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TMI Blog2012 (9) TMI 507X X X X Extracts X X X X X X X X Extracts X X X X ..... king disallowance twice. Decision in favour of assessee Addition on account of outstanding amount towards expense - Books of account and other relevant materials were impounded during assessment proceeding by AO - AO has not allowed the assessee to take photocopies of the impounded books of account and other documents – Held that:- As the assessee was not in a position to furnish the name and complete addresses of the creditors. In the remand report, the AO is silent on this aspect except merely stating that the assessee failed either to furnish the full address of the persons. Therefore issue remand back to AO Disallowance in respect of cash payment of expenses exceed Rs.20,000/- AO invoking provisions of Sec.40A(3) disallowed 20% thereof in addition to the total income – Held that:- These expenses are in respect of labour charges which are already disallowed. Therefore making disallowance u/s 40A(3) of the Act would amount to double disallowance. Decision in favour of assessee Disallowance of certain expense on account of failure to produce relevant detail - The assessee could not furnish the full details viz., name and address of the persons to whom the payments of expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lain the source of opening cash balance as per the cash book. The AO therefore, added a sum of Rs.15,05,497/- as income from other sources. 4. Before the CIT(A) the assessee submitted that the cash balance as on 31-03-2006 cannot be subject matter of investigation in assessment year 2007-08, as the previous year for assessment year 2007-08 was the period from 01-04-2006 to 31-03-2007 and during that period there was no cash receipts. The assessee relied on the decision of the Hon ble Supreme Court in the case of Baladin Ram Vs CIT 71 ITR 427(SC) wherein it as been held as follows; It is now well settled hat the only possible way in which income from an undisclosed source can be assessed or reassessed is to make the assessment on the basis that the previous year for such an income would be the ordinary financial year. Even under the provisions embodied in sec.68 of the IT Act, 1961 it is only when any amount is found credited in the books of assessee for any previous year that the section will apply, and the amount so credited may be charged to tax as the income of that previous year. If the assessee offers no explanation or the explanation offered by him is not satisfactory . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceipts of Rs.30, 98,108/-. The details of contract receipts are given below; Date Gross amount Net amount received, after deduction of TDS, Sales tax, royalty etc. 28/6/2005 77,519 69,832 7/2/2006 9,99,131 9,00,000 7/2/2006 9,98,968 8,97,086 23/3/2006 9,98,515 9,10,184 25/3/2006 23,975 10,000 Total 30,98,108 28,08,782 Out of the total receipts, Rs.9.99,086/- and Rs.10,00,000/- deposited in SB account bearing no.19047 were in turn, withdrawn (self withdrawals) on the following dates; Date Amount (Rs.) 21/2/2006 1,00,000 27/2/2006 80,000 3/3/2006 1,00,000 6/3/2006 8,000 6/3/2006 19,000 8/3/2006 50,000 9/3/2006 10,000 15/3/2006 50,000 20/3/2006 50,000 22/3/2006 80,000 24/3/2006 30,000 27/3/2006 55,000 28/3/2006 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endered by the Hon ble Karnataka High Court in the case of CIT Vs N.L.Sathyanarayana Setty, (supra). Therefore, the same would not be binding. For the reasons given above, we confirm the order of the CIT(A) and dismiss ground nos.1 to 3. 9. Ground nos.4,5 8 can be taken up together. These grounds read as follows; 4. The CIT(A) has erred in deleting the addition of Rs.4,10,900/- made on account of sundry creditors. 5. The CIT(A) stand that books/documents were impounded by the AO and the assessee was not prevented from producing the same before the AO is untenable. 8. The CIT(A) ha erred in disallowing a sum of Rs.4,80,827/- u/s 40A(3) on account of cash payment exceeding Rs.20,000/- 10. The sum of Rs.4,10,900/- which is challenged in Gr.No.4 and 5 by the Revenue comprises of two parts. The first part relates to a sum of Rs.1,69,150/- and the other part relates to a sum of Rs.2,41,050/-. We will deal with the two parts separately in the following paragraphs. Before we deal with the additions challenged in Gr.No.4 and 5 and 8, we have to make a reference to a disallowance of Rs.36,64,141/- because they are inter connected to the disallowances challenged in Gr.No.4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made any exercise to ensure the genuineness of the credits through the entire sets of books of account, which were under his custody. 6.7 In the remand report, the AO is silent on this aspect except merely stating that the assessee failed either to furnish the full address of the persons, who have carried out the machinery work, or to produce the said persons before him for verification. 6.8 It is a fact that the entire affairs of the business transactions as well as the names and addresses of the persons with whom transactions were made are available in the books of account and the relevant papers/documents. In the absence of the books of account, the required information could not be gathered by he assessee. In view of these facts, there is merit in the assessee s submissions that the AO should have caused enquiries as per the information available in the impounded materials and brought on record any adverse findings. Therefore, in my opinion, the action of the AO in disallowing the credits of Rs.4,10,900/- is not justified. Hence, the same is deleted. Thus, the assesseee gets relief of Rs.4,10,900/- . 14. The learned DR submitted that the CIT(A) ought to have verified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... furnish the full details viz., name and address of the persons to whom the aforesaid payments were made. Under the circumstances, the AO disallowed 20% of the aforesaid expenses resulting an addition of Rs.4,60,000/-. On appeal by the asseseee, the CIT(A) deleted the disallowance for the following reasons; 7.3 A perusal of the assessment order reveals that the disallowance was made since the assessee did not produce the complete details. In the remand report also, the AO has not reported any specific finding as to whether the expenditure claimed is excessive, bogus or not related to the assessee business. On the other hand, the assessee reiterated that the entire books of account were under the AO s custody and the relevant information could have been culled out by him from the books of account. There was no necessity for the AO to call upon the assessee to verify the books of account and furnish the information. 7.4 I find merit in the assesee s submission that the books of account were impounded and kept under his custody and copies of the same were not provided to the assessee. Since the books of account and other materials were in his custody, he could have examined and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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