TaxTMI 
TaxTMI 
2017 (3) TMI 93
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.....2002. The assessee is a private limited company. A search operation under Section 132 of the Income Tax Act was carried out on 11.06.2002 and consequently notice under Section 158BC of the Income Tax Act, 1961 was served on the assessee on 20.03.2003 requiring it to file return in Form 2B. The assessee filed return on 05.05.2003 declaring "nil" undisclosed income. In the assessment that was completed, apart from other additions, the unexplained credit for 1,17,33,055/-, 10,88,212/- Rs. Rs. being service charges from sister concern of the assessee at Nepal and Rs.22 lakh, being service charges from students were also added towards the income of the assessee. The first appellate authority, after retaining certain additions made by the assess....
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....e assessee. 3. Insofar as the deletion of the unexplained credit of 1,17,33,055/- is concerned, a reading Rs. of the assessment order itself would show that though the assessee had claimed that the said credit balance was from its Nepal company, despite various requests and opportunities provided, the assessee did not produce copies of audited accounts of the Nepal company for each of the years falling in the block period. Despite that, both the first appellate authority and the Tribunal erroneously proceeded on the basis that the assessee had produced audited accounts of Nepal company. 4. Insofar as unexplained credits are concerned, a reading of Section 68 shows that the conditions that are required to be established by the assessee are....
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....nal. 5. Insofar as the deletion of the additions towards service charges from sister concern at Nepal and the service charges from students is concerned, a reading of the impugned orders would show that while the company had initially was following the mercantile system of accounting, the assessee was following cash system, it is by upholding this dual method of accounting that the first appellate authority has deleted the additions and the Tribunal has confirmed it. In the judgment in Keshav Mills Ltd. v. Commr. of Inc.-Tax [1953] ITR 230, the Apex Court has explained the mercantile system of accounting at page 239 which reads as follows: "The mercantile system of accounting or what is otherwise known as the double entry system is oppose....