TaxTMI 
TaxTMI 
2009 (6) TMI 658
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.... and had disallowed Rs. 23,100. 5. The appellant had also advanced a loan of Rs. 10,00,000 to Shri Arun Kumar Jain. No interest was credited in books of account on accrual basis. Interest was received in subsequent year and had been disclosed in the return of income. The AO had made addition of interest @ 18 per cent which was reduced to 12 per cent by the CIT(A). The learned CIT(A) after having discussed the facts of the case in his order has sustained the disallowance of interest of Rs. 23,100 in the case of Shri Sanjeev Sarin and also upheld the addition of Rs. 37,480 as accrued interest on loan to Shri Arun Kumar Jain in the hands of the appellant. 6. The learned Authorised Representative admitted that the books of accounts had been maintained on regular basis, but in respect of interest transactions, the system followed was receipt or payment basis. The appellant was ignorant about the amendment brought under s. 145 w.e.f. 1st April, 1997, whereby the assessee was required to follow mercantile or cash system and the assessee had not followed this system of accountancy. The learned Authorised Representative placed reliance on the case of Motilal Padampat Sugar Mills Co. Ltd. ....
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....that during the year, the appellant purchased a plot of land from Smt. Madhu Sood. It was claimed before the AO that the charges for the stamp paper, registry and other expenses to the extent of Rs. 36,010 were incurred by the seller in this case. According to the AO there was no mention in the sale deed of such expenditure having been incurred by the seller. Such claim was also found against the normal conduct between a vendor and vendee. Therefore, the learned AO inferred that such expenditure had been incurred by the assessee out of his unexplained sources and added the same to the income of the appellant. The learned CIT(A) has sustained this addition for the reasons given in his order. 11. Having considered the facts of the case, we find that there was no mention of registration expenses having been incurred by the vendor or by the vendee. In such a situation, the claim of the appellant should have been accepted that these expenditures were incurred by Smt. Madhu Sood. The AO cannot brush aside the assertion of the appellant without bringing any material on record. The AO had not made any enquiry from Smt. Madhu Sood, the seller of the property. In absence of any material bro....
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....er purpose. The assessee's explanation was found to be a handy explanation to support the purchases of the drafts, which came to the notice of the Department after about six months of their purchase. Therefore, the learned CIT(A) sustained the addition made by the AO. 15. The learned Authorised Representative submitted that first of all, the AO had not found any defect in the books of account so as to warrant the invocation of s. 145. Secondly, even if the books of accounts are rejected, the entries in the cash book cannot be disbelieved because s. 145 is invoked for verifiable purchases and sales. The cash book was produced before the AO and the CIT(A). The extracts from the copies of account had also been filed at paper book pp. 25 to 35 with extract of cash book at paper book p. 36. The original cash book was also brought by the learned counsel after quoting from the extract of the statements, which were recorded on 24th March, 1998. The learned Authorised Representative submitted that during the course of statement recorded under s. 132(4), no specific surrender was made. Some relevant replies given are as under: "(i) The ADI enquired about investment and bank accounts. The a....
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.... 16. The learned Authorised Representative submitted that the withdrawals have been made as stated by CIT(A) and as per details at p. 36 of the paper book. In the same para on p. 6, the CIT(A) has stated that the assessee is not expected to keep the money idle so long without any basis. In reply to the last question the assessee had stated that the cash withdrawn was used for drafts deposited with bank. This reply was to specific question to explain the investment of money withdrawn in cash and the information regarding cash withdrawals can only be on the basis of cash book. 17. The learned Departmental Representative relied upon the orders of the lower authorities. 18. We have heard the rival submissions. We have also perused the records. We find that the appellant had purchased the drafts for Rs. 12,33,799 after cash withdrawal from the cash book. The appellant had given specific dates of withdrawals from the cash book and had also explained how the cash was built up in the cash book. The AO has erred in not accepting the claim of the assessee only on the basis that books of accounts have been rejected under s. 145 of the IT Act. The AO had not rejected the cash book. The prov....
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....Rs. 1,30,000 as against Rs. 1,20,214 shown by the appellant. 20. We have heard the rival submissions. We find that the AO had made addition only on the ground that the provisions of s. 145 are applicable. For this reason, he estimated the professional receipts at Rs. 1,30,000 against Rs 1,20,214 and the same had also been confirmed by the learned CIT(A) without going into the merits of the case. First of all, no specific defects had been pointed out in the account books and secondly, there is no basis for estimating the professional receipts at Rs. 1,30,000. The learned AO has neither referred to the past history nor cited any comparable case. Therefore, the learned CIT(A) has erred in confirming the estimation of professional receipts made by the AO. The order of CIT(A) is reversed on this ground and the addition of Rs. 7,986 sustained by him is hereby deleted. 21. Ground No. 6 regarding charging of interest under ss. 234A, 234B and 234C, is consequential. The AO is directed to allow consequential relief. 22. Ground No. 7 is of general nature which does not call for any adjudication. 23. In the result, the, appeal is allowed in part. SMT. DIVA SINGH, J.M.: &n....
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....hat the issue for verification with regard to funds availability in the computerized cash book has been restored in the leading order as observed also accepts the correctness of the stand of the Department in as much as the correctness of the action of the AO to the extent of addition made by him and sustained by the CIT(A). 5. The judgment of the apex Court in the case of Pullangode Rubber & Produce Co. Ltd. vs. State of Kerala & Anr. 1972 CTR (SC) 253 : (1973) 91 ITR 18 (SC) in fact lays down the proposition that no doubt an admission is an important piece of evidence, however, by way of documentary evidence the same can be rebutted. This proposition is an accepted and a settled legal principle but in the facts of the present case it cannot lead to the conclusion that the action of the AO is wrong and as observed since the leading draft order has restored for verification the same has also not doubted the stand of the AO and the CIT(A) in the leading draft order. As such on facts the said judgment is not relevant. 6. The issue in the present appeal is also not in the context of validity of the surrender before the Investigation Wing since whatever may have been the basis for th....
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....s statement before the ADI on 24th March, 1998, it was stated that transactions right from 24th Nov., 1997 to 12th Jan., 1998 in his bank account represented his disclosed income. The present AO has remarked that the AO who was passing the assessment order was justified in rejecting assessee's version that the deposits of Rs. 12,33,799 were out of cash withdrawals from his cash book." 11. The issue was concluded by the CIT(A) in the following manner: "(6.4) The facts and circumstances relating to this objection have been considered and examined. Records of the AO have also been perused. It is noticed that assessee's statement was recorded by the Investigation Wing on 24th March, 1998. On being asked as to what was his source of income in Delhi that he had opened an account in Delhi branch of Nova-Scotia Bank, it was replied that he had no source of income at Delhi but since he wanted to start a clinic at Delhi, he required to transfer money from Jhansi. On being shown the transactions on various dates from 24th Nov., 1997 to 12th Jan., 1998, it was replied in the statement that it related to his declared income. He was also asked about the source of deposit of Rs. 27,53,399 and a....
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....t have been used for some other purpose but found as a handy explanation to support the purchase of the drafts which came to the notice of the Department after about six months of their purchase. By such time neither return for the assessment year i.e., 1998-99 was due nor the books had been closed and audited. Here it may be stated even at the risk of repetition that at the time of appellant's statement before ADI on 24 March, 1998 neither this cash book was produced nor referred. In fact as this could not be explained, it was surrendered on 26th March, 1998. In nutshell, the availability of cash of RE. 12,33,7997 to purchase the drafts is not substantiated by any explained source. The AO cannot thus be said to be at any error to hold that this amount was in fact undisclosed income of the assessee. In the circumstances of the case, no interference is warranted in the conclusion of the AO. Thus, no relief on this account will be admissible to the assessee." 12. On a perusal of the above, it is seen that the stand of the assessee was that these drafts were purchased from the money available to him from his professional practice and also taken on loan. The details from the persons f....
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....n this aspect. Accordingly, in these. peculiar facts and circumstances, I am of the view that it cannot be accepted per se that sufficient funds were available in the cash book especially taking note of the fact that these funds were supposedly available from professional income or loans etc. The existence of the same still needs to be established. This fact first has to be established as the verification as set out in the leading draft order would follow subsequently if the assessee is able to meet the first hurdle. The stand of the assessee throughout the proceedings has to be taken into consideration and finding arrived at thereon only thereafter the drafts deposited to the tune of Rs. 12,23,799 supposedly from the cash book in the Nova-Scotia Bank, Delhi Branch can be accepted on verification. Accordingly, though agreeing with the finding that the issue should be restored for verification, I am of the opinion that it is necessary to restore with the direction to first verify the availability of funds at the relevant point of time in the cash book and thereafter verification as directed in the leading draft order is to be made. 16. Similarly, with respect to ground No. 5, it is....
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....ad been rejected under s. 145 of the IT Act and he thus had made the addition of Rs. 12,33,799. 3. The CIT(A) confirmed the action of the AO. He brought additional reasoning on record that in the computerized cash book, which was shown at the time of assessment proceedings, the opening balance of Rs. 7,04,684 was claimed but the same appeared to have continued till 20th November after which on 24th Nov., 1997, 5th Dec., 1997, 12th Dec., 1997 and finally on 16th Dec., 1997 cash is claimed to be withdrawn from cash book to make various drafts. He noticed that firstly, that no reference was made about cash book withdrawals used (cash) to make the drafts during statement recorded on 24th March, 1998 by the Investigation Wing and secondly it could not be expected that an amount of approximately Rs. 7 lakhs cash claimed to be on the opening day of the year would be idle and intact in the books of account to be used for purchasing bank drafts from such balance in November or December, 1997, i.e., after about eight months. The cash balance must have been used for some other purpose. The assessee's explanation was found to be a handy explanation to support the purchases of the drafts, whic....
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....urchase of drafts was withdrawn from the regular cash book. If he finds that the cash has been withdrawn from the cash book maintained by the assessee before purchase of drafts, no addition is called for. 5. The learned JM observed that the amount of Rs. 12,23,799 on enquiry by the AO was merely from his professional practice and some money taken on loan. The fact that the assessee from its professional income is returning a meager income of Rs. 1,20,214 and Rs. 29,160 from agricultural income also needs consideration; that the details from the persons from whom loans were supposedly taken were never given before the tax authorities; that no details have also been filed before the Bench. Cognizance of these facts as such when taken leads to the conclusion that the availability of funds in the cash book has never been established by the assessee; that accordingly, in these peculiar circumstances it cannot be accepted that sufficient funds were available to the assessee in its cash book at the relevant point of time. The same is still required to be established especially keeping in mind as mentioned earlier that in the year under consideration the assessee had returned a meager pro....
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....ales; that during the course of statement recorded under s. 132(4), no specific surrender was made; that the ADI enquired about investment and bank accounts, the assessee disclosed his account with Nova-Scotia Bank; that the ADI showed a copy of bank account and enquired if it belonged to him, the assessee accepted the account as his; that the ADI enquired whether these transactions were out of declared income or undeclared the assessee replied that those were out of declared income; and that the ADI enquired about other sources of income, the assessee disclosed agricultural income. In spite of the fact that there was complete disclosure of income and sources of income etc., the assessee was asked to come to Agra time and again and the assessee under duress had surrendered the amount through a letter. This so-called surrender on which much emphasis has been laid, has no evidentiary value or binding force as the AO himself did not accept the amount of surrender before the AO and reduced it to Rs. 12,33,999 from Rs. 27,53,993; that the ADI did not find anything adverse, which might have prompted the assessee to make a surrender; that the surrender was not made in the course of any st....
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..... the Board directed in letter F. No. 286/2/2003-IT (Inv.), dt. 10th March, 2003 that no attempt should be made to obtain confession and assessment should be based on the basis of material gathered. On the contrary surrender once made has to be shown as wrongly been made with supporting evidence in view of the Allahabad High Court in (1990) 86 CTR (All) 66 : (1990) 184 ITR 404 (All) holding that erroneous admission by assessee cannot be a foundation for assessment. The assessee stated that the withdrawals have been made as stated by CIT(A) and the assessee had stated that the cash withdrawn was used for drafts deposited with bank. This reply was to specific question to explain the investment of money withdrawn in cash and the information regarding cash withdrawals can only be on the basis of cash book. 10. When a part of the surrender can be accepted on proper explanation the rest can also be allowed to be explained. The assessee's claim that balance was from cash withdrawals from cash book has to be tested on the facts appearing in the case. For that test it would be necessary that cash book be examined. Both Members agree to that effect the AM stating that if cash is found withd....