TaxTMI 
TaxTMI 
1991 (3) TMI 186
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....7,643. 2. That in any case the estimate of sales maintained at Rs. 8 lacs as against sales shown at Rs. 7,61,939 is highly excessive, keeping into view small discrepancy and also the GP rate @ 10 per cent as against 9.5 per cent shown. 3. That in view of the fact that the nature of match box sales was merely on commission basis and the business was also new considering all the facts and circumstances of the case the disallowance of Rs. 44,000 under s. 40A(3) by the A.O. and confirmed by learned CIT(A) is arbitrary, illegal and unjustified. As a matter of fact the payment was also made to genuine party, identity proved and the transaction was genuine and even covered by exceptions as provided under r. 6DD(j). 4. That the various obs....
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....in the account, then it cannot be said as to how much sales without cash memo might have been made by the assessee and not shown in the account. In view of the said fact, we are of the opinion that the ITO was justified in rejecting the accounts and estimating the sales and gross profit rate and the learned CIT(A) was also correct in confirming the said order. The sales shown was Rs. 7,61,939 and the estimated sales upheld by the learned CIT(A) is only Rs. 8 lakhs, which, in our opinion, is not on the higher side. If at all it can be said that it is towards leniency. We, therefore, do not find any justification to interfere with the said estimate. As regards the gross profit rate the assessee himself had shown 9.5 per cent and the Assessing....
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....ly covered under r. 6DD(j) and the addition made by the Assessing Officer and confirmed by the learned CIT(A) was not justified. On the other hand, the learned Departmental Representative relied on the order of the learned CIT(A). 5. After hearing the parties at length on the point, we are of the opinion that the said addition was not justified in the eyes of law. The basic principle behind s. 40A(3) is that people may not dilute the profits by showing false payments in cash to different persons as it becomes difficult to get the said cash payments verified properly. It is towards such contingency that these provisions were introduced in the IT Act. The legislature in its wisdom has framed r. 6DD(j) to dilute the stringency of s. 40A(3) ....
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....ast ground is regarding the addition of Rs. 54,000 out of capital contribution made by the partners in the hands of the firm under s. 68. The brief facts are that the partners of the firm had contributed Rs. 20,000 each in the firm out of which Rs. 26,000 was allowed by the assessing officer treating the same as the original contribution made by the partners towards the business and the rest Rs. 54,000 were disallowed and added in the hands of the firm as an undisclosed income under s. 68. The learned counsel for the assessee has very vehemently stressed that this disallowance is not justified in the eyes of law as at the time when these amounts were contributed, it can by no stretch of imagination be said that these amounts were profits ea....
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....t if there are cash credits in the books of a firm in the accounts of individual partners and it is found as a fact that cash was received by the firm from its partners, then, in the absence of any material to indicate that these are profits of the firm, they cannot be assessed in the hands of the firm though they may be in the hands of the individual partners. Although in the said decision, the Hon'ble Court has held that there was no sufficient evidence to prove the nature and source of the cash credit entries in the books of the firm and thus the addition was sustained. Delhi Bench of the Tribunal in the case of Prem Rice & General Mills vs. ITO had held that the nature of the accounts credited in the names of the partners is nothing but....