9911796707
TMI Blog1978 (10) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... d accounted for interest at assessee rate 12 per cent whereas, according to him, he had information that the assessee was charging interest from its constituents at assessee higher rate. Income Nov., 1974, assessee search was conducted in the premises of the assessee firm as well as its partners under s. 132 of the IT Act, in the course of which certain diaries maintained by the Managing Partner of the firm were seized. It was noticed by the ITO that the interest charged by the assessee in the year 1969, in some cases, was as high as 18 per cent. Income this connection, he reproduced in the assessment order the aforesaid entries and observed that it was strange, in the light of the above fact, that the interest accounted for by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onth's interest has been paid. Agreed 18 per cent. 1974 diary : Alleppey Ration Shop + The Chitty amount for the previous two months have not been paid. The party has promised to pay both the instalments together on 1st Sept., But 300 + 300 (Interest) has already been paid. Sd. 28th Aug., 1974. To get from Dwarka Interest for Rs. 250 received on 4th Sept,., 1974. Interest for Rs. 250. 3. Subsequent to the search under s. 132, the assessee made voluntary disclosure for the asst. yrs. 1972-73, 1973-74, 1974-75 and 1975-76. The amount disclosed for 1975-76 was Rs. 2,00,000 in addition to the income disclosed by the books. It was the claim of the assessee that all interest actually received during the year have been faithful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 2,00,000 did not cover the shortfall even it is assumed that the entire interest is not accounted for. In rejecting the assessee's accounts and making the estimated additions, the ITO has assumed that the interest of Rs. 300 + 300 shown under the heading 1974 diary represented the interest for one month, Rs. 300 being the interest accounted for in the books and the other Rs. 300 being interest clandestinely received. Similarly, he assumed that the interest of Rs. 250 and a Rs. 250 receivable from Dwarka as shown income the diary represented Rs. 250 accounted for in the books and Rs. 250 not accounted for. The AAC found that there was absolutely no basis for such an assumption on the part of the ITO as the entries in the diary did not w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee has suppressed interest receipts or how he came to the conclusion that the two entries of interest, namely 300+300 in respect of Alleppey Ration Shop on 28th Aug., 1974 and the two items of Rs. 250 on 4th Sept,., 1974 from Dwarka represented interest relating to one month and that only one of the two items of Rs. 300 and Rs. 250 represented interest accounted for in the books and the other item of Rs. 300 and Rs. 250 represented suppressed interest income. In fact, the entries in the diary do not contain any indication whatsoever, on the basis of which the ITO could have drawn such an inference. Nor has he brought out any other material on the basis of which such an inference could have been drawn. 6. Referring to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 21 per cent based on such calculation for the earlier years, after taking into account the amounts disclosed by the assessee could not be said to be either a proper or a correct method. 8. Another point which was made out by the learned representative of the assessee was that the amounts declared by the assessee under the Voluntary Disclosure scheme were based on investments made by the partners of the assessee firm and not on the basis of actual interest receipts during those years. For this reason, also, it was not correct to work out the average rate of interest for this year on the basis of the voluntary disclosures made during those years. 9. On behalf the Revenue, reliance was placed on the assessment order and the observati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve of the assessee that the working out of average rates of interest on the basis of the disclosures made by the assessee for the earlier years would not represent the correct rate of interest charged by the assessee for those years as the accounts are maintained on the cash basis and secondly as the disclosures were of amounts invested by the partners during those years and not of actual interest receipts to those years. Thus, it would not be correct to estimate the interest income for the year under consideration with reference to such rates worked out by the ITO for the earlier years. As we have pointed out, the ITO has also not brought on record any material to show that the income of the assessee during the year of account was more tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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