TaxTMI 
TaxTMI 
2010 (10) TMI 686
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.... the profit and loss account filed along with the return of income assessee has included this income as other income under the head "Income disclosed in survey". During the course of survey cash of Rs.5,62,200 was found in the premises which was duly inventorised. Partner of the assessee firm had explained the cash found during the survey as belonging to various sister concerns of the firm. Cashbooks of all these concerns were examined during the survey and cash found was explained. During the course of assessment books of accounts of the assessee were examined. It was observed that the assessee has deposited the sum of Rs.50 lakhs in the cashbook on 8.3.2005 as income disclosed during survey. On 12.3.2005 and 14.3.2005 assessee has deposited cash of Rs.15,00,000, Rs.8,00,000 and Rs.17,00,000 in the bank. The assessee has disclosed the additional income during survey as additional profits during the year. No excess cash was found during the survey operations from any of the business premises of assessee firm. From the date of survey to the date of cash deposits in the bank, assessee's sale proceeds are not to the tune of Rs.50 lakhs. Therefore, the assessee was asked to explain as ....
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....ore CIT(A) it was submitted that the additional income surrendered during the course of survey was generated out of profit of business of export of readymade garments which is the only source of income of the assessee., Since the amount of Rs.50 lakhs has to be treated as business income the assessee is entitled to remuneration of the partner on this amount. It was further submitted that the Assessing Officer's reasoning is contrary. 6. However, the CIT(A) was not convinced with the explanation given by the assessee. Relying on the decisions of the Hon'ble Punjab and Haryana High Court in the case of National Legguard Works vs. CIT and Anr. Reported in 288 ITR 18 and the decision in the case of Sarla Handicrafts Pvt. Ltd. vs. Addl. CIT reported in 296 ITR 94, he held that the income surrendered during the course of survey has to be treated as "Income from other sources" and the assessee is not entitled to get remuneration to partners on this income. Aggrieved with such order of the CIT(A), the assessee is in appeal before us. 7. The learned counsel for the assessee referring to the copy of the assessment order and the statement given by the partner during the course....
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....to the decision of the Hon'ble Calcutta High Court in the case of CIT vs. Margaret's Hope Tea Co. Ltd., reported in 201 ITR 747, he submitted that the Hon'ble High Court in the said decision has held the cash credits appearing in the books of the assessee as income of the assessee company from its tea business. Referring to the decisions relied on by the CIT(A), he submitted that those decisions are relating to deduction u/s. 80HHC and not on business income. He submitted that the assessee is in business and has got no other source of income. The very basis of the statement of the assessee declaring additional income is on account of suppressed profit, therefore, the additional income surrendered during the course of survey has to be treated as business income and the assessee is entitled to remuneration of partner. 8. The learned DR, on the other hand, while supporting the order of the Assessing Officer and the CIT(A) submitted that the assessee during the course of survey has declared only additional income and has never said it is from business income. Referring to page 8 of the order of the CIT(A), he submitted that the CIT(A) has given a finding that the entire turnove....
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....the firm M/s. Ramlord Apparels shall be paying additional advance tax on a sum of Rs.30 lacs in addition to the sum of Rs.64 lacs estimated earlier and partners shall pay additional advance tax on a sum comprising of interest and salary amounting to Rs.20 lacs in addition to the sum of Rs.86 lacs estimated earlier. 10. We further find that the Assessing Officer in the assessment order itself has given a finding that the assessee has been declaring income from the activity of manufacture of garments over the last so many years and the assessee in the course of survey has offered the additional income of Rs.50 lakhs from its garments business. The relevant portion of the Assessing Officer's order in page 2 reads as under: "Reply of the assessee is carefully considered and was not found acceptable. There is no dispute in the fact that assessee has been declaring income from the activity of manufacture of garments over last many years. There is also no dispute in the fact that during the course of survey assessee has offered an additional income of Rs.50 lakhs from its garments business. The same amount was credited in the cash book of assessee on 8.3.2005. .... "  ....
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.... carried forward. The assessee, according to the ITO, did not comply with his requisition for proving the nature and source of the cash credit account, though, however, it was lastly claimed to have been the amount of one M/s Hukumchand Santalal, P.O. Soneda, Darjeeling, who admitted this by letter dt. 25th Feb., 1977, and also supplied the ITO with a copy of the details and payments in that account from 1st Jan., 1973, to 31st Dec., 1973. The ITO found discrepancies in the accounts while tallying the parties statements with the assessees accounts. The said party was not an income-tax assessee and, in those circumstances, the ITO held that the party had no creditworthiness and, secondly, the assessee failed to prove the nature and source of the cash credit. In the circumstances, the ITO took the peak credit of the incoming and outgoing of the cash which was calculated at Rs.1,28,369 and the said amount was treated as assessed income from undisclosed sources. 13. The CIT(A) following the decision of Calcutta High Court in the case of Daulatram Rawatmull directed the Assessing Officer to treat such cash credit as secret income of the assessee from tea business. On further app....
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....ed. 17. Grounds of appeal No. 4 and No. 6 are as under: 4. The CIT(A) erred in sustaining the addition of Rs.58,48,912/- under section 40(a)(ia) of the Act. 6. Without prejudice and in any event, as a result of his sustaining the addition in (4) hereinbefore under section 40(a)(ia), the CIT(A) erred in not directing the AO to consequently and correspondingly enhance the deduction pertaining to partners' remuneration under section 40(b). 18. Facts of the case, in brief, are that on going through the details and the copies of TDS certificates filed, the Assessing Officer noted that in case of certain payments the TDS has not been made as per law. The total of such payments came to Rs.77,95,501. Since the assessee has made the TDS payments beyond the stipulated date i.e., paid to the Government in the subsequent year and after the expiry of time given in section 200(1) the Assessing Officer held that in view of provisions of section 40(a)(ia) such expenses have to be disallowed. He accordingly disallowed an amount of Rs.77,95,501 and added to the total income of the assessee. He, however, held that since the assessee made the payment in the subsequent y....
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....uction pertaining to partners remuneration u/s. 40(b) of the Act. 21. The learned DR, on the other hand, submitted that the assessee during the course of hearing before the CIT(A) has admitted the disallowance to the tune of Rs.58,48,912. Therefore, the order of the CIT(A) to this extent has to be upheld. As regards the submission of the learned counsel for the assessee that the provisions of section 40(a)(ia) have been amended he submitted that the same is applicable from 1.4.2010. This amendment cannot be applicable to pending assessments nor can be held as retrospective since it is not curative. As regards the submission of the learned counsel for the assessee that in case the addition of Rs.58,48,912 is upheld the same should be allowed for the purpose of higher remuneration to the partners, he submitted that it is not possible because remuneration to partners has to be allowed on book profit only. He accordingly relied on the order of the CIT(A). 22. We have considered the rival submissions made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also gone through the decision....
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....CIT(A) on this issue. 23. As regards the alternate contention of the learned counsel for the assessee that enhanced remuneration to partners should be allowed in case the disallowance of Rs.58,48,912 is upheld, we do not find any merit in the same. Remuneration to partners has to be computed on the basis of the book profit declared by the assessee subject to the conditions prescribed u/s. 40(b) of the Act. Enhanced remuneration to partners cannot be allowed on the basis of any addition/disallowance made in the assessment order. Therefore, we do not find any merit in the alternate contention of the learned counsel for the assessee. The above grounds by the assessee are accordingly dismissed. 24. In grounds of appeal No. 7 the assessee has challenged the order of the CIT(A) in confirming the disallowance of depreciation of Rs.1,10,773 on motorcar and disallowance of vehicle expenses of Rs.50,000 made by the Assessing Officer on account of personal use of such vehicles. 25. We find the Assessing Officer disallowed an amount of Rs.1,10,773 being 20% of the depreciation on motorcar claimed at Rs.5,53,867. Similarly he disallowed an amount of Rs.50,000 out of vehi....