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TMI Blog2018 (5) TMI 802X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri W. H. Siddiqui who used to keep the amount in safe custody at his home. The debits and credits appearing in the ledger account are nothing but the transfer of cash from office to house and vice versa. Had AO considered debits appearing in the ledger account before the dates of credits, no addition would have been called for. We further find that assessee had explained and reconciled each and every entry in excess of 50,000/- recorded in the impounded documents. The details of explanation made by the assessee to Assessing Officer is placed at paper book pages 15 to 18 but Assessing Officer instead of accepting the reconciliation, chose to make the addition and which learned CIT(A) has rightly deleted. Addition on account of interest paid in cash - Held that:- This amount of interest related to interest on amount of 3,34,000/- which the Director of the assessee had owned up and for which we have already decided in favour of assessee. The Director of the company in the same affidavit had also owned up the payment of interest on such loans. The learned CIT(A) has also noted that Shri W. H. Siddique has filed affidavit accepting the interest on loan which was paid by him in his per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.M. This is an appeal filed by the Revenue against the order of CIT(A) dated 04/08/2015. The grounds of appeal taken by the Revenue are reproduced below: "1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of ₹ 3,34,000/- made by the A.O. u/s 68 of the I T Act, 1961 whereas the assessee failed in discharging its onus of proof and explanation offered by the assessee company was not satisfactory in the opinion of the Assessing officer. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in deleting the addition of ₹ 18,65,060/- made by the A.O. u/s 68 of the I.T. Act, Appellant by Shri Ajay Kumar, Addl. CIT (D.R.) Respondent by Shri K. R. Rastogi, C. A. without appreciating the fact that documents impounded during the course of survey proceedings u/s 133A demonstrate that number of cash loans were received by the assessee company through its Director Shri W.H. Siddiqui. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of ₹ 1,21,250/- on account of interest paid on cash loan without appreciating the fact that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... davit stating therein that the entries belonged to him and therefore, learned CIT(A) deleted the same. Similarly regarding addition on account of violation of provisions of section 40A(3), Learned A. R. submitted that these amounts were not spent as expenditure and neither any expenditure was claimed in the profit & loss account and therefore, learned CIT(A) has rightly deleted the same. Learned A. R. heavily placed his reliance on the order of learned CIT(A). 4. We have heard the rival parties and have gone through the material placed on record. We find that Assessing Officer made various additions on the basis of documents seized during survey. The details of additions made by the Assessing Officer are reproduced below: (i) Addition u/s 68 of the Act Rs.3,34,000/- (ii) Addition u/s 68 of the Act Rs.18,65,060/- (iii) Addition on account of interest paid on cash loan Rs.1,21,250/- (iv) Addition u/s 40A(3) Rs.30,46,780/- (v) Addition u/s 69C Rs.23,77,162/- (vi) Addition on account of estimated income from projects Rs.7,81,705/- 4.1 As regards the first addition of ₹ 3,34,000/-, the assessee during the assessment and appellate proceedings had submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn from bank account of the sister concern of the group company. However, the Assessing Officer did not accept this contention of the assessee. The learned CIT(A) however has drawn a complete position of cash in hand of various group companies and has held that cash in hand of the entire group was much more than the amounts which were received by the assessee from Shri W. H. Siddiqui. We further find from the examination of seized document A-52 that it is a copy of hand written ledger account titled as 'WH Loan' and in which various entries of debits and credits are appearing. The Assessing Officer had picked up certain amounts on various dates and has made the addition on account of credits appearing in the ledger account. However, he has ignored the debits appearing in the ledger account on earlier dates. The assessee during the appellate proceedings and before the Assessing Officer had explained that the cash belonging to the group was retained by the Director Shri W. H. Siddiqui who used to keep the amount in safe custody at his home. The debits and credits appearing in the ledger account are nothing but the transfer of cash from office to house and vice versa. Had the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion offered by the assessee is that the entries refer to the cash of the appellant-company available with the director for safe keeping. Once the cash available with the directors is owned by the appellant-company and it is the same cash as is reflected in the cash book there can be no withdrawal from the cash book as such withdrawals are made when the cash has to be spent on the expenses and not for safe keeping. 6(8) I find that the position of availability of cash as per cash book of the appellant-company and its sister concerns is as under - Date Balance In Drosia Construction Pvt. Ltd. Balance In Drosia Hotels Ltd. Balance In JEDC Ideal Enterprises & Drosia Construction Balance In Drosia Interiors Total 18.10.07 1,545,417.00 164,405.70 18,597,935.00 2,233,153.00 22,540,910.70 22.10.07 1,523,801.00 150,502.70 18,597,935.00 2,232,653.00 22,504,891.70 08/10/07 1,823,856.00 167,291.70 18,632,340.00 28,157.00 20,651,644.70 25.10.07 1,457,962.00 147,868.70 18,597,935.00 2,181,233.00 22,384,998.70 26.10.07 1,435,847.00 147,676.70 18,597,935.00 2,180,733.00 22,362,191.70 29.10.07 1,255,182.00 147,401.70 18,592,135.00 2,179,633.00 22, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,068.00 211,525.70 26,365,1^8.00 3,943,743.00 31,410,524.70 04.02.08 857,381.00 182,564.70 25,896,468.00 3,945,437.00 30,881,850.70 02.02.08 861,412.00 182,769.70 25,896,468.00 3,945,937.00 30,886,586.70 20.02.08 850,729.00 177,028.70 25,850,808.00 3,949,399.00 30,827,964.70 23.02.08 809,846.00 160,606.70 25,848,048,00 3,948,839.00 30,767,339.70 27.1)2.08 805,071.00 159,226.70' 25,844,083.00 3,940,339.00 30,748,719.70 03.03.08 773,938.00 142,167.70 15,348,083.00 3,948,1$9.00 20,212,327.70 07.03.08 767,777.00 141,637.70 15,343,793.00 3,870,820.00 20,124,027.70 14.03.08 1,151,001.00 125,169.70 15,320,648.00 3,903,764.00 20,500,582.70 13.04.07 616,032.00 159,718.70 - 19,362.00 795,112.70 25.04.07 643,413.00 154,303.70 - 46,166.00 843,882.70 26.04.07 651,413.00 163,834.70 - 45,091.00 860,338.70 21.11.07 1,179,185,00 110,774.70 18,568,068.00 2,622,342.00 22,480,369.70 6(9) I find from the entries referred by the AO that on the particular dates on which there is entry of cash in the name of W. H. Siddiqui and Smt. Swaleha Naim, both directors of the appellant-company as per impounded Ledger A-52, the posit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee explained that these documents did not contain the name of the appellant company and the entries therein belonged to Shri W. H. Siddiqui, director of the appellantcompany. The AO did not accept the contention of the assessee and made the aforesaid addition of ₹ 1,21,250/- under section 68 of the Act. 7(6) I find that the assessee explained that the entries appearing in the impounded ledger A-52 at page 59 referred to interest payments on personal loans taken by Shri W. H. Siddiqui, director of the appellant-company. Shri W. H. Siddiqui, director of the appellant-company also filed an affidavit dated 16/02/2016 during remand proceedings before the AO. In the affidavit so filed, Shri W. H. Siddiqui, director of the appellantcompany, accepted that the loans were taken by him in personal capacity from Shri Nasreen Jafri, Shri Ashfaq and Shri Rahan /Nima. The AO did not consider it necessary to call Shri W. H. Siddiqui in order to cross- examine him with reference to the statements made by him in his affidavits. Under these circumstances it is not open to the Revenue to challenge the correctness of the statements made in the affidavit. Nevertheless, once Shri W. H. Si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer from the angle of applicability of making addition under section 40A(3) of the Act. 8(6)(i) Page 1 of annexure A-52 shows the following entries- 16.06.2007 Asad Gittiwala Rs.55,000/- 09.12.2007 Asad Gittiwala Rs.71,000/- 11.12.2007 Asad Gittiwala Rs.42,800/- Rs.1,68,800/- The appellant has explained that these entries were not claimed as expenses in the books of accounts as these were personal expenses of Shri W. H. Siddiqui, director of the company and were considered his personal withdrawals. Shri W. H. Siddiqui, director of the appellant-company also filed an affidavit dated 16.02.2015 during remand proceedings before the AO. In the affidavit so filed, Shri W. H. Siddiqui, director of the appellantcompany, accepted that these expenses were his personal expenses. I therefore find that addition under section 40A(3) of the Act made by the AO is not justified as the appellant has not claimed these expenses in the books of accounts and these were personal expenses of Shri W. H. Siddiqui, Director of the appellant company. The addition of ₹ 1,68,800/- made by the AO under section 40A(3) of the Act is deleted giving corresponding relief to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of cash has been explained as under- Date Withdrawal from Account of Cheque No. Amount 18/05/2007 BOB A/c No. 0069 IEDC (JV) 543109 10,00,000 11/06/2007 BOB A/c No. 0069 IEDC (JV) 543116 15,00,000 14/06/2007 BOB A/c No. 0069 IEDC (JV) 543121 10,00,000 09/06/2007 Cash in hand - 7,87,317 18/06/2007 BOB A/c No. 0069 IEDC (JV) 543131 15,00,000 It appears therefore that these entries do not relate to any claim of expenditure in the books of accounts. The AO has without examining the nature of the entries come to the conclusion that the entries were related to claim of expenditure and has made the impugned disallowance under section 40A(3) of the Act. The entries are not even related to of a joint venture, a sister concern. I therefore find that the addition made under section 40A(3) of the Act is unjustified as the entries do not relate to any claim of expenditure. The addition of ₹ 23,50,000/- made by the Assessing Officer under section 40A(3) of the Act is deleted giving corresponding relief to the appellant. 8(6)(v) Page numbers 34 and 35 of annexure A-52 shows the following entries. Date Name Amount 01.08.2007 Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r held that some of entries were not even related to the appellant company as withdrawals have been made from the account of a group concern. We further find that a major portion of disallowance u/s 40A(3) relates to details in the ledger account marked as A-52. These debits have already been held to be transfer of cash from office to house of Director. The Assessing Officer made the additions on account of debits in the ledger account u/s 40A(3) of the Act whereas the credits in the ledger account have been added as additions u/s 68 of the Act. The learned CIT(A) has rightly appreciated the facts and has rightly allowed the relief. In view of the above, we do not find any infirmity in the order of learned CIT(A) therefore, ground is No. 4 is dismissed. 4.5 As regards ground No. 5 regarding addition made by the Assessing Officer u/s 69C of the Act, we find that learned CIT(A) has made a finding of fact that the amounts treated to be investments u/s 69C were in fact expenses incurred by various assessees on various projects. The learned CIT(A) has noted various expenses under various heads of expenditure which relate to other concerns. For the sake of completeness the findings of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9(8) Again, interest @12,500/- per month has been paid periodically to Shri Ashok Sur for 7 months and the total expenses of ₹ 87,500/- have been paid by cheque drawn on HDFC Bank after deduction of TDS. The repayment of loan of ₹ 25,00,000/- has been made on 29.10.2007 through cheque drawn on HDFC Bank. Further, TDS of ₹ 37,655/- has been deducted from interest on 31.03.2007. In view thereof, the expenses amounting to ₹ 87,500/- are therefore duly accounted for in the books of accounts and therefore addition made under section 69C of the Act by the AO is unjustified. The addition amounting to ₹ 87,500/- is deleted giving relief to the appellant. 9(9) I find that Section 69C of the Act clearly stipulates that where, in any financial year, the assessee has incurred an expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if it is offered by him, is not in the opinion of the Assessing Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year. Thus, the focus of Section 69C of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r actually not incurred by the assessee on the projects. The AO has not specifically pointed out as to which expenses have been wrongly claimed by the assessee under the head direct or indirect expenses. The Hon'ble Bombay High Court in the case of CIT vs. Tata Iron & Steel Co. Ltd. (106 ITR 363) held that when the method of accounting followed by the assessee company cannot be said to be an unreasonable method and that in such a case, even if a better method could be visualized, the method; consistently followed can be accepted. Moreover, in the instant case no defects have been pointed out by the AO in books of accounts, which haye been audited. Under the circumstances there is no justification in estimating profit @5% on work-in-progress The addition of ₹ 7,81,705/- is deleted giving relief to the appellant." We find that learned CIT(A) has deleted this addition by holding that the method of valuation of work-in-progress was consistent and therefore, he has rightly held that there was no justification in estimating the profit @5% on the work-in-progress. The assessee had just capitalized the work-inprogress and had not earned any income from it as the assessee had no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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