2011 (9) TMI 610 - HC - Income Tax

Addition - Assessing Officer has categorically stated in his order that in the absence of any clarification he is left with no option except to treat the sum of Rs. 40.00 lacs Rs. 31.50 lacs to have been paid out of books from the income not disclosed was not perverse - assessing officer has not pointed out as to what happened to Rs. 40 lac which were earlier appearing in the balance sheet. If the said sum has been transferred to the head Unsecured Loan , obviously Rs. 40 Lac is a part of Rs. 1 crore only - It is merely adjustment of entries i.e transfer of the figure from one head to another head - assessee has only figured out the entire share application money to another head during the financial year 2001-02 - Decided in favor of the assessee. Addition on account of unexplained expenditure - held that - Rs. 1,86,260/were recovered from the cashier and if Rs. 75,000 is added which was the amount used for purchase of demand draft, the shortage of Rs. 2,61,260 stands explained. The amount was taken by the cashier during the assessment year under consideration and the same was duly shown as shortage in the cash chest. Since the figure tallies, there is no reason to reject the assessee s explanation out rightly.

Summary

Issues Involved:
1. Interpretation of findings regarding addition of difference in opening and closing balances in the assessment year.
2. Examination of unexplained expenditure on the purchase of demand draft.
3. Assessment of discrepancies in fuel expenses and consumption of HSD and paddy husk.

Interpretation of Findings on Opening and Closing Balances:
The department filed an appeal under Section 260A of the Income Tax Act, 1961 against the Tribunal's decision for the assessment year 2003-04. The dispute centered around the difference in opening and closing balances in the company's accounts. The appellant argued that the explanation provided by the assessee was unsatisfactory and lacked supporting evidence. However, the respondent contended that the amounts were consolidated for convenience and no income was suppressed. The High Court examined the records and concluded that the addition made by the Assessing Officer was based on presumption without substantial evidence. The Court upheld the Tribunal's decision, ruling in favor of the assessee.

Examination of Unexplained Expenditure on Purchase of Demand Draft:
The second issue revolved around the addition of Rs. 75,000 as unexplained expenditure on the purchase of a demand draft. The appellant claimed that the amount was used to buy a demand draft but was not debited in the cash book. The respondent argued that the amount was recovered from the cashier and accounted for, thus no loss was incurred. The Court concurred with the Tribunal's decision, stating that the figure tallied and there was no reason to reject the assessee's explanation. The order was upheld in favor of the assessee.

Assessment of Discrepancies in Fuel Expenses and Consumption:
The final issue concerned discrepancies in fuel expenses, specifically regarding High Speed Diesel (HSD) and paddy husk consumption. The Assessing Officer added Rs. 17,18,894 due to discrepancies in the accounts. The appellant contended that the figures provided by the assessee were incorrect and purchases were made outside the books of accounts. However, the respondent argued that the quantities were reconciled and verifiable from the ledger. The Court noted that the A.O. made additions on an estimate basis without concrete evidence. As the quantities were reconciled with voucher support, the Tribunal's decision was upheld in favor of the assessee. The appeal filed by the department was dismissed by the Court.