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TMI Blog2012 (2) TMI 592X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/- for want of vouchers towards maintenance of vehicle; & (v) confirming the disallowance of ₹ 1,08,090/- (sic) ₹ 21,618/- u/s 40A (3) of the Act. 3. Before adjudicating the issues raised by the assessee, it has been noticed that there was a delay of 26 days in preferring this appeal against the impugned order of the first appellate authority. An affidavit of partner in Shri N A Prasad Associates was filed, detailing the reasons for filing the appeal belatedly. The relevant extracts from the Affidavit is reproduced below:- "The firm has closed its business in April 2007 and I am now residing in Bangalore. The appellate orders of the CIT(A) dated 19/3/2010 and 23/3/2010 for the respective assessment years were received by my nephew and, since I was attending to my wife who was suffering from cancer, I could not go to Hubli. A copy of the hospital record regarding the treatment given to her in 2008 is enclosed. Although she was discharged on 1/9/2008, the outpatient treatment continued, which necessitated my continued presence in Bangalore. This led to the delay of 26 days in filing the appeal". 3.1. During the course of hearing, it was submitted that the delay in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10%, the interest on the amount of ₹ 15,35,000/-, advanced by the assessee firm to the above concerns. % would work out to ₹ 1,53,500/-. Therefore, out of total interest on OD A/c claimed at ₹ 1,78,433/-, ₹ 1,53,500/- is disallowed as interest payment not incidental to business, considering the diversion of funds for non-business purposes". (ii) Excess of assets over liabilities: According to the AO, the assessee had shown credit balances to the tune of ₹ 3,65,402/- in the cases of (i) ISKON Temple; (ii) Murudeshwar Ceramics Ltd; (iii) Bellad & Co. (Bellad Enterprises); and (iv) Kamat Yatri Nivas, Bangalore. On verification of account extracts of the assessee appearing in the books of the concerns cited supra, according to the AO, the credit balances claimed by the assessee were found to be incorrect and for the detailed reasons recorded in the impugned order, the AO resorted to add the sum of ₹ 2.37 lakhs being excess of assets over liabilities. (iii) Addition of ₹ 69,643/-: According to the AO, certain bills towards works executed by the assessee to the tune of ₹ 69,643/- were impounded during the course of survey operation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ambit of diversion of funds for non-business purposes. Therefore, the AO is justified in disallowing the proportionate interest of ₹ 1,53,500/- attributable to the diversion of funds for non-business purposes on which the appellant firm has borne the burden of interest….." (ii) Excess of assets over liabilities: (a) Iskon Temple: "4.1.2……..It is seen that the appellant had received a sum of ₹ 16,043/- in lieu of POP work done for ISKON temple. Therefore, this entire amount should have been offered for taxation by the appellant and the question of any amount having shown payable to ISKON does not arise. Therefore, the liability shown by the appellant against the actual receipts remains unexplained which is rightly disallowed by the AO.." (b) Murudeshwar Ceramics: "4.2.2……………..It is seen that the appellant has received the entire amount of POP work done for M/s.Murudeshwar Ceramics and there remains ₹ 21,965/- payable by the appellant as per the account extract. Therefore, the excess liability shown by the appellant against the actual receipts remains unexplained which is rightly disallowed by AO&h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red in cash for which no proper bill and vouchers are maintained and such expenses are supported only by self made vouchers but in the case of present appellant even the self made vouchers are not available for verification as the appellant has not maintained the details. Therefore, the disallowance made by AO for want of bills and vouchers and looking to the nature of business, the addition made by AO of ₹ 15,000/- is confirmed." (v) Disallowance u/s 40A(3) of the Act: "7.2…………..It is seen there from that cash payments have been made to all the parties in cash which on a particular date in single transaction exceeds ₹ 20,000/- which is in contravention to the provisions of section 40A(3) of the Act. The payments made by the appellant are not covered under the exceptions of rule 6DD. The ratio of the decision relied upon by the appellant is not applicable to the facts & circumstances, therefore, the disallowance made by AO of ₹ 1,08,090/- (sic) ₹ 21,618/- u/s 40A(3) of the Act." 7. Agitated, the assessee has come up with the present appeal. It was submitted by the Ld. AR that the authorities below have disregarded the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the above facts and also in the principles of natural justice, this issue is remitted back to the file of the AO with a specific direction to look into this aspect and to take appropriate action in accordance with the provisions of the Act, of course, after providing a reasonable opportunity to the assessee of being heard. The assessee shall be at liberty to produce the documentary evidence, if any, at its possession to strengthen its claim that the loans advanced are from surplus funds. It is ordered accordingly. (ii) Addition of ₹ 2,37,032/- - Excess of assets over liability With regard to second ground (excess of assets over liabilities), we have carefully perused the reasoning of the AO and also the detailed findings of the CIT (A). In fact, the AO had examined the account extracts of the assessee in the respective firms and brought on record that the assessee's claims were not backed with any documentary proof. The CIT (A) had also, after due verification of facts, sustained the stand of the AO. Even at this stage, the assessee had not brought any evidence to contradict the Revenue's stand on this issue. In view of the above facts, we are of the considered view tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of ₹ 1.08 lakhs (sic) ₹ 21,618/- u/s 40A(3) of the Act. Before us, it was argued that the assesee was forced to make freight charges in cash to the extent of ₹ 1.08 lakhs as the goods were delivered in its premises at odd hours and the truck drivers insisted for cash payments to meet the contingency expenses such as fuel, their maintenance etc., The Ld. A R sought refuge under rule 6DD (G) to strengthen his argument. He also placed reliance on the finding of the earlier Bench in the case of M/s. Haryana Plywood v. ITO, W 1(1), Hubli in ITA No.208 & 209/Bang/2009 dated 19.3.2010. We have carefully considered the contentions of the assessee and also perused the reasoning of the authorities below. It is an undisputed fact that goods lorries/trucks are prohibited to enter into city limits during the day time and, accordingly, the drivers of such vehicles will reschedule the timings to reach their destinations preferably at odd hours - well beyond the working hours of the banks. Such being the ground realities, the recipients of such goods would naturally be forced to make payments only in cash as the circumstances so warrant. Though, making such payments in cash ..... X X X X Extracts X X X X X X X X Extracts X X X X
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