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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 ..... he grounds of appeal before the appeal is heard or is disposed of." 3. The facts are that the appellant is engaged in the trading of Bardana, jute yarn and foodgrains under the name and style of M/s Ram Nath Rajesh Kumar, Kaithal. A survey action u/s 133A of the Income-tax Act was carried out at the business premises of the appellant on 26.03.2007. The appellant, declared additional income of Rs.39 lacs to cover up the discrepancies in the wheat account and Rs.1 lakh on account of excess cash found during survey. The appellant also deposited advance tax amounting to Rs.13 lacs on the additional income declared during the survey. He, however, did not disclose this additional income of Rs.40 lacs in the return of income for the year under consideration i.e. A.Y. 2007-08. The reason thereof was stated that there was no discrepancy in the wheat account. The plea of the appellant was, however not found tenable by the AO, in view of the fact that the appellant clearly admitted discrepancies in the wheat account and excess cash of Rs.1 lakh and surrendered the same as his additional income during survey. 4. The ld. 'DR' referred to para 2.1 of the appellate order passed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... making addition without bringing any credible and cogent evidence on record. This is a settled position of law that any addition made by the AO should be based on relevant and material evidences and not on the basis of inferences and surmises. In the present case, the AO has failed to bring on record any material to support his conclusions. 7. The findings of the CIT(A) based on appreciation of the submissions filed by the assessee before him are reproduced hereunder: "The issue is considered. To summarize the facts, a survey u/s 133A was carried out at the business premises of the appellant. During survey, on examination of stock register of wheat, it was noted that there was an inspection by the officers of the Market Committee at the business premises of the appellant on 3.5.2006 in which unexplained stock of wheat was claimed to be detected. The appellant, however, claimed that no unexplained stock of wheat was detected but the issue was that the officers of the Market Committee was of the view that the market fee was leviable on the wheat purchased from Delhi, whereas it was of the opinion that no market fee was leviable on this wheat being the same was purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... naccounted on the part of the assessee or the AO has not brought any material on record to justify his conclusions for making addition. Further, the findings of the CIT(A) are categorical as far as making addition in the proper status. In view of this, the above findings of the CIT(A) are upheld. 12. In view of the above discussions, the appeal of the Revenue is dismissed. 13. In Cross Objection, the assessee has raised the following Grounds of Appeal: "1. (a) That the ld. CIT(A) is not justified in concurring with ld. AO in confirming addition of Rs.1,00,000/- on account of cash in hand without appreciating the facts, circumstances, explanations and evidences filed thereof. (b) That without prejudice to above, the appellant disputes the quantum of addition as excessive. 2. (a) That the ld. CIT(A) is not justified in concurring with ld. AO in confirming the disallowance of Rs.6,16,150/- by applying the provisions of Section 40A(3) of the Income-tax Act,1961 without appreciating the facts, circumstances, explanations and evidences filed thereof. (b) That without prejudice to above the appellant disputes the quantum of addition as excessive. &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that the AO had validly made the addition which was upheld by the CIT(A). In this context, the findings of the CIT(A) as contained in para 3.06 are reproduced hereunder: "In view of the statement of the appellant recorded during survey, it is noted that cash of Rs.1,06,400/- was found as against the cash as per cash book of Rs.7913/-. This fact was confronted to the appellant and he was requested to clarify the position. The appellant declared excess cash of Rs.1 lakh as an additional income. The same was, however, not taken in the return of income. During the assessment proceedings the appellant came out with a new story that the excess cash was due to the advance received from one Shri Harish Kumar as a result of agreement of sale of its Maruti car. The deal was not materialized and the amount was claimed to be returned to that fellow. The said advance was claimed to be received in the morning on the date of survey. It is difficult to appreciate that when the said amount was received in the morning of the date of survey itself, the appellant should have been able to tell this fact during the survey, instead of declaring the same as his additional income. Apparently, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 40A(3) of the Act. The assessee in his reply dated 17.12.2009 reiterated the submissions already made but no evidence was filed in support of this claim. The AO therefore held that payment of Rs.3080746/- was made by the assessee otherwise than by account payee cheque in violation of provisions of Section 40A(3) and disallowed 20% of this payment resulting in an addition of Rs.6,16,150/- on this account. 4.6 The appellant stated that the sale consideration of wheat was diverted to make payment of purchase of wheat to avoid the delay. The appellant also claimed that it was liable to pay interest to seller, if the payment was cleared after many days. The appellant further referred to the proviso of Section 40A(3) and claimed that its case is squarely covered by the exception laid down in Section 40A(3) in the form of 'consideration of business expediency and other relevant factors'. The appellant also stated that the payments are also covered by the exception laid down under clause (i) of Rule 6DD which is as under, "Where the payment is made by any person to his agent who is required to make payment in cash for goods or services on behalf of such person". 4.7 The su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... modus-operandi, demonstrated by the assessee in making the payment is not reliable hence validly rejected by the lower authorities. We do not find any infirmity in the findings of the CIT(A), hence the same are upheld. 20. In Ground No.3, the assessee pointed out that CIT(A) was not justified in concurring with the AO in confirming the disallowance of Rs.75,000/- on account of freight expenses. The findings of the ld. AO clearly reveal that freight expenses claimed by the assessee were bogus. The CIT(A), after examining the issue, upheld the addition of Rs.75,000/- made by the AO. The findings of the CIT(A) are reproduced in para 5.05 to 5.07 of the order, which is reproduced as under: "5.05 The issue is examined. The appellant claimed that wheat weighing 4710.78 qtls. were purchased from Delhi and claimed to have sold the same in Delhi. The appellant as such would have transported wheat from Delhi to Kaithal and Kaithal to Delhi. GRs of bringing the wheat from Delhi to Kaithal were found and impounded during survey. For verification of claim, a letter was sent to the said transport company at the address mentioned in the GRs but the registered letter was received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Consequently, under such peculiar fact-situation of the case, no interference in the findings of the CIT(A) is called for. Hence, this ground is also dismissed. 22. In Ground No.4, the assessee contended that CIT(A) erred in confirming the addition of Rs.19,867/- on account of interest on advance to M/s Preet Service Station for the purchase of petrol pump without appreciating the facts of the case. The findings of the CIT(A) in the matter, as contained in para 6.05 are reproduced hereunder: "6.5 The issue is examined. During the assessment proceedings, the AO noted that there was a debit balance of Rs.6 lakh in the name of M/s Preet Service Station Kaitha. On further examination, it was noted that advance of Rs.5 lakh was made to the party on 15.12.2006 and Rs.1 lakh on 19.1.2007 which remained outstanding upto 31.3.2007. The assessee was asked to state the purpose of advance and to explain the reasons for not charging the interest on these advances, specifically when it paid interest to the bank and other parties from whom the loans were taken. The assessee submitted that the advance was made for purchasing the pump but due to differences, the deal was not matu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... giving any security. The plea of the assessee was rejected by the AO since loan was available in the market at lower rate i.e. 15% and disallowed the interest paid in excess of this rate of interest. In the written submissions the appellant submitted that the prevalent market rate of interest was 19.8% in the relevant year but without bringing any evidence in support of this claim on record. The plea of the appellant is, therefore, not tenable. Disallowance out of interest made by the AO is, therefore confirmed."
26. A perusal of the facts of the case, it is evident that the AO disallowed the impugned interest within the meaning of Section 40A(2) (b) of the Act. The AO considered the rate of interest as higher in comparison to prevailing market rate of interest at that time. The assessee failed to file any plausible explanation before the AO as well as before the CIT(A). In view of this, we do not find any infirmity in the order of the CIT(A) and hence, the same are upheld.
27. In the result, the appeal of the Revenue as well as Cross Objection of the assessee are dismissed.
Order pronounced in the Open Court on 14.11.2011. X X X X Extracts X X X X X X X X Extracts X X X X
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