AI Drafter 
TaxTMI 
TaxTMI 
2010 (1) TMI 1217
X X X X Extracts X X X X
X X X X Extracts X X X X
....y evidences : (i) Cash of Rs. 1 lac received in the business on 20th May, 2004. (ii) Cash of Rs. 2 lacs received in the business on 6th Aug., 2004. (iii) Cash of Rs. 5 lacs received in the business on 5 March, 2005. 4. These deposits were made in the capital account of one of the partner, namely, Shri Gopal Bhasin. The assessee submitted before the AO that partner, Shri Gopal Bhasin had withdrawn certain cash amount from his personal account in his proprietorship firm, which money was introduced towards the capital in the present assessee firm. The assessee furnished the copy of bank passbook, etc. in support of his contentions. However, the AO has treated these deposits as undisclosed cash credit of the assessee firm. 5. On an appeal before the CIT(A), the assessee submitted that Mr. Gopal Bhasin, partner of the present assessee firm was also running a proprietary concern in the name and style of B2B Connectors, where from he had withdrawn cash amounts and deposited the same in the present partnership firm. Relevant extract of the cash book of proprietary concern namely B2B Connectors, alongwith other papers were furnished before the CIT(A), where ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssee's case is covered by the exception provided under r. 46A(1) to admit the additional evidences filed before the CIT(A). He, therefore, admitted the additional evidences, which were adduced by the assessee at the appellate stage and considered them for deciding various additions made by the AO. 7. After considering the assessee's explanation and the remand report, the CIT(A) found that the assessee has been able to give satisfactory and reasonable explanation as to the source of deposit made by the partner, Shri Gopal Bhasin. The CIT(A)'s operative order on this issue runs as under : "I may revert to the issue of addition made under s. 68 to the tune of Rs. 8 lacs. I have gone through the order of the learned AO, the submissions made by the assessee as well as the remand report filed by the learned AO. The stand of assessee is that the partner of the assessee has introduced the amount of Rs. 8,00,000. The partner Shri Bhasin was also running a proprietary concern is the name and style of B2B Connectors from where he had drawn cash amount and introduced the same in the appellate firm. From the books of M/s B2B Connectors, it is observed that the following ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f Rs. 1 lac, Rs. 2 lacs and Rs. 8 lacs on 20th April, 2004, 6th Aug., 2004 and 5th March, 2005 from his proprietary concern and deposited the same in the partnership firm on 20th May, 2004, 6th Aug., 2004 and 5th March, 2005, respectively. It is not the case of the AO that the amount withdrawn by the assessee from the proprietary concern has been otherwise used and utilized for some other purposes. We are, therefore, inclined to uphold the order of the CIT(A) in deleting the addition of Rs. 8 lacs on account of deposits made by Shri Gopal Bhasin, partner of the assessee firm. Thus, this ground raised by the Revenue is rejected. 11. Next issue is with regard to the addition of Rs. 26,39,294 made by the AO on account of bogus purchases. 12. From the examination of the books of account produced during the course of assessment proceedings, it was observed by the AO that in respect of few parties, most of the payments on account of purchases made by the assessee were made in cash. According to the AO, this system was not in conformity with the normal practice followed by the assessee, when most of the payment were made through banking channels. The AO, therefore, asked the assesse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mand report the AO has not commented adversely, in respect of the various letters and confirmations filed by the assessee. 18. The CIT(A)'s order on this issue runs as under : "32. In the remand report dt. 5th Feb., 2009, it has been submitted by the learned AO as under : 'Addition of Rs. 26,39,294 on account of bogus purchases : The AO made this addition due to non submission of details and confirmation in spite of specific request and also observing that payments for purchase made in cash are below Rs. 20,000 to avoid appeal provisions of s. 40A(3). The issue of admissibility of additional evidences has already been discussed above.' "In the rejoinder filed on 9th March, 2009, the assessee has stated that as the AO has conceded on the issue, the addition should be deleted. I have carefully gone through the order of the learned AO and the submission filed in the remand report dt. 5th Feb., 2009 by her, as also the submissions made by the assessee insofar admission of additional evidences is concerned. I have carefully taken the same on record for the reasons cited in para 9 above. Perusal of the impugned assessment order ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 9,15,916.94 January 9,15,916.94 February 30,662.25 9,46,579.19 March 9,46,579.19 22. The AO has taken a view that these advance amounts received by the assessee have neither been returned nor any goods supplied. The AO, therefore, treated the same as liability no longer required to be paid by the assessee. The AO, therefore, made the addition of Rs. 9,46,579. 23. On an appeal, the CIT(A) deleted the addition. 24. The CIT(A) observed that there was an opening balance in respect of the said party as on 1st April, 2004 amounting to Rs. 9,15,916.94, and in the month of February, 2005, the assessee received further sum of Rs. 30,662.25, taking the aggregate amount of advance to Rs. 9,46,579. The CIT(A) has made a reference to the decision of Tribunal, in the case of Shri Vardhman Overseas Ltd. vs. Asstt. CIT (2008) 24 SOT 393(Del), where it was held that the genuineness of the advances can only be examined in the year, in which they were credited in the accounts of the assessee. The following observation of the Tribunal was taken into consideration by the CIT(A) : "13. Accordi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nal evidence, for the reason given in para 9 above and that the learned AO in the remand report has also not disagreed or objected to the assessee's version, the addition to tune of Rs. 9,46,579 is deleted. The assessee succeeds in ground of appeal No. 2(7)." 26. We have heard both the parties and have carefully gone through the orders of the authorities below. 27. It is not in dispute that the assessee has shown the amount of Rs. 9,46,579, in the balance sheet, being the amount payable by the assessee against the advance received from the concerned party viz., BHP Industries Ltd. The assessee has not written off this amount in the books of account. The assessee has acknowledged the liability by showing same in the balance sheet. The AO has not brought any material on record to show that the liability, which is appeared in the balance sheet, has actually been ceased and it is no longer payable by the assessee. Merely because no confirmation has been filed by the assessee during the year under consideration, it by itself cannot be a basis that this liability is no longer payable by the assessee. We, therefore, uphold the order of the CIT(A) in deleting the addition. Hence,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lhi Tribunal and therefore, the exception to the principle of consistency would have to be followed as held in Dabur India Ltd. vs. CIT (2008) 219 CTR (Del) 152: (2008) 13 DTR (Del)34. Thus, the assessee fails in ground of appeal No. 2(5). The addition of Rs. 6,97,440 is upheld." 32. We have heard both the parties and have carefully gone through the orders of the authorities below. 33. It is not in dispute that the assessee has been following mercantile system of accounting. Sec. 145(1) as amended by the Finance Act, 1995 w.e.f 1st April, 1997, provides that it is upon the assessee to follow either cash or mercantile system of accounting. In other words, mixed or hybrid system of accounting as stood prior to the amendment has not been recognized for the purpose of assessment under the IT Act after 31st March, 1997. It is, therefore, clear that if any income is accrued to the assessee in any assessment year as per the method of mercantile system of accounting regularly followed by the assessee, the assessee is bound to account for same in the return of income and cannot embark upon the reasons that it is to be included only on cash basis. Following mercantile system of account....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o Care (P) Ltd., while as per provisions of s. 194C of the Act, the assessee was required to deduct the TDS on the payment paid to the above named freight contractor. The AO stated that since the assessee has failed to deduct the TDS on the payment made to the contractor under s. 194C of the Act, the corresponding expenditure is not liable to be allowed as deduction as per the provisions contained in s. 40(a)(ia) of the Act. 40. On an appeal, the CIT(A) confirmed the AO's action by observing as under : "25. Turning to the facts of the case, it is undisputed that the assessee has made payment to M/s Committed Cargo Care (P) Ltd. The payment was of Rs. 4,80,981. It is also undisputed that the assessee had to deduct tax under s. 194C. The assessee had not deducted tax under s. 194C during the financial year. On 9th March, 2009, the assessee has stated that tax has been deducted and payment has been made to the Government Exchequer. A perusal of the counter foil submitted on 9th Sept., 2009, it reveals that a sum of Rs. 10,899 has been tendered on 3rd March, 2009 (financial year 2009-10) and not during the financial year 2004-05. Further the assessee had taken the stand....