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TMI Blog2011 (11) TMI 473X X X X Extracts X X X X X X X X Extracts X X X X ..... cash found during the year, dis-allowance u/s 40A(3) for purchase of wheat in cash, dis-allowance of fright expenses on ground of it being bogus, hence AO rightly made the addition. Addition on account of interest free advance - Held that:- Assessee has failed to justify the advance made to the said party without interest, though he was paying interest on the loans taken by him. The assessee has also failed to demonstrate any business expediency in the matter. Addition rightly made - Decided against the assessee Interest applying rate of interest at 15% as against 18.25% actually paid on account of interest on old loan received from Smt.Shakuntala Devi, mother of karta, HUF - Dis-allowanceSection 40A(2)(b) - Held that:- Assessee failed to file any plausible explanation before the AO as well as before the CIT(A). As the rate of interest as higher in comparison to prevailing market rate of interest at that time dis-allowance made is upheld - against assessee. - ITA No. 1454/CHD/2010, - - - Dated:- 14-11-2011 - H.L. Karwa, Mehar Singh, JJ. ORDER Mehar Singh, Accountant Member 1. The present appeal filed by the Revenue and the Cross Objection filed by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) ITO V Vijay Kumar Kesar (2010) 231 CTR (Chhattisgarh) 165 (iii) Satish Builders V AcIT (2009) 39 ITR EPS 426 (ITAT Delhi) 5. We have carefully perused the facts of the case, rival submissions and the relevant record brought on record. The AO noted in para 2.2 of his order that an inspection of the business premises of the appellant was carried out by a team of Market Committee Officers, Kaithal on 03.05.2006 when unaccounted wheat weighing 4710.71 quintals was found and it was detected that market fee and HRDF was not paid on that stock. In view of these facts, the assessee was asked to explain and to show cause that why the investment in excess stock be not treated as unexplained investment. The assessee in its reply filed on 23.12.2009 before the AO stated that no unaccounted stock of wheat was detected by the market committee officers. There was a difference of opinion between the assessee and the officer of the Market Committee about the levy of the Market Fee. The AO, however, insisted that unexplained stock of wheat was found by the Market Committee Officers during inspection and hence levied compounding fee and penalty etc. The AO held that assessee was hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for transport of wheat from Delhi to Kaithal and Kaithal to Delhi. These facts have been admitted by the AO in the assessment order. In view of these facts, it is held that the AO failed to establish that the said wheat was unexplained or there was any discrepancy in the wheat account. The AO placed reliance only on the declaration of additional income on this account by the appellant during survey. Since the appellant has been able to explain that there was no unexplained stock of wheat, no addition was called for on this account and hence the addition made by the AO is hereby deleted." 8. The CIT(A), after appreciation of the factual matrix of the case and explanation filed by the assessee deleted the impugned addition. 9. In view of the legal and factual discussion, we do not find any infirmity in the findings of the ld. CIT(A) and hence, the same are upheld. 10. The Revenue raised another ground wherein deletion of addition of Rs.60,000/- made on account of low withdrawal for household expenses has been challenged. The ld. CIT(A) deleted the impugned addition by recording his findings in para 8.03 at page 25 of his appellate order, which is reproduced hereunder: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of interest on advance to M/s Preet Service Station for the purchase of petrol pump without appreciating the facts, circumstances, explanations and evidences filed thereof. (b) That without prejudice to above, the appellant disputes the quantum of addition and also the rate of interest so charged as excessive. 5. (a) That the ld. CIT(A) is not justified in partially confirming the disallowance of interest by applying rate of interest at 15% as against 18.25% actually paid on account of interest on old loan received from Smt.Shakuntala Devi mother of karta of HUF/appellant without appreciating the facts, circumstances, explanations and evidences filed thereof. (b) That without prejudice to above, the appellant disputes the partial disallowance of interest of Rs.18,002/- so charged as excessive. 6. That the appellant carves leave to addition, amend or delete any of the grounds of appeal on or before the disposal of the present cross appeal ." 14. In the Cross Objection, the first ground as raised in the form of Ground No. 1(a), the assessee has contended that the CIT(A) was not justified in confirming the addition of Rs.1,00,000/- on account of cash in hand. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Cross Objection stands dismissed. 17. In Ground No.2 as raised in the Cross Objection it was stated by the assessee that the CIT(A) was not justified in confirming the disallowance of Rs.6,16,150/- u/s 40A(3) of the Act. 18. The AO made an addition of Rs.6,16,150/- u/s 40A(3) of the Act as the payment was made in violation of the said provision. The AO has rejected the specious explanation filed by the assessee. It would be pertinent to reproduce the findings of the CIT(A) in the matter: "4.5 The issue is considered. The appellant claimed to have purchased wheat of Rs.3925680/- from M/s Shri Sai Baba Rice Traders, Naya Bazaar, Delhi on 17.4.2006. The payment was claimed to be made of Rs.844934/- through account payee cheque dated 7.3.2007 of SBOP Kaithal. For remaining payment of Rs.3080746/- was explained that wheat was sold through consignee M/s Shri Ganesh Trading Co., Naya Bazaar Delhi and the party was asked to pay the sale consideration of wheat to M/s Shri Sai Baba Rice Traders on their behalf. The AO asked the assessee to give evidence that the above payment was made by account payee cheques but the assessee failed to file any evidence. In order to verify ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... support of its claim that the payment was made through account payee cheques. The AO got the copy of the bank statement of the bank account of the seller wherein the amount of Rs.844934/- was found credited but not the remaining amount of Rs.3080746/-. The appellant filed a copy of its accounts in the books of the said seller and purchaser of wheat and hence there should not be any problem to file evidence such as copy of bank statement of the bank account wherein the said payment was credited or a certificate from the bank. 4.08 The appellant further made an attempt to claim that payments are covered by the exception laid down in clause (i) of Rule 6DD. At the outset, it amounts to admission that the payment was not made through account payee cheques. Further, this plea of the appellant is difficult to appreciate that how the payments made in cash is covered in exception, clause in view of the facts of the case. The wheat was claimed to be purchased on 17.4.06. Payment of Rs.3080746/- claimed to be made in instalments from 3.10.06 to 11.12.06, refer para 5 of the assessment order and balance payment of Rs.844934/- was made by cheque dated 7.3.07 Thus there cannot be said to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification of facts from the transport authority there was wide gap between the wheat claimed to be loaded in a truck and the capacity of that truck as per details reproduced below: Truck No. Inward Outward Wheat claimed to be loaded Loading capacity as per RTA (in qtls.) HR 65-1275 Inward 268 96 HR 64-0706 Outward 30 250 HR 56-0817 Inward 260 68 HR 56-172 Outward 260.45 162 HR 56 427 Outward 251.30 162 HR 56 GA- Outward 219.40 Number not yet allotted 3967 219.40 5.06 The assessee could not explain the position but submitted before the AO that despite all odds, it is not disputed that the wheat was brought and was then sent to Delhi which was not possible without payment of freight. In view of these facts, the AO made an adhoc disallowance of Rs.75000/- out of the total claim of freight expenses of Rs.253407. 5.07 In the written submissions, the appellant instead of establishing the genuineness of freight expenses, to address/rebut the findings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss purposes. The AO placed reliance on the decision of the Hon'ble Punjab and Haryana High Court in the case of CIT V Abhishek Industries 286 ITR 1 (P and H)." 23. The AO noted that there was debit balance of Rs.6 lacs in the name of M/s Preet Service Station, Kaithal. It was found on further examination of the issue that an advance of Rs.5 lacs was made on 15.12.2006 of Rs.1 lac on 19.01.2007 which was outstanding upto 31.3.2007. The AO, after considering the explanation submitted by the assessee, made impugned addition by following the decision of the jurisdictional High Court in the case of CIT V Abhishek Industries 286 ITR 1. Ld. CIT(A) upheld the findings of the AO. 24. We have carefully perused the facts of the case and found that the assessee has failed to justify the advance made to the said party without interest, though he was paying interest on the loans taken by him. The assessee has also failed to demonstrate any business expediency in the matter. Thus, having regard to the fact-situation of the case, we are of the considered opinion that there is no ground for making any interference in the findings of the ld. CIT(A) and the same are upheld. 25. In Ground ..... X X X X Extracts X X X X X X X X Extracts X X X X
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