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TMI Blog2012 (7) TMI 333X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 5,29,919 as per bills unearthed and impounded in the course of survey were nothing but estimates as contended or to disprove Revenue’s finding that they were contract receipts not accounted for - assessee’s ground is dismissed. Addition on account of excess of assets over liabilities - Assessing Officer had examined the account extracts of the assessee in the books of ISKON Temple and clearly established that the assessee’s claim that an amount of Rs. 29,326 was due by it to ISKON was not backed by any material evidence or documentary proof – Held that:- Assessee has not brought on record any documentary evidence to contradict Revenue’s finding on this issue – Against assessee Addition as unexplained cash credit under section 68 of the Act - credits in the capital account of partners of the assessee firm - Held that:- While the identity of the creditors, i.e. the partners, is proved, the transactions remain unexplained in the hands of the firm and he was of the view that the credit worthiness and genuineness of the transaction was not proved in the absence of any plausible explanation - assessee has failed to discharge its burden to prove and establish with documentary ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clared by the assessee : i) Disallowance of excess claim of wages Rs. 1,88,919 ii) Disallowance of wages as not incidental to business Rs. 50,000 iii) Disallowance under section 40A(3) Rs. 65,000 iv) Addition towards contract receipts not accounted Rs. 5,29,919 v) Excess of assets over liabilities Rs. 29,326 vi) Unexplained cash credits under section 68 Rs. 8,10,000 Rs. 16,73,164 3.2 The assessee went in appeal against the order of assessment before the CIT(A). The learned CIT(A) disposed of the appeal by order dt.19.3.2010 confirming in toto the addition / disallowance at S.Nos.(i), (ii), (iv), (v) and (vi) and allowing the assessee only marginal relief of Rs.5,981 from out of the disallowance of Rs.65,000 u/s.40A(3) of the Act. 4.1 The assessee is now in appeal before us against the order of the learned CIT(A). 4.2 The grounds raised by the assessee in the appeal are as under : 1. The order of the CIT(A), in so far as it is against the interests of the appellant, is opposed to law and facts of the appellant s case. 2. The CIT(A) erred in confirming the disallowance of Rs. 188819 under the head wages disregardin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.O. came to the view that payment of wages to the extent of Rs.8,06,140 as reflected in the cash book were genuine entries and the balance of Rs.1,88,919 being unsubstantiated vis- vis contract work and the cash book, disallowed the same. The A.O. made a further adhoc disallowance of Rs.50,000 out of wages of Rs.8,06,140 as he found that they were not properly vouched, no wages register, rate of wages, working days etc was maintained. The learned CIT(A) in his order confirmed the disallowance of Rs.2,38,919 (Rs.1,88,919 + Rs.50,000) made by the Assessing Officer. 6.3 The learned counsel for the assessee submitted that during the relevant period, the assessee had debited an amount of Rs.9,95,059 in its profit and loss account as payment of wages to labour. It was further submitted that in the course of assessment proceedings, the Assessing Officer had examined the assessee s books of account and on finding that the amount reflected in the cash book was Rs.8,06,140 brought the difference of Rs.1,88,919 to tax in spite of the assessee furnishing an explanation that the figure was wrongly given by them due to some problem in the computer and submission of a revised statement of wage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) on this issue and confirm the disallowance of Rs.1,88,919 on account of excess wages claimed. 6.6 In respect of adhoc disallowance of Rs.50,000 as being not incidental to the assessee s business, we find that this disallowance appears to have been made out of Rs.8,06,140 which the A.O. himself has held to be the actual payment of wages reflected in books of account as against the deduction claimed towards wages payment of Rs.9,95,059 at many places in the order of assessment. It is also common knowledge that the practice in the line of business of petty contracts is that labourers generally have to be paid in cash on a daily or weekly basis in the course of work. We are of the view that if at all the A.O. had to make disallowances on this account, it should have been on specific instances when payments were not made. On the one hand to hold that the wage payments to the extent of Rs.8,06,140 were actual payments and then to go on to make an adhoc disallowance merely stating that they are expenses not incidental to the assessee s business in our considered view is certainly not called for as the A.O. has not established that it is so. In this view of the matter, we delete t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to make payments only in cash as the circumstances would so warrant. Though making such payments in cash contravene the provisions of the Act, the assessee would be forced to oblige the drivers requests in exceptional circumstances. Rule 6DD (g) reads as under: 6DD(g) - where the payment is made in a village or town, which on the date of such payment is not served by any bank, to any person who ordinarily resides, or is carrying on any business, profession or vocation, in any such village or town. A perusal of Rule 6DD(g) indicates clearly that it would not come to the assessee s rescue as the assessee place of business is Hubli which has the branches of all leading banks. However, taking into account the peculiar circumstances under which the assessee was placed and also in conformity with the finding of the co-ordinate Bench of this Tribunal in the assessee s own case for the A.Y. 2004-05 (supra) and the case of M/s. Haryana Plywood (supra), we are of the considered view that the assessee was placed in exceptional circumstances to make cash payments to the extent of Rs.2,95,096 and the authorities below were not justified to invoke the provisions of section 40A(3) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Rs.2,86,536 were in order. In respect of the remaining bills amounting to Rs.5,29,919, the assessee failed to explain with material evidence as to how these contract receipts were not reflected in the assessee s books of accounts and therefore, the A.O. brought the same to tax in the assessee s hands as contract receipts not accounted for. 8.5 In appeal, the learned CIT(A) after examining all the claims of the assessee, rejected them and confirmed the addition ofRs.5,29,919 made by the A.O. on account of contract receipts not accounted for. 8.6 The learned counsel for the assessee in his submissions reiterated the same arguments put forth by the assessee before the A.O. and the learned CIT(A) that all contract receipts were accounted for and that the explanation and the submissions made by the assessee ought to have been accepted by the authorities below. The learned counsel for the assessee prayed that the addition of Rs.5,29,919 on account of contract receipts not accounted for be deleted. 8.7 The learned Departmental Representative strongly supported the findings and order of the Assessing Officer and the learned CIT(A). He submitted that their findings on the issue of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reflected a credit balance of Rs. 29,326 in the name of ISKON Temple. Verification of the assessee s account extracts in the books of ISKON, revealed that the assessee s claim was not correct as there was no amount payable by the assessee to ISKON Temple for POP work done. The Assessing Officer, therefore, came to the finding that if the liability be removed, there would be an excess of assets over liabilities to the extent of Rs. 29,326 which he brought to tax in the assessee s hands as unexplained liability. On appeal, the learned CIT(A) after examination of the facts of the matter, concurred with the view of the Assessing Officer and confirmed the addition made. 9.3 In proceedings before us, the learned counsel for the assessee reiterated the submissions put forth before the learned CIT(A) that the assessee had done POP work for ISKON Temple for a prolonged period and had a recurring account and that the said sum of Rs. 29,326 was adjusted in a final bill in the next year. It was prayed that in view of this explanation, the addition of Rs. 29,326 be deleted. 9.4 The learned Departmental Representative on his part supported the findings on this point by the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one cheque was to M/s. Arihant Steels and not to the assessee firm as claimed by the assessee. As regards the credits of Sri N.A. Prasad, the Assessing Officer recorded that the assessee has not filed any documentary evidence to establish the credit appearing in his capital account in the assessee firm. The Assessing Officer by another letter dt.11.10.2007 afforded the assessee another opportunity to explain the sources for the capital introduced by the partners but there being no response thereto, the Assessing Officer had no option but to treat the credits of Rs. 8,10,000 in the partners capital account as unexplained under section 68 and bring the same to tax in the assessee s hands which he did. In appeal before the CIT(A), the assessee reiterated its earlier submissions made before the Assessing Officer that it was further submitted that the cheques given to Vijay Kumar were to be made use of as and when required but were unutilized by him. In respect of the payment made to Arihant Steels, it was submitted that the assessee firm had purchased certain material from this concern and the payment was made by Sri Chandrabhan Varma on behalf of the firm which was taken as an additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount of partners of the assessee firm. Sri N.A. Prasad and Sri Chandrabhan Varma respectively. On being asked about the sources of these credits, it was claimed by the assessee that they were out of their individual income and from withdrawals from their respective bank accounts. It is a matter of record that the assessee was unable to furnish the bank statement of Sri N.A. Prasad or any other documentary proof to establish the credit in his capital account. We also find that examination of the bank account of Sri Chandrabhan Varma revealed that withdrawals therefrom did not find credit in his capital account with the firm but were payments to one Vijay Kumar which is confirmed by the Affidavit dt.22.5.2012. We also find that the very contentions made in this Affidavit have been examined and dealt with by the learned CIT(A) in his order wherein at para 9.2 on page 13 thereof he has held that the contention of the appellant that the signed cheques were kept with Sri Vijay Kumar for use as and when required does not carry much substance in as much as there is no evidence of issue of capital by the parties in the name of the firm, therefore, the use of money in the hands of Sri Vij ..... X X X X Extracts X X X X X X X X Extracts X X X X
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