debits the cash account on receipt of monthly instalment and credits the ledger account of the customer. When the jewellery is given, at that point the credits are converted into sales. I see no infirmity in this accounting methodology. 8. After going through the aforesaid finding of the CIT (A), we find no infirmity in the said order. We therefore uphold the findings of the CIT (A) and reject the grounds raised by the revenue. Hence the appeal filed by the Revenue is dismissed. ITA No.1211/Hyd/2009- Assessee s appeal) 9. The assessee has raised following grounds before us:- 1. The order of the AO is contrary to facts, law and circumstances of the case. 2. The AO ought not to have added an amount of Rs.5,47,394/- as deficit in stock. 3. The CIT (A) ought not have confirmed the addition on account of deficit in stock. 4. The AO ought not to have dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ines Jewellers, Gunfoundary, Hyderabad. The AO issued summons to Sri Satish G. Shah. Shri Satish G. Shah appeared before the AO with his books of accounts and a statement was recorded from him. Sri Satish G. Shah stated before the AO that the said diamonds might have been sent to him, but he might not have done the assortment and hence returned to the assessee without assortment. The AO came to a conclusion that in absence of any entry either in the books of the assessee or in the books of Satish Kumar Shah, the receipt and delivery note is a mere piece of paper. The AO further concluded that the assessee and Sri Satish Kumar Shah made collusive arrangement to give colour to a flimsy transaction. The AO treated the deficit in stock as unaccounted sales and added an amount of Rs.5,74,394/-. 11. The assessee challenged the addition before the CIT (A). Before the CIT (A), the assessee contended that the Assessing Officer has issued summons and examined Sri Satish Kumar G. Shah and recorded a statement from him behind his back. Even though the Assessing Officer has utilised the statement recorded from Sri Satish Kumar G. Shah, no opportunity was given to the assessee to either cros ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on loans to his family members. Though the assessee stated the said loans advanced were out of own funds and not from borrowed capital, the Assessing Officer did not accept it and charged interest at the rate of 12% on the loan advanced of Rs.30 lakhs and added an amount of Rs.3,60,000/- to the income of the assessee. In the first appellate proceedings, the CIT (A) also upheld the addition. 14. The learned AR for the assessee submitted before us that the assessee has advanced loans of Rs.30 lakhs out of his own surplus capital and not from borrowed capital. Therefore, there should not be any addition. The learned AR further contended that the loans taken from family members are from earlier years on which interest was paid, no fresh loan has been taken by the assessee from family members. 15. The learned Departmental Representative, on the other hand, supported the orders of the revenue authorities. 16. We have heard rival submissions of the parties and perused the material on record. It is seen from the balance-sheet of the assessee that as on 31-3-2008 he was having capital of Rs.32,64,979/-. Therefore, it can be seen that the assessee was having enough capital to advan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... monthly basis are credited to the respective customer s accounts as instalment collection and same has been shown as liability/advance sales collection. It is seen from the terms and conditions of the scheme that under no circumstances, cash will be refunded to the member and only gold ornaments will be issued. Therefore, the inference to be made is as soon as the member participates in the scheme and pays instalment money, there is accrual of income to the assessee since the money is not going to be refunded to the member. The member participates in the scheme is only entitled to get gold ornament on completion of scheme. Therefore, it cannot be said that the income has not accrued to the assessee. It is not material how the assessee treats the receipt in his account books since the assessee s style of writing does not alter the real nature of receipt. If it is a trading receipt, from the facts available on record, it can be concluded that the amount received under the monthly gold scheme is a trading receipt. The assessee is showing it as a liability, will not change the character of receipt which always remains as a trading receipt. This is in accordance with the principle of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ials on record. It is seen from the conclusion arrived at by the CIT (A) in para 9.2 of his order, the CIT (A) has given a specific finding that the Assessing Officer has not indicated the price which he has taken to arrive at the closing stock valuation. When the CIT (A) himself admits that the Assessing Officer has not indicated the price on the basis of which he has valued the closing stock, he should not have accepted the valuation made by the Assessing Officer by observing that the Assessing Officer has valued the stock on the basis of FIFO method. More so, when the assessee has been consistently adopting the same method of valuation of closing stock from the past years without being doubted or questioned by the department earlier. When the method of valuation of closing stock being consistently followed by the assessee is sought to be changed by the department, it has to be backed by sound reasoning which is lacking in the present case. We therefore set aside this issue to the file of the AO who shall take a decision after affording a reasonable opportunity of being heard to the assessee. 22. In the result, appeal filed by the department is dismissed and that of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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