TMI Blog2010 (1) TMI 1217X X X X Extracts X X X X X X X X Extracts X X X X ..... n 20th May, 2004. (ii) Cash of ₹ 2 lacs received in the business on 6th Aug., 2004. (iii) Cash of ₹ 5 lacs received in the business on 5 March, 2005. 4. These deposits were made in the capital account of one of the partner, namely, Shri Gopal Bhasin. The assessee submitted before the AO that partner, Shri Gopal Bhasin had withdrawn certain cash amount from his personal account in his proprietorship firm, which money was introduced towards the capital in the present assessee firm. The assessee furnished the copy of bank passbook, etc. in support of his contentions. However, the AO has treated these deposits as undisclosed cash credit of the assessee firm. 5. On an appeal before the CIT(A), the assessee submitted that Mr. Gopal Bhasin, partner of the present assessee firm was also running a proprietary concern in the name and style of B2B Connectors, where from he had withdrawn cash amounts and deposited the same in the present partnership firm. Relevant extract of the cash book of proprietary concern namely B2B Connectors, alongwith other papers were furnished before the CIT(A), where from it was clear that amounts of ₹ 1 lac, ₹ 2 lacs and ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under r. 46A(1) to admit the additional evidences filed before the CIT(A). He, therefore, admitted the additional evidences, which were adduced by the assessee at the appellate stage and considered them for deciding various additions made by the AO. 7. After considering the assessee's explanation and the remand report, the CIT(A) found that the assessee has been able to give satisfactory and reasonable explanation as to the source of deposit made by the partner, Shri Gopal Bhasin. The CIT(A)'s operative order on this issue runs as under : I may revert to the issue of addition made under s. 68 to the tune of ₹ 8 lacs. I have gone through the order of the learned AO, the submissions made by the assessee as well as the remand report filed by the learned AO. The stand of assessee is that the partner of the assessee has introduced the amount of ₹ 8,00,000. The partner Shri Bhasin was also running a proprietary concern is the name and style of B2B Connectors from where he had drawn cash amount and introduced the same in the appellate firm. From the books of M/s B2B Connectors, it is observed that the following amounts have been disallowed in cash by Shri Gop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2B Connectors and then deposited the same with the present assessee firm wherein Shri Gopal Bhasin is a partner. Shri Gopal Bhasin, partner of the assessee firm has withdrawn the sum of ₹ 1 lac, ₹ 2 lacs and ₹ 8 lacs on 20th April, 2004, 6th Aug., 2004 and 5th March, 2005 from his proprietary concern and deposited the same in the partnership firm on 20th May, 2004, 6th Aug., 2004 and 5th March, 2005, respectively. It is not the case of the AO that the amount withdrawn by the assessee from the proprietary concern has been otherwise used and utilized for some other purposes. We are, therefore, inclined to uphold the order of the CIT(A) in deleting the addition of ₹ 8 lacs on account of deposits made by Shri Gopal Bhasin, partner of the assessee firm. Thus, this ground raised by the Revenue is rejected. 11. Next issue is with regard to the addition of ₹ 26,39,294 made by the AO on account of bogus purchases. 12. From the examination of the books of account produced during the course of assessment proceedings, it was observed by the AO that in respect of few parties, most of the payments on account of purchases made by the assessee were made in cash. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the CIT(A) deleted the addition by observing that the question of admission of additional evidences has already been considered by him while deciding the appeal, and in the remand report the AO has not commented adversely, in respect of the various letters and confirmations filed by the assessee. 18. The CIT(A)'s order on this issue runs as under : 32. In the remand report dt. 5th Feb., 2009, it has been submitted by the learned AO as under : 'Addition of ₹ 26,39,294 on account of bogus purchases : The AO made this addition due to non submission of details and confirmation in spite of specific request and also observing that payments for purchase made in cash are below ₹ 20,000 to avoid appeal provisions of s. 40A(3). The issue of admissibility of additional evidences has already been discussed above.' In the rejoinder filed on 9th March, 2009, the assessee has stated that as the AO has conceded on the issue, the addition should be deleted. I have carefully gone through the order of the learned AO and the submission filed in the remand report dt. 5th Feb., 2009 by her, as also the submissions made by the assessee insofar a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9,15,916.94 May 9,15,916.94 June 9,15,916.94 July 9,15,916.94 August 9,15,916.94 September 9,15,916.94 October 9,15,916.94 November 9,15,916.94 December 9,15,916.94 January 9,15,916.94 February 30,662.25 9,46,579.19 March 9,46,579.19 22. The AO has taken a view that these advance amounts received by the assessee have neither been returned nor any goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dering the aforesaid decision and the facts of the case, the CIT(A) deleted the addition by observing as under : 37. In view of the binding decision of the Hon'ble Delhi Tribunal, the onus that the liability had ceased was on the Revenue, for making addition under s. 41(1). There is no evidence on record that there was indeed a cessation of liability, as envisaged under s. 41(1), to the tune of ₹ 9,15,916.94. As such, this amount cannot be added to the income of the assessee. The only amount that is left is ₹ 30,662.25. While the learned AO has stated that this amount was transferred on 19th Feb., 2005, from the accounts of another party, nothing has been elaborated on this issue. As such, this also cannot be brought within the provision of s. 41(1) due to the non-speaking nature of the conclusion. Further, on the basis of the confirmation filed, which has been admitted as an additional evidence, for the reason given in para 9 above and that the learned AO in the remand report has also not disagreed or objected to the assessee's version, the addition to tune of ₹ 9,46,579 is deleted. The assessee succeeds in ground of appeal No. 2(7). 26. We hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case in hand, it is undoubted that the duty drawback has accrued to the assessee in the assessment year as it is following the mercantile system of accounting and therefore has to be accounted for in the assessment year itself and not on cash basis. This is not permissible, as per law. The assessee has taken the stand that it has consistently been following this practice. Even assuming for a moment that earlier this practice had indeed been accepted by the Department (even though any evidence of earlier years were not submitted), it is not necessary that in subsequent years also the blatant mistake should be allowed to be perpetuated. This mistake should be rectified as early as possible, as held in CIT vs. Foss Electronic (2003) 182 CTR (Raj) 542: (2003) 263 ITR 125(Raj). Moreover, the amendment in the Act w.e.f 1st April, 1997, has been deliberated in a number of decision of the Delhi High Court and the Delhi Tribunal and therefore, the exception to the principle of consistency would have to be followed as held in Dabur India Ltd. vs. CIT (2008) 219 CTR (Del) 152: (2008) 13 DTR (Del)34. Thus, the assessee fails in ground of appeal No. 2(5). The addition of ₹ 6,97,440 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omotion 24.03.2005 79,043 Tour and Travelling Total 1,01,816 36. On an appeal, the CIT(A) confirmed the addition by saying that the assessee's case is not covered by any of the exclusion clauses of r. 6DD. 37. After hearing both the parties and in the absence of any explanations by the assessee and having found that the case is not covered by exclusion clause of r. 6DD, we are inclined to uphold the order of the CIT(A) in confirming the addition of ₹ 20,363 being 20 per cent of the total payment of expenses made in cash in excess of ₹ 20,000 in contravention of the provision of the s. 40A(3) of the Act. Thus, this ground raised by the assessee is rejected. 38. Next ground is with regard to the addition of ₹ 4,80,891, being disallowance of expenses by invoking provisions of s. 40(a) of the Act. 39. During the course of the assessment proceedings, it was noticed by the AO that assessee has not deducted TDS on freight and cartage expenses of ₹ 4,80,981 paid to M/s Committed Cargo Care (P) Ltd., while as per provisions of s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case. We, therefore, do not find any merit in this ground raised by the assessee, which is accordingly rejected. 42. Last issue involved in the assessee's appeal is with regard to the addition of ₹ 30,000, as undisclosed income. 43. In the course of assessment proceedings, it was noticed by the AO that there was a negative cash balance to the extent of ₹ 20,888 in respect of which no satisfactory explanation was given by the assessee. The AO, therefore, treated the sum of ₹ 30,000 as undisclosed income of the assessee, out of which negative balances were met out. 44. On an appeal, the CIT(A) confirmed the addition for the similar reasons as given by the AO. 45. We have heard both the parties and have carefully gone through the orders of the authorities below. 46. It is not in dispute that the assessee has incurred expenses in cash of ₹ 20,888, which is not covered by the cash available with the assessee in between the dates from 3rd March, 2005 to 5th March, 2005. The assessee's explanation is not satisfactory as so pointed out by the AO as well as by the CIT(A). No evidence has been produced by the assessee that the entry in the book ..... X X X X Extracts X X X X X X X X Extracts X X X X
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