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TMI Blog2015 (2) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... uced before the undersigned and on going through the P&L account, it is seen that amount of ₹ 1.40 crores has not been debited in the P&L account; rather the same has been shown as advance in the balance sheet and grouped under the sub head 'Loans and advances' in the asset side. [Thus as per principle of accountancy also an amount which is appearing as advance could not have been debited in the P&L account.] Thus, though on the day of survey this invoice was not recorded in the books of the appellant company (the intention of the appellant might be to claim this sum as bogus expenditure but in view of the survey conducted by the department on 27.12.2006, in the final books of accounts which is finalised as on 31;10.2007, this amount has not been claimed as an expenditure and therefore shown as advance) but subsequently when the books are finalised, the payment made against this invoice has been shown as advance. The reasons for the same may be the survey conducted by the Department, but the facts remains that this amount has not been debited in the P&L account; rather it has been directly shown as advance. (Based on this P&L Account and balance sheet the appellant ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unds of appeal before or during the course of the hearing of the appeal. 2. The facts in brief are that the assessee company filed return of income declaring loss of ₹ 46,88,8401/- on 28.1.2006. It was further revised and declared NIL income. Statutory notices were sent and assessee s response were filed. After going through the facts records, AO completed the assessment u/s 143(3) of the Income Tax Act, 1961 and made the addition of ₹ 1,40,00,000/- and for doing so he observed as under:- (i) Inspite of the fact that assesses had been issued sale bill of ₹ 1.4 crore and on 24.6.2005, the assese has failed to take any legal steps for recovery, as claimed by assessee in his reply. (ii) The assessee has made payment against the sale bill through six different cheques issued between 1.7.2005 to 13.7.2005 on which TDS has been deducted. (iii) It is only due to survey in this case that assessee has come up with excuse that the payment was made as advance and no goods have been delivered. In fact the sale bill was alleged sale of ₹ 1.40 crore is treated as accommodation entry taken by the assessee from M/s B.T. Technet Ltd. 3. Against the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he cheque payment has been made by the appellant company. This fact has been mentioned by the AO in the order itself. Time and again it has been reiterated by the appellant, its Accounts Manager and it's Chairman/MD during the time of survey and during assessment proceedings also that the payment under reference made to B.T.Technet Ltd is advance only. This clearly means that the same has not been debited in the profit and loss account. (From perusal of the assessment order it appears that AO has not bothered to see the P L account and b/s of the appellant.) Even final printed balance sheet has also been produced before the undersigned and on going through the P L account, it is seen that amount of ₹ 1.40 crores has not been debited in the P L account; rather the same has been shown as advance in the balance sheet and grouped under the sub head 'Loans and advances' in the asset side. [Thus as per principle of accountancy also an amount which is appearing as advance could not have been debited in the P L account.] Thus, though on the day of survey this invoice was not recorded in the books of the appellant company (the intention of the appellant might be to claim t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. It has to be seen as to whether this amount has been claimed as revenue expenditure or capital expenditure by the assessee. If it is claimed as revenue expenditure and debited in the profit and loss account then it may be considered for disallowance. If claimed as capital expenditure then it is to be seen as to whether the same has been capitalised or not during the year and if capitalised then claim of depreciation on such capitalisation only is liable to be disallowed. We find that ld. CIT(A) has observed that the AO has totally missed this aspect in this order. At the time of survey it was clearly noted by the I.T. Authority conducting survey that the amount of RS.1 ,40,00,000/- was not reflected in the books of account although the cheque payment has been made by the appellant company. This fact has been mentioned by the AO in the order itself. Time and again it has been reiterated by the appellant, its Accounts Manager and it's Chairman/MD during the time of survey and during assessment proceedings also that the payment under reference made to B.T.Technet Ltd is advance only. This clearly means that the same has not been debited in the profit and loss account ..... X X X X Extracts X X X X X X X X Extracts X X X X
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