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TMI Blog2014 (11) TMI 287X X X X Extracts X X X X X X X X Extracts X X X X ..... AO to examine assessee’s contention - in the nature of assessee’s trade, the transactions are mostly in cash and the payment from the debtors are generally realised in cash only - If the assessee has given the addresses as per the list which consists of several debtors, at least some of them should have been enquired on sample basis – thus, the matter is to be remitted back to the AO for examination of explanation as to the source of deposit in the bank account was from debtor’s realization, the AO may carry out enquiry from some of the debtors on test check basis to see whether the amount from such debtors have been realised by the assessee in this year. Ad-hoc disallowance of 25% of expenses – Held that:- The expenses appearing are mostly verifiable from the fact that the are the expenses against which the payment is made by cheque to statutory body - Insofar as the other operational expenses for sums it have been incurred in cash which are not open for full verification - Thus, if any ad–hoc disallowance is called for, then the same should be 25% - Decided partly in favour of assessee. - ITA No. 7692/Mum./2012 - - - Dated:- 21-10-2014 - Shri R. C. Sharma And Shri Amit S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk account with Warana Sahakari Bank Ltd., Vashi Branch, Navi Mumbai. In response to the show cause notice and statutory notices, it appears that the assessee did not attend the proceedings on most of the occasions except on few occasions and accordingly, the Assessing Officer proceeded to complete the assessment ex parte under section 144. The Assessing Officer, on a perusal of the bank account, found that the assessee has deposited cash of ₹ 17,47,874 up to 10th June 2008, wrongly mentioned by the Assessing officer as 10th June 2011, and cheque amount of ₹ 16.70 lakhs in Oriental Commercial Bank. The cheque was received from one Shri Shantanu Shivara, for property dealing. However, the said cheque was returned by the bankers. The Assessing Officer noted that the assessee has not submitted any evidence regarding action taken under section 138 of Negotiable Instrument Act and, therefore, he presumed that the assessee has received consideration in cash against cheque issued which was bounced. Regarding other bank transactions, the assessee vide letter dated 3rd November 2011, had stated as under: I am furnishing you the opening and closing details, evidencing the so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the earlier year as well as for this year was filed. The purpose of cash deposit was stated as it was for the re payment of old loans of ₹ 6.50 lakhs taken from Nayan Thakkar and ₹ 8.50 lakhs from Smt. Jigna Thakkar. The assessee also paid interest of ₹ 1,56,000 and ₹ 91,874, respectively on such loans. In support of this contention, confirmation of the said parties was also filed along with their copy of bank statement, highlighting loan transaction. The list of documents with regard to the creditors filed before CIT(A) has been incorporated at Page 4 of the appellate order. It was submitted that the list of opening and closing debtors was filed before the Assessing Officer along with the letter of 31st November 2011, however, the Assessing Officer did not take proper cognizance of the same. The cash deposit was squarely covered by the debts realisation which was due to the assessee as on 31st March 2008. Thus, no addition on account of deposit in the bank account should be made. Regarding debtors realised during the year, the assessee furnished the copy of the return of income for the assessment year 2008 09, wherein the outstanding debtors for realis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equired to maintain books of account. However, the assessee had always prepared the list of debtors from whom the amount was to be realized, not only in this year but also in the earlier years. In the Balance Sheet and the return of income for the assessment year 2008 09, the assessee has clearly shown the outstanding sundry debtors at ₹ 20,28,244. In support of her contention, she drew our attention to page 18 of the paper book, which is a copy of return of income for the assessment year 2008 09. Thus, it cannot be disputed that there were certain sundry debtors from whom the amount was due to the assessee. She further submitted that before the learned Commissioner (Appeals), the assessee has provided detail list of debtors with the addresses and the learned Commissioner (Appeals) instead of carrying out any enquiry through the Assessing Officer or herself has rejected the assessee s contention of debtor realization, simply on the ground that the learned Commissioner (Appeals) in the earlier year has rejected such a contention. She submitted that the facts and issues involved in the assessment year 2008 09, were entirely different. In that year an alternative contention was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the absence of any evidence or proof of genuineness of the payment, such an expenditure cannot be allowed. 9. We have heard the rival contentions and perused the relevant findings of the impugned order as well as the material available on record. The assessee is a commission agent deriving commission income from agricultural produce. Most of his transactions are with either farmer or small vendors wherein the transactions are mostly carried out in cash. Here, the main dispute relates to cash deposit of ₹ 17,47,874, and the addition on account of sundry debtors of ₹ 20,28,294. The assessee s case has been that cash deposits has been made from the debtors realisation. During the year, the amount due from the sundry debtors as on 31st January 2008, stood at ₹ 20,28,294, which was also reflected in the return of income for the assessment year 2008 09. The learned Commissioner (Appeals) has rejected the assessee s contention on the ground that similar plea of the assessee has been rejected by the learned Commissioner (Appeals) in the assessment year 2008 09. From the perusal of the record, it is it is evident that in the return of income for the assessment yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may carry out enquiry from some of the debtors on test check basis to see whether the amount from such debtors have been realised by the assessee in this year. The assessee shall also make effort for producing some of the debtors before the Assessing Officer for examination. If the explanation of the assessee regarding realisation of the money from the sundry debtors is found to be acceptable, then the source of cash deposit stands explained. With these directions, we set aside the issue of cash deposit of ₹ 17,47,874 to the file of the Assessing Officer. The Assessing Officer will also provide due and reasonable opportunity of hearing to the assessee and the assessee will also co operate for carrying out necessary enquiry and verification. Thus, ground raised by the assessee is partly allowed for statistical purpose. 11. Now, coming to the issue of ad hoc disallowance of 25% of the expenses claimed by the assessee of ₹ 6,88,120, we find merits in the contention of the learned Counsel that out of ₹ 6,88,120, sums aggregating to ₹ 3,55,554, is on account of expenses which has been incurred through cheque and that to be mostly on interest payment on loans ..... X X X X Extracts X X X X X X X X Extracts X X X X
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