TMI Blog2017 (6) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee. Unexplained capital introduced by the partners - Held that:- It is true that the assessee has filed the tax details of all the partners. It is also true that the Assessing Officer has not disputed that the credits in the accounts of the partners were not deposits from the partners. In our understanding of the law, the addition cannot be made in the hands of the firm and if anything remains unexplained the addition can only be made in the hands of the partners. We find that the reliance placed by the ld. CIT(A) on the decision of the Hon’ble Jurisdictional High Court of Gujarat in the case of Pankaj Dyestuff Industries (2005 (7) TMI 601 - GUJARAT HIGH COURT) is well founded and, therefore, no interference is called for. - Decided in favour of assessee. Addition made on account of foreign travel expenses - Held that:- It is true that Mr. Sapin Shah and Ms. Priyanka Shah are not partners of the assessee firm. It is also true that they are employees of the firm who travelled abroad for the purposes of the business of the assessee. We find that the assessee has filed the details of sales made at Hong Kong and Dubai in support of its foreign travel expenditure. Merely, bec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the scrutiny assessment proceedings, the A.O. noticed that the assessee has debited an amount of ₹ 30,27,85,170/- in the Profit and Loss account as loss in forward contract cancellation. The assessee was asked to explain the nature of forward contracts and the reasons for the loss in forward contracts. 5. The assessee filed a detailed reply in justification of its claim of loss. It was explained that the contracts were made to hedge the future fluctuation in the foreign currency rate against the export/import orders of diamonds. The assessee furnished the bank-wise details of net foreign exchange forward contract loss which is as under: (i) ABN Amro Bank (-) ₹ 30,29,26,409/- (ii) HDFC Bank ₹ 2,95,55,932/- (iii) ICICI Bank (-) ₹ 2,94,14,693/- Net Loss ₹ 30,27,85,170/- 6. The A.O. sought details from the bank and the banks filed the necessary details as called by the A.O. After examining the details filed by the banks, the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l set of facts, the Hon ble High Court of Calcutta in the case of Soorajmull Nagarmull 129 ITR 169 had the occasion to consider the following facts and held accordingly:- The assessee-firm carried on the business of import and export of jute. In the course of its business it used to enter into forward contracts in foreign exchange in order to cover the loss arising due to difference in foreign exchange valuation. The assessee had entered into foreign exchange contracts in 1952 with the Hindustan Mercantile Bank. The difference payable by the assessee on the forward contract was determined in December, 1952, but the assessee disputed its liability. The dispute was settled in 1955, and its account in the bank was debited in June,1955. The assessee claimed this loss amounting to ₹ 80,491/- as a revenue expenditure in the assessment year1956-57. The ITO disallowed the claim on the ground that the loss was a speculation loss and, in any event, as the assessee was following the mercantile system, it could not claim the loss in 1956- 57. The AAC found that the transaction in which the loss arose was not speculative and this finding was upheld by the Tribunal. The AAC held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ners introduced capital as under:- ( i) Mukesh Shah ₹ 13,00,000/- (ii) Piyush Shah ₹ 3,00,000/- (iii) Hina Shah ₹ 2,53,00,000/- 17. The assessee was asked to explain the source of capital introduced by these partners with supporting evidences. The assessee filed the copy of the returns of the partners along with supporting documentary evidences. The A.O. was of the firm belief that the assessee has failed to explain the credit entries in the partners capital account and made the addition of ₹ 2.69 crores u/s. 68 of the Act. 18. Before the First Appellate Authority, it was strongly contended that since the assessee has filed the necessary evidences pertaining to the Income Tax returns of the partners who are assessed to tax and the capital introduction made by partners stands reflected in their respective records, the same cannot be treated as unexplained in the hands of the assessee. 19. After considering the facts and the submissions and drawing support from the decision of the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artners of the assessee firm. It is also true that they are employees of the firm who travelled abroad for the purposes of the business of the assessee. We find that the assessee has filed the details of sales made at Hong Kong and Dubai in support of its foreign travel expenditure. Merely, because the two persons who went abroad were not partners of the assessee firm would not justify the disallowance made by the A.O. We also find that the lump sum disallowance of ₹ 5 lakhs is without any basis as the assessee has successfully proved the sales made at Dubai and Hong Kong. We, therefore, do not find any reason to interfere with the findings of the ld. CIT(A). 28. The next grievance of the revenue relates to the deletion of the addition of ₹ 2,51,91,060/- made u/s. 40(a)(ia) of the Act. 29. The A.O. noticed that as per the TDS returns, the assessee has deducted ₹ 5,19,047/- on total receipts of ₹ 4,74,71,878/-. The A.O. further noticed that the assessee has made payment of tax at ₹ 2,45,089/-. The A.O. assumed that the assessee has deducted tax @ 1.1% only on the payments of labour contract charges and, therefore, made a disallowance of ₹ 2, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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