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TMI Blog2018 (8) TMI 1631X X X X Extracts X X X X X X X X Extracts X X X X ..... shed. Disallowance of interest paid on unsecured loans - AO disallowed claim on the ground that the loan itself were found to be unexplained and addition was made U/s 68 of the Act in the earlier years and therefore, the claim of interest being consequential to the claim of unsecured loans which was disallowed in the earlier year - Held that:- Since this is a consequential issue to the issue of unsecured loans treated as unexplained cash credit by the Assessing Officer in the earlier year, accordingly, we set aside this issue to the record of the Assessing Officer for quantifying the amount of disallowance of interest if any after considering the addition made U/s 68 of the Act attend finality in the earlier assessment years. Accordingly, this ground of appeal is allowed for statistical purposes only. Addition of contract receipt as unaccounted income - Held that:- As AR of the assessee has now referred to the sale bills in support of his claim, however, we find that after expiry of about 10 years and in absence of books of account as well as other supporting evidence, this fact cannot be verified even from the government offices for want of relevant record preserved by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee by : Shri Rajiv Sogani (CA) Revenue by : Shri Anup Singh (JCIT) ORDER Per : Vijay Pal Rao, J.M. These two appeals by the assessee are directed against the two separate orders of ld. CIT(A)-I, Jaipur, both dated 07/08/2015 for the A.Y. 2006-07 and 2009-10 respectively. For the A.Y. 2006-07, the assessee has raised following grounds of appeal: 1. In the facts and circumstances of the case and in law, the Id. CIT(A) has erred in confirming the action of the Id. AO in reopening the assessment u/s 147 of Income Tax Act, 1961. The action of the Id. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the reassessment proceedings being illegal and without any basis. 2. In the facts and circumstances of the case and in law, the Id. CIT(A) has erred in confirming the action of the Id. AO in adding the unsecured loan of ₹ 13,24,300/- as unexplained credits u/s 68 of the Income Tax Act, 1961. The action of the Id. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by treating the loan as genuine and deleting the addition of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year under consideration but without obtaining requisite sanction/approval U/s 151 of the Act. Therefore, the reopening without sanction is invalid and illegal. The ld AR has referred to the reasons recorded by the Assessing Officer at page No. 7 of the paper book and submitted that the Assessing Officer has reopened the assessment on the basis that the ld. CIT(A) for the A.Y. 2007-08 had deleted the addition made by the Assessing Officer U/s 68 of the Act by holding that a sum of ₹ 13,24,300/- pertains to the A.Y. 2006-07. However, there is no definite finding of the ld. CIT(A) on the fact that the said amount was introduced as cash credit by the assessee during the financial year relevant the A.Y. 2006-07 but the ld. CIT(A) has deleted the addition on the fact that the said amount was an opening balance as on 01/4/2006 and therefore, the same was not introduced in the books during the financial year relevant to the assessment year 2007- 08. The ld AR has submitted that the Assessing Officer reopened the assessment without ascertaining the fact whether the said amount was actually introduced as cash credit by the assessee during the period relevant to the assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or A.Y. 2006-07 with ITO, Ward-6(4), Jaipur. Earlier, assessment for the A.Y. 2005-06 was completed by my predecessor. Also, the assessment for A.Y. 2007-08 2008-09 have also been completed by the undersigned. In all the assessments, unsecured loan was shown and they are to be verified. The assessment for A.Y. 2007-08 which was completed on 31/12/2009, the A went in ld. CIT(A), Jpr. and got some relief on a/c of unsecured loan. The ld. CIT(A) gave the relief on the pretext that some amounts are pertaining to A.Y. 2006-07 (Rs. 13,24,300), therefore, the same would have not added in A.Y. 2007- 08. On going through the order (appellate) of the ld CIT(A) it is noticed that the amount of ₹ 13,24,300/- on account of unsecured loans has been given on relief however, now this figure has come up in the appellate order of the ld. CIT(A), the A.O could not understand. In order to verify the identity, creditworthiness and genuineness of the cash creditors, I have reasons to belief that escapement of income within the meaning of Section 147 of the IT Act, 1961. Action U/s 147 of the IT Act, 1961 is to be taken. Notice U/s 148 of the IT Act is issued. Thus, it is clear that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) [or clause (c)]; (b) if four years, but not more than six years, have elapsed of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year;] [(c) if four years, but not more than sixteen years, have elapsed from the end of the relevant assessment year unless the income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment.] Explanation.-In determining income chargeable to tax which has escaped assessment for the purposes of this sub-section, the provisions of Explanation 2 of section 147 shall apply as they apply for the purposes of that section.] (2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151. (3) If the person on whom a notice under section 148 is to be served is a person treated as the agent of a non-resident under section 163 and the assessment, reassessment or recomputation to be made in pursuance of the notice is to be made on him as the agent of such non-resident, the notice shall not be issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the issue of such notice.] Explanation.-For the removal of doubts, it is hereby declared that the Joint Commissioner, the Commissioner or the Chief Commissioner, as the case may be, being satisfied on the reasons recorded by the Assessing Officer about fitness of a case for the issue of notice under section 148, need not issue such notice himself.] The plain reading of these provisions reveals that Section 150(1) provides exception to the limitation provided U/s 149 for issuing notice U/s 148. Therefore, Section 150 of the Act can be pressed into service in a particular case of reopening based on the directions or giving effect to the order of the appellate authority only when the time limitation provided U/s 149 has already expired. In the case in hand, the time limit provided U/s 149 of the Act was certainly not expired as on 31/4/2011, however, it is certainly after the expiry of four years from the end of the assessment year and therefore, as per the provisions of Section 151, the notice U/s 148 cannot be issued unless the Principal Chief Commissioner, Chief Commissioner, Principal Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g interest of ₹ 4,94,606/- paid on unsecured loans out of total interest expenses claimed. The action of the Id. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the said disallowance of ₹ 4,94,606/-. 2. In the facts and circumstances of the case and in law, the Id. CIT(A) has erred in confirming the action of the Id. AO in making the addition to contract receipts amounting to ₹ 7,68,966/- as unaccounted income. The action of the Id. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the addition of ₹ 7,68,966/-. 3. In the facts and circumstances of the case and in law, the Id. CIT(A) has erred in confirming the action of the Id. AO in taxing a sum of ₹ 50,241/- as interest income of the assessee. The action of Id. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of ₹ 50,241/-. 4. In the facts and circumstances of the case and in law, the Id. CIT(A) has erred in confirming the disallowance to the extent of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act work was executed or labour was supplied by the assessee which requires any TDS U/s 194C of the Act. The ld AR has referred to the details of TDS and submitted that the government offices have deducted TDS U/s 194 of the Act whereas the assessee has supplied only steel furniture. He has referred to the sale bills and submitted that the assessee supplied only steel furniture to the government offices. 11. On the other hand, the ld DR has submitted that the Assessing Officer has specifically asked the assessee to reconcile the details as given in 26AS. However, the assessee failed to produce any record or books of account. Even before the ld. CIT(A), the assessee could not produce the books of account or supporting evidence to show that the amount as shown in the 26AS is part of the sale declared by the assessee in the books. 12. We have considered the rival submissions as well as relevant material on record. The Assessing Officer made this addition when the assessee failed to produce books of account as well as supporting evidences to show that the amount of ₹ 7,68,966/- is part of the sales recorded in the books. On appeal the ld. CIT(A) has called for a remand repo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ledger account at page 35 of the paper book as on 31/3/2009. However, the assessee has not included the said amount in the income only on the ground that the same was not received during the year. We find that undisputedly the assessee is following mercantile system of accounting and therefore, it is not permitted to follow the cash system of accounting only for a particular income when all other income are recognized by following the mercantile system of account. Hence, in view of the admitted position and as per the audit report the assessee is following mercantile system of accounting and the interest on unsecured loan given by the assessee duly recognized by the debtor and became due to the assessee then the same would be considered as income of the year under consideration. Hence, we do not find any error or illegality in the orders of the authorities below qua this issue. Hence, this ground of assessee s appeal is dismissed. 18. Ground No. 4 of the appeal is regarding disallowance of ₹ 1.00 lac made by the Assessing Officer, which was restricted by the ld. CIT(A) to ₹ 50,000/- on account of various expenses. 19. We have heard the ld. AR of the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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