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TMI Blog2013 (4) TMI 171X X X X Extracts X X X X X X X X Extracts X X X X ..... the hands of the assessee as capital were liquidated and rendered to tax u/s.132(4). Thus the earning of commission to be passed on to the real creditor was not to be disturbed as expenditure remaining unexplained. Deletion of Rs.30,85,000 as commission claimed as expenditure which was to be on the basis of income earned to the like amount directed. Similarly the enhancement of Rs.6,17,000 does not have any basis as computed by the AO as they are contrary to his own finding for the purpose of taxation expenditure from undisclosed income. Loans and advances standing were against the reserve created by the assessee was on the basis of income rendered to tax and therefore could not be taxed in the hands of the assessee insofar as the AO accepted that the major loans and advances was to Sudha Devi Foundation. When the balance was rendered to tax it was nobody's case that the assets were to be verified which assets were not created and were part and parcel of the physical cash found at the time of search. Thus having rendered income, AO ought to have considered that the assets and liabilities cannot be taxed over and above the returned income have to be under specific provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investment in cash which the Assessing Officer observed and perused the financial statements when he observed that the assessee had shown commission payable which commission he had claimed as expenditure and disallowed the same. He also observed that the commission payable and receivable being contra entries the rate which varied was between 2.5% to 3% when he proposed to enhance the same by 0.5% making an additional income of Rs.6,17,000. He observed that the assessee had shown loans and advances amounting to Rs.4,33,94,527 being application of the funds when the major advance was to Sudha Devi Foundation amounting to Rs.5.5. Crores. As the assessee had failed to obtain confirmations from the debtors he proposed to tax the sum of Rs.83,94,527 being unavailable. In the liability side of the balance sheet capital reserve of Rs.40,39,630 was lying which amount he held was share premium account being the investment by share holders to which the assessee could not give a befitting reply. He further made addition of Rs.40,39,638. 3. Aggrieved the assessee appealed before the first appellate authority, before whom the assessee appellant submitted that the Assessing Officer has added 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer. He held that the facts and circumstances do not indicate any transactions having been carried out which require further verification. 4. The learned Counsel for the assessee initiating his arguments submitted that the Assessing Officer after having accepted the returned income on the basis of search material being cash forming part and parcel of the income returned tried to analyze the financial statements in his own way when the purported so called additions have no bearing to be taxed either as disallowance or as for insufficient explanation offered by the assessee which he fully supported as per the submissions before the learned CIT(A) mentioned above. He pointed out as to having established the fact that the assessee is an investing Company and grants loans and advances against the share capital invested balance the earning of income which commission was shown payable as well as receivable the assessee being a Private Limited Company holding the position of Trust between the two. The contra entry of Rs.30,85,000 ought to have been considered as from the investment and considered and brought n record by the Assessing Officer and not that unilaterally to enhance the tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to be deleted as they are self balancing under the provisions of the I.T.Act. 5. The learned CIT-DR opposed the contentions of the learned Counsel for the assessee. She submitted that the book entries were to be verified by the Assessing Officer which the assessee could not explain insofar as that having rendered income the assessee was to establish by way of regular return the modus operandi of holding the assets and liability when the assessee himself admits that the commission earned as commission payable leave no room for having any business transactions. 6. We have heard the rival parties and perused the material available on record. On our careful consideration of the facts and circumstances of case as brought on record by the authorities below, we are inclined to find a meaning into the modus operandi of the assessee appellant which was verified on the basis of search and seizure operation carried out by the Income-tax authorities. The assessee filed return indicating that the cash seized was on the basis of liquidation of investment which were incorporated in the balance sheet may or may not have been paper transactions but were on the basis of receipt of cash which w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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