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TMI Blog2015 (9) TMI 172X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of net debit cumulative balance of all the partners. 2. In the facts & circumstances of the case, the CIT (A) has erred in deleting the trading addition of Rs. 3 lakhs." The grounds raised in the cross objection are as under :- "1. The ld. CIT (A) has erred on facts and in law in confirming the disallowance to the extent of Rs. 4,91,054/- out of interest expenses. 2. The ld. CIT (A) has erred on facts and in law in upholding the rejection of books of accounts u/s 145(3)." 2. The assessee filed return of income on 28.03.2011 declaring income of Rs. 2,43,39,170/-. The case was scrutinized under section 143(3) of the IT Act. The assessee firm was carrying on the business in the name and style of M/s. Art Asia as Manufacturer/Tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, at the end of the year, the management takes physical stock and valued it. After considering the assessee's reply, the AO held that the closing stock was verified at the end of the year which did not compensate for the absence of a stock register. Purchases and sales were verifiable but the non maintenance of stock register in the business of the assessee indicates that the income of the assessee firm could not be deduced correctly. The closing stock also became unverifiable. Therefore, the trading results shown by the assessee are not acceptable. She was not satisfied with the correctness and completeness of accounts of the assessee. Therefore, she made adhoc addition of Rs. 3,00,000/- in trading results to tap possible leakage. 3. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.11.2011 and closing stock of textile division vide letter dated 25.11.2011. AO has wrongly stated that closing stock of textile division is not furnished. Hence, simply because stock register is not maintained, rejection of books of accounts is not correct. For this proposition, reliance is placed on the following cases :- Malani Ramjivan Jagannath vs. ACIT 207 CTR (Raj.) 19 Ashoke Refractories P. Ltd. vs. CIT 279 ITR 457 (Cal.) CIT vs. Jacksons House 198 Taxman 385 (Delhi) CIT vs. Jas Jack Elegance Exports 324 ITR 95 (Del.) CIT vs. Smt. Poonam Rani 41 DTR 194 (Del.) CIT vs. Om Overseas 315 ITR 185 (P&H) 7. We have heard rival contentions and perused the material on record. The assessee challenged the similar addition in A.Y. 2008- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee is dismissed. 8. Ground no. 1 in Revenue's appeal is against restricting the allowance of interest expenses of Rs. 29,09,278/- to Rs. 4,91,054/- and in assessee's cross objection ground no. 1 is against confirming the disallowance of interest of Rs. 4,91,054/-. The AO observed that during the year under consideration it is found on verification of partners accounts that Shri Sandeep Mundra and Shri Ravi Kant Ladha had debit balance of Rs. 1,92,36,187/- and Rs. 23,30,199/- respectively. No interest has been charged on debit balances. The interest liability of the firm had also increased from Rs. 19,62,291/- to Rs. 49,91,013/- during the year compared to preceding year. This was due to the increase in borrowings from Rs. 3,31,1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest free funds advanced/diverted to partners. Therefore, she disallowed the interest attributable to the debit balances in the name of Shri Sandeep Mundra and Shri Ravi Kant Ladha amounting to Rs. 29,09,278/-. 9. Being aggrieved by the order of AO, assessee carried the matter before ld. CIT (A) who had allowed the appeal partly by observing as under :- "2.3. I have duly considered the material available on records. The facts in the instant year are slightly different from earlier years. In A.Y. 2007-08 and 2008-09, there were net credit balances considering all the partners accounts together. However, in the instant year i.e. A.Y. 2009-10, there is net debit balance considering cumulative balance of all the partners. Ld. AR has informed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of interest on the basis of credit and debit balances of all the partners at Rs. 4,91,054/-. Similar disallowance was made by the AO in A.Y. 2008-09 which has been deleted by the ld. CIT (A) vide order dated 9.3.2012. Such deletion was confirmed by the ITAT in ITA No. 404/JP/2012 dated 31.10.2012. During the year the position is same but on day to day basis on certain days there was a debit balance in the capital account of two partners because the profit is credited to the account of the partners at the end of the year. Therefore, in view of the above, it was argued that cross objection may please be allowed on this ground. 12. We have heard rival contentions and perused the material on record, and gone through the coordinate Bench dec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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