TaxTMI 
TaxTMI 
2012 (12) TMI 517
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....ht to have appreciated the fact that the assessee has not provided the details of sales made to the customers who have participated in the scheme and the loss incurred on the sales made." 3. Briefly, the facts are the assessee derived income from trading in jewellery. For the assessment year under dispute, the assessee filed its return of income declaring an income of Rs.9,86,160/-/-. The return was processed u/s 143(1) of the Act. Subsequently, the assessment was reopened u/s 147 of the Act. In course of reassessment proceedings, the AO found that the assessee had shown an amount of Rs.36,61,-16/- as sundry creditors in the balance sheet. The assessee explained that he has floated a lucky draw, monthly gold scheme consisting of 250 members and the scheme is for duration of 20 months. Every member of the scheme participating in this scheme pays an amount of Rs.250/- per month for 20 months and at the end of the completion of the scheme, every member is entitled to gold jewellery worth Rs.5,000/-. The assessee explained that this amount received from the members which have been shown as sundry creditor. The AO rejected the explanation of the assessee on the finding that the as....
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....on, capacity to pay and genuineness of the transaction are in doubt. Therefore, addition under section 68 cannot be made in this case." 7. It is revealed from the ledger account submitted with the paper book that the assessee has disclosed the addresses and telephone numbers of the members in the ledger account. Therefore, the allegation of the AO that the details have not been furnished, cannot be accepted. In view of the aforesaid facts, we find no infirmity in the order of the CIT (A) in deleting the addition made u/s 68 of the Act. So far as scheme loss is concerned, the CIT (A) after examining the accounting entries adopted by the assessee, deleted the addition by observing in the following manner:- "Further, I find that with respect to the accounting entries, the appellant debits the cash account on receipt of monthly instalment and credits the ledger account of the customer. When the jewellery is given, at that point the credits are converted into sales. I see no infirmity in this accounting methodology." 8. After going through the aforesaid finding of the CIT (A), we find no infirmity in the said order. We therefore uphold the findings of the CIT (A) and reje....
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....dated 28-3-2008 by stating that the differential stock was sent for assortment. In course of scrutiny assessment proceedings also the assessee stated that differential stock was sent for assortment and in support of such claim, the assessee submitted a receipt dated 7-9-2007 signed by Satish Kumar G. Shah acknowledging receipt of 58.20 cts., of diaonds from Dinesh Jewellers, Gunfoundry, Hyderabad for assortment and a 'delivery note' acknowledging delivery of diamonds packet of 58.20 cts to M/s Dines Jewellers, Gunfoundary, Hyderabad. The AO issued summons to Sri Satish G. Shah. Shri Satish G. Shah appeared before the AO with his books of accounts and a statement was recorded from him. Sri Satish G. Shah stated before the AO that the said diamonds might have been sent to him, but he might not have done the assortment and hence returned to the assessee without assortment. The AO came to a conclusion that in absence of any entry either in the books of the assessee or in the books of Satish Kumar Shah, the receipt and delivery note is a mere piece of paper. The AO further concluded that the assessee and Sri Satish Kumar Shah made collusive arrangement to give colour to a flimsy transac....
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....ording an opportunity of being heard to the assessee in this regard. 13. Ground Nos. 4 and 5 have been raised challenging disallowance of an amount of Rs.3,60,000/- towards notional interest received on loan advances of Rs.30 lakhs. Briefly, the facts are the Assessing Officer in course of assessment proceedings found that the assessee had advanced loan of an amount of Rs.18,50,000/- to Dinesh Agarwal and Rs.11,50,000/- to Lokesh Agarwal without charging any interest, whersas the assessee paid interest on loans to his family members. Though the assessee stated the said loans advanced were out of own funds and not from borrowed capital, the Assessing Officer did not accept it and charged interest at the rate of 12% on the loan advanced of Rs.30 lakhs and added an amount of Rs.3,60,000/- to the income of the assessee. In the first appellate proceedings, the CIT (A) also upheld the addition. 14. The learned AR for the assessee submitted before us that the assessee has advanced loans of Rs.30 lakhs out of his own surplus capital and not from borrowed capital. Therefore, there should not be any addition. The learned AR further contended that the loans taken from family members ....
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....erial on record. The scheme of the assessee has been noted at para-7.1 of the CIT (A)'s order. The terms and conditions of the scheme have also been extracted at para 7.3 of the order of the CIT (A). Admittedly, the assessee followed mercantile system of accounting. It is the contention of the learned AR of the assessee that at the end of lucky draw scheme, the total amount received from members is converted into sales and taken to the Profit & Loss A/c. Until completion of scheme period, the monies received on monthly basis are credited to the respective customer's accounts as instalment collection and same has been shown as liability/advance sales collection. It is seen from the terms and conditions of the scheme that under no circumstances, cash will be refunded to the member and only gold ornaments will be issued. Therefore, the inference to be made is as soon as the member participates in the scheme and pays instalment money, there is accrual of income to the assessee since the money is not going to be refunded to the member. The member participates in the scheme is only entitled to get gold ornament on completion of scheme. Therefore, it cannot be said that the income has not....