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TMI Blog2013 (5) TMI 744X X X X Extracts X X X X X X X X Extracts X X X X ..... carried the matter before Ld. CIT(A). Ld. CIT(A) vide order dated 10-12-2009 granted partial relief to the assessee. Aggrieved by the aforesaid order of Ld. CIT(A) the assessee is now in appeal before us and has raised the following effective grounds, which read as under:- "1.0 The learned Commissioner of Income-tax (Appeals) erred in law and on facts in confirming the addition of Rs.43,27,787/- on account of unrealized sales. 2.0 The learned Commissioner of Income-tax (Appeals) erred in law and in facts in confirming the action of the disallowances of Rs.38,95,570/- being interest and Rs.1,00,000/- being administrative expenses made u/s. 14A by the AO. The learned Commissioner of Income-tax (Appeals) further erred in setting aside the issue to the AO for the purpose of application of Rule 8D of the Income Tax Rules, 1962." 3. First ground is with regard to addition of Rs.43,27,787/- on account of unrealized sales. 4. During the course of assessment proceedings, Assessing Officer noted that assessee had not included a sum of Rs.43,27,787/- in the sales for the relevant period. He also noted that similar issue was there in assessee's own case in AY 2005-06. He following the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot have two system of accounting. In total contravention of sec. 145 of the Act the appellant has accounted for 90% of sales on mercantile basis and remaining 10% on cash basis. Therefore, the system adopted by the appellant deserves to be rejected. 6.5 The Ld. AR has claimed that there is no loss to the revenue on account of such method adopted by the appellant. However, the claim so made is contrary to facts which are revealed from the details filed by the Ld. AR during the appellant proceedings. The Ld. AR filed the following details with regard to retained amount from 1.4.2002 to 1.4.2005, these details are as under:- Year Retained Amt Receipt O/s Balance Upto 1/4/2002 11,35,036 - 11,35,036 2002-03 20,59,500 - 20,59,500 2003-04 8823,678 11,53,200 76,70,478 2004-05 4032,955 - - 40,32,955 1.4.2005 1,60,51,168 11,53,200 1,48,97,968 6.6 That aforesaid would show that in last four financial years the accumulated amount in this account was to the tune of Rs.1,60,51,168/- and recovery out of the same was disclosed at Rs.11,53,200/- only. In other words, the appellant could not recover its more than 90% of such amount from the purchasing parties. Interestingly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 06 and Ld. CIT(A) had followed the order of his predecessor. The Hon'ble ITAT Co-ordinate Bench for AY 2005-06 has decided the issue by holding in para-5 ITA No. 1294/Ahd/2009, which is reproduced hereinbelow:- "5. We have heard both the parties and gone through the facts of the case as also the aforecited decisions. Indisputably, the assessee is following mercantile method of accounting and an amount of Rs.2,80,65,368/- was reduced from the debtors on the ground that certain customers paid 80-90% of the sales amount, the assessee having provided warranty for specific period as also provided certain specific services to the customers in terms of the contract entered in to with the respective parties. In such cases the amount retained by the customers was accounted from as and when received by the assessee. However, the AO was of the opinion since the said sum was part of sale consideration and was retained by various parties by way of security for the fulfillment of warranty conditions, it could not be said that the said sum did not accrue to the assessee. The ld. CIT(A) without going into the terms and conditions of the relevant contacts, merely upheld the findings of the AO. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rce of investment made during the year. He was, thus, of the view that proportionate interest is to be disallowed for the purpose of making investment in share and mutual fund. He accordingly, worked out proportionate interest in the ratio of investment to the total funds and worked out the disallowable interest at Rs.38,95,570/-. He further held that certain administrative expenses would also have been incurred for making monetary investment and accordingly he disallowed a sum of Rs.1 lakh on that account. He, thus made of total disallowance of Rs.39,95,570/- u/s. 14A of the Act. 10. Aggrieved by the order of Assessing Officer, assessee carried the matter before Ld. CIT(A). Ld. CIT(A) after considering the submissions of the assessee in principle agreed the AO's action on confirming the disallowance, however, he observed that AO has not worked out the disallowance for the purpose of u/s. 14A of the Act by following the guidelines laid down in Rule 8D of the IT Rules, 1962. Ld. CIT(A) following the decision of Special Bench of Mumbai Bench in the case of ITO v. Daga Capital Management Pvt. Ltd. (2008) 119 TTJ 209 (Mum)(SB) directed the Assessing Officer to work out the disallowanc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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