TMI Blog2018 (5) TMI 802X X X X Extracts X X X X X X X X Extracts X X X X ..... dits appearing in the ledger account are nothing but the transfer of cash from office to house and vice versa. Had AO considered debits appearing in the ledger account before the dates of credits, no addition would have been called for. We further find that assessee had explained and reconciled each and every entry in excess of ₹ 50,000/- recorded in the impounded documents. The details of explanation made by the assessee to Assessing Officer is placed at paper book pages 15 to 18 but Assessing Officer instead of accepting the reconciliation, chose to make the addition and which learned CIT(A) has rightly deleted. Addition on account of interest paid in cash - Held that:- This amount of interest related to interest on amount of ₹ 3,34,000/- which the Director of the assessee had owned up and for which we have already decided in favour of assessee. The Director of the company in the same affidavit had also owned up the payment of interest on such loans. The learned CIT(A) has also noted that Shri W. H. Siddique has filed affidavit accepting the interest on loan which was paid by him in his personal capacity from whom the unsecured loan was obtained. Violation of pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T. S. KAPOOR, A.M. This is an appeal filed by the Revenue against the order of CIT(A) dated 04/08/2015. The grounds of appeal taken by the Revenue are reproduced below: 1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of ₹ 3,34,000/- made by the A.O. u/s 68 of the I T Act, 1961 whereas the assessee failed in discharging its onus of proof and explanation offered by the assessee company was not satisfactory in the opinion of the Assessing officer. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in deleting the addition of ₹ 18,65,060/- made by the A.O. u/s 68 of the I.T. Act, Appellant by Shri Ajay Kumar, Addl. CIT (D.R.) Respondent by Shri K. R. Rastogi, C. A. without appreciating the fact that documents impounded during the course of survey proceedings u/s 133A demonstrate that number of cash loans were received by the assessee company through its Director Shri W.H. Siddiqui. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of ₹ 1,21,250/- on account of interest paid on cash loan without apprec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or which the director had also filed affidavit stating therein that the entries belonged to him and therefore, learned CIT(A) deleted the same. Similarly regarding addition on account of violation of provisions of section 40A(3), Learned A. R. submitted that these amounts were not spent as expenditure and neither any expenditure was claimed in the profit loss account and therefore, learned CIT(A) has rightly deleted the same. Learned A. R. heavily placed his reliance on the order of learned CIT(A). 4. We have heard the rival parties and have gone through the material placed on record. We find that Assessing Officer made various additions on the basis of documents seized during survey. The details of additions made by the Assessing Officer are reproduced below: (i) Addition u/s 68 of the Act Rs.3,34,000/- (ii) Addition u/s 68 of the Act Rs.18,65,060/- (iii) Addition on account of interest paid on cash loan Rs.1,21,250/- (iv) Addition u/s 40A(3) Rs.30,46,780/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment marked as A-52 that assessee had received loan from Shri W. H. Siddiqui in cash on various dates and he has noted the various dates in his assessment order, the total of which amounted to ₹ 18,65,060/-. The assessee explained that the cash received from Shri W. H. Siddiqui was nothing but was amount brought back from residence which had earlier been withdrawn from bank account of the sister concern of the group company. However, the Assessing Officer did not accept this contention of the assessee. The learned CIT(A) however has drawn a complete position of cash in hand of various group companies and has held that cash in hand of the entire group was much more than the amounts which were received by the assessee from Shri W. H. Siddiqui. We further find from the examination of seized document A-52 that it is a copy of hand written ledger account titled as WH Loan and in which various entries of debits and credits are appearing. The Assessing Officer had picked up certain amounts on various dates and has made the addition on account of credits appearing in the ledger account. However, he has ignored the debits appearing in the ledger account on earlier dates. The assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rce has to be appreciated in light of evidences and if the explanation is found satisfactory, no addition is called for under section 68 of the Act irrespective of the entries in the books of accounts. The Assessing Officer is however, of the opinion that the explanation offered is to be overlooked as entries in the books of accounts cannot be ignored. Further, the explanation offered by the assessee is that the entries refer to the cash of the appellant-company available with the director for safe keeping. Once the cash available with the directors is owned by the appellant-company and it is the same cash as is reflected in the cash book there can be no withdrawal from the cash book as such withdrawals are made when the cash has to be spent on the expenses and not for safe keeping. 6(8) I find that the position of availability of cash as per cash book of the appellant-company and its sister concerns is as under Date Balance In Drosia Construction Pvt. Ltd. Balance In Drosia Hotels Ltd. Balance In JEDC Ideal Enterprises Drosia Construction Balance In Drosia Interiors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22,090,613.70 10.12.07 1,229,754.00 112,961.70 28,576,670.00 2,575,534.00 32,494,919.70 11.12.07 1,225,693.00 112,961.70 28,576,670.00 2,575,034.00 32,490,358.70 14.12.07 1,168,571.00 112,797.70 28,576,670.00 2,566,534.00 32,424,572.70 12.12.07 1,205,771.00 112,961.70 28,576,670.00 2,567,034.00 32,462,436.70 20.12.07 1,101,401.00- 108,525.70 28,573,859.00 3,333,552.00 33,117,337.70 24.12.07 1,071,035.00 246,262.70 28,573,859.00 3,333,552.00 33,224,708 70 17.12.07 1,107,439.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29,497,019.00 4,045,569.00 34,698,813.70 ,21.01.08 935,121.00 211,557.70 27,554,299.00 3,990,874.00 32,691,851.70 23.01.08 918,136.00 211,525.70 26,365,188.00 3,990,874.00 31,485,723.70 29.01.08 894,545.00 200,034.70 25,898,548.00 3,913,679.00 30,906,806.70 24.01.08 890,068.00 211,525.70 26,365,1^8.00 3,943,743.00 31,410,524.70 04.02.08 857,381.00 182,564.70 25,896,468.00 3,945,437.00 30,881,850.70 02.02.08 861,412.00 182,769.70 25,896,468.00 3,945,937.00 30,886,586.70 20.02.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the directors of the appellant-company on a particular date, the explanation regarding the nature and source of entry should have been called for from the directors rather than the appellant-company. In any case, the availability of cash referred to in the entry considered by the AO is satisfactorily proved by the cash balance as per cash book of the appellant-company and sister concerns. The addition of ₹ 18,65,060/- made by the AO under section 68 of the Act is deleted as the entries referred by the AO are satisfactorily explained. The appellant gets a relief of ₹ 18,65,060/-. In view of the above categorical findings of learned CIT(A), we find no infirmity in his order therefore, ground No. 2 is dismissed. 4.3 As regards deletion of addition of ₹ 1,21,250/- which the Assessing Officer had made on account of interest paid in cash, we find that this amount of interest related to interest on amount of ₹ 3,34,000/- which the Director of the assessee had owned up and for which we have already decided in favour of assessee. The Director of the company in the same affidavit had also owned up the payment of interest on such loans. The learned CIT(A) has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred by the Assessing Officer no not belong to the appellant. The appellant gets a relief of ₹ 1,20,250/-. The above findings of learned CIT(A) do not contain any infirmity therefore, ground No. 3 of the Revenue s appeal is dismissed. 4.4 Now coming to ground No. 4 regarding violation of provisions of section 40A(3) of the Act, we find that the Assessing Officer had made these additions on the basis of certain cash payments noted in document A-52. The assessee during the assessment proceedings and appellate proceedings had argued before learned CIT(A) that these payments were not expenses and were not booked in the books of account and were never claimed in the profit loss account and therefore, these were not hit by the provisions of section 40A(3) of the Act. The learned CIT(A) has dealt the issue from para 8(5) onwards wherein each and every amount mentioned by the Assessing Officer has been explained and learned CIT(A) has categorically held that these were not expenditure and therefore, were not hit by the provisions of section 40A(3) of the Act. For the sake of completeness, the findings of learned CIT(A) as contained in para 8(5) and 8(6)(i) are reproduced b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ves Tours and Travels Rs.1,00,000/- 09.06.2007 Eves Tours and Travels ₹ 50,000/- ₹ 1,50,000/- The appellant has explained that these entries were not claimed as expenses in the books of accounts as these were personal expenses of Shri W. H. Siddiqui, director of the company and were considered his personal withdrawals. Shri W. H. Siddiqui, director of the appellant-company also filed an affidavit dated 16/02/2015 during remand proceedings before the AO. In the affidavit so filed, Shri W. H. Siddiqui, director of the appellantcompany, accepted that these expenses were his personal expenses. I therefore find that addition under section 40A(3) of the Act made by the AO is not justified as the appellant has not claimed these expenses in the books of accounts and these were personal expenses of Shri W. H. Siddiqui, Director of the appellant company. The addition of ₹ 1,50,000/- made by the AO under section 40A(3) of the Act is deleted giving corresponding relief to the appellant. 8(6)(iii) Page 175 of annexur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09/06/2007 Cash in hand - 7,87,317 18/06/2007 BOB A/c No. 0069 IEDC (JV) 543131 15,00,000 It appears therefore that these entries do not relate to any claim of expenditure in the books of accounts. The AO has without examining the nature of the entries come to the conclusion that the entries were related to claim of expenditure and has made the impugned disallowance under section 40A(3) of the Act. The entries are not even related to of a joint venture, a sister concern. I therefore find that the addition made under section 40A(3) of the Act is unjustified as the entries do not relate to any claim of expenditure. The addition of ₹ 23,50,000/- made by the Assessing Officer under section 40A(3) of the Act is deleted giving corresponding relief to the appellant. 8(6)(v) Page numbers 34 and 35 of annexure A-52 shows the following entries. Date Name Amount 01.08.2007 Manish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se expenses was made by Shri Mohd Chand, employee, whose name is mentioned on the entry. I find that the payment under one head as a particular date is less than an amount of ₹ 20,000/- and therefore, no addition can be made u/s 40A(3) of the Act. The addition of ₹ 56,980/- made by the Assessing Officer under section 40A(3) of the Act is deleted giving corresponding relief to the appellant. The above findings of learned CIT(A) clearly state that the amounts referred by the Assessing Officer as expenditure were not expenditure and were not claimed by the assessee in the profit loss account. The learned CIT(A) has further held that some of entries were not even related to the appellant company as withdrawals have been made from the account of a group concern. We further find that a major portion of disallowance u/s 40A(3) relates to details in the ledger account marked as A-52. These debits have already been held to be transfer of cash from office to house of Director. The Assessing Officer made the additions on account of debits in the ledger account u/s 40A(3) of the Act whereas the credits in the ledger account have been added as additions u/s 68 of the Act. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 1,63,631/- The assessment in the case of M/S Drosia Interiors has been completed under section 143(3) of the Act and no adverse inference has been drawn as regards claim of the expenses. The expenses amounting to ₹ 1,63,631/- are therefore not related to the appellant-company and therefore addition made under section 69C of the Act by the AO is unjustified. The addition amounting to ₹ 1,63,631/- is deleted giving relief to the appellant. 9(7) Further, the following expenses have been duly accounted for in the books of accounts of the appellant for the year under consideration vi) Legal Expenses page 139 ₹ 48,867/- vii) Salary wages page131/DC53 Rs.3,12,940/- x) Project Expenses DC/27 Rs.1,09,669/- xi) Project Expenses DC/46 Rs.16,54,555/- Rs.21,26,031/- The expenses amounting to ₹ 21,26 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Assessing Officer who would check as to whether project expenses debited under the above said head matches with the entries in the impounded document. Therefore, for the limited purpose of examination by Assessing Officer, we direct Assessing Officer to verify the above expenses from the impounded documents and decide accordingly. In view of the above, ground No. 5 is partly dismissed and partly allowed for statistical purposes. 4.6 As regards ground No. 6 relating to estimation of income from projects, we find that the Assessing Officer had made this addition on the basis of application of 5% profit on total cost of construction. The Assessing Officer applied 5% profit to work-in-progress which learned CIT(A) deleted by holding as under: 10(5) I have examined the facts and circumstances of the case. I have considered the observations of the Assessing Officer in the assessment order and the submissions of the appellant. The appellant has been consistently following project completion method. The expenses relating to projectsunder construction are accounted for by applying the 'project completion method' under which the entire project cost including direct as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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