TaxTMI 
TaxTMI 
2010 (10) TMI 531
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....Assessing Officer noticed that the books of account of the assessee-company disclosed that it had received an approximate amount of Rs. 90 lakhs as "security deposit" from some of the distributors towards wooden crates and bottles. Though there are several distributors to the assessee-company, the Revenue has entertained a doubt in regard to eight distributors on the ground that they are all fictitious persons and also on the ground that some of them are relatives of the directors of the assessee-company, some of them are retired employees of the assessee-company and some of them are employees. Based on the same, the amount of Rs. 90 lakhs received under the head "Security deposit" was treated as income of the assessee. Similarly, the Assessing Officer has deleted the expenditure claimed by the appellant under the head "Bottle breakage" amounting to Rs. 3,98,012 and also a sum of Rs. 4,37,571 claimed as deduction on account of damage caused to the wooden crates and the cost of repairs. Accordingly, these deductions were not accepted and they were treated to be capital expenditure and the same was disallowed. An order of assessment came to be passed on March 7, 1996. 3. Ag....
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....essee in a sum of Rs. 90 lakhs under the head "Security deposit" towards bottle from eight distributors passed by the Assessing Officer has been erroneously reversed by the Commissioner of Income-tax (Appeals) and further confirmed by the Income-tax Appel- late Tribunal. According to him, the assessee has got more than 100 distributors and all of them have furnished the "security deposit" towards bottles and wooden crates. The Revenue has accepted the returns filed by the assessee in regard to the deposit made by most of the distributors except the eight distributors on the ground that those eight distributors are not at all doing any business and that they are the kith and kin of the directors of the assessee-company and some of them are retired employees and some of them are employees. Therefore, the amount of Rs. 90 lakhs shown in the "security deposit" towards bottles is fictitious in nature and that the findings of the Assessing Officer are based on facts and therefore the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal could not have reversed the well reasoned order of the Assessing Officer. In the circumstances, he requests the court to allow the a....
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....s as security deposit or not. Without verifying the books of account of those eight distributors, only on the ground that some of them are relatives of the directors of the assessee-company and some of them are retired employees of the company and some of them are employees of the company, the Assessing Officer could not have added Rs. 90 lakhs as an income of the assessee during the relevant assessment year. He further contends that if a distribution is given to the relatives of the directors of the assessee-company or to the retired employees or to the employees, it is not for the Revenue to contend that there was no real transaction between the assessee and those eight distributors, which could have been cross-checked or verified by the Assessing Officer by looking into the business transaction of the assessee and also that of the eight distributors. In the absence of non verification of the books of account of those eight distributors, who are also assessees under the Income-tax Act, the findings of the Assessing Officer have to be considered perverse and not based on proper appreciation of records. In the circumstances, he contends that the Commissioner of Income-tax (Appeals)....
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....above, it is clear that the assessee has made a categorical statement that the income earned by those eight distributors is enjoyed by them only and the quantum of deposit would vary and depends upon the actual business of each of the distributor. Then again on January 24, 1996, the assessee has furnished the details of income-tax returns filed by those eight distributors. These facts are not in dispute. If the eight distributors are considered as benamis of the assessee by the Revenue, in all fairness, it was for the Revenue to find out whether really those eight distributors have done business in their individual names and whether the assessee has supplied the beverages to those eight distributors and if it is supplied, what is the total quantity of beverages supplied by the assessee and the total turnover in that particular year, in order to find out whether those eight distributors could pay a security deposit of Rs. 90 lakhs as contended by the assessee and if they are assessed to tax and in the books of account of those eight distributors, the amount of Rs. 90 lakhs is reflected under the head "Security deposit" towards bottles and wooden crates, the case of the Revenue canno....