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TMI Blog1982 (5) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee also furnished a certificate from the said M/s Lathi warehouse in which it was stated that they insisted for getting their ware house charges in cash before delivery of goods more so because the assessee had not made any payment for the last 5 years. The ITO did not find this explanation plausible and made the said addition of Rs. 35,000 invoking s. 40(A0(3) and with an observation that provisions of r. 6 DD(j) are not applicable as, according to him, no exceptional circumstances had been brought out. Beside this addition of Rs. 35,000, the ITO discussed about another addition of Rs. 23,600 on account of ware house charges paid to M/s Lathi ware house out of the total claim of Rs. 32,000 with an observation in para 2 of his order that the said amount of Rs. 23,600 pertained to earlier years and the same as such is to be disallowed. He, however, only worked out the disallowance of Rs.23,600 but did not make any separate addition on that account because the same was included in the total disallowance of Rs. 32,000 already made by the ITO as above, on account of specific provisions of s. 40A (3). 3. When the assessee carried the matter before the CIT(A), he confirmed the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e year under consideration and when it was in the first two years that the assessee had claimed the deduction, the assessee during the year under consideration had no case for deduction in respect of the earlier years for which it did not make any claim as the method of accounting of the assessee is mercantile. He placed his reliance on the cases of Calcutta Co. Ltd. vs. CIT (1959) 37 ITR 1 (SC) and Kedarnath Jute Mfg. Co. Ltd. vs. CIT (1971) 82 ITR 363 (SC). 6. After taking into consideration the rival submissions and careful perusal of facts on record and the assessee's compilation placed before us, we are unable to sustain the addition of Rs. 35,000. First of all, we deal with the first limb of the cause, according to which, the addition was warranted by two lower authorities, ie., u/s 40(A)(3). There is no dispute about the fact that 50 bags of rags which were lying in M/s Lathi warehouse were those bales which were confiscated by the customs authorities, which were released by the customs authorities in the month of April, 1976, for mutilation. In a letter dt. 24th August 1976 written to M/s Vallabhdas Bhanji Bhatia with copies endorsed to the assessee and Asst. Collector o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 6th December 1976 through which M/s Lathi warehouse sought permission of Asst. collector, Customs permitting them to make auction of the said goods subject to mutilation and under supervision of the Asst. Collector, Customs permitting them to make an auction of the said goods subject to mutilation and under supervision of the Asstt. Collector, Customs. It was as a consequence of all this that the assessee made cash payment of Rs. 35,000 — Rs. 20,000 on 18th January 1977 and Rs. 15,000 on 8th Feb 1977. From the above circumstances alone, it is clear that no prudent businessman under these circumstances would have accepted anything from the assessee except cash. The ITO observed that draft was as good as cash and at least that could have been and, if the cash was proposed to be paid, it could not be two dates. The amount of Rs.20,000 paid in cash on 18th January 1977 was received from M/s Kothari wool traders and was paid to M/s Lathi warehouse by the assessee's partner Sh. Mohinder Kumar Sagger and amount of Rs. 15,000 was paid on 8th February 1977 in cash out of funds taken by Sh. Sudharshan Kumar Sagger, one of the partners of the assessee firm, from Ludhiana for settlement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... export in pertaining to earlier assessment years instead of being under taken to profit and loss account could be taken to balance sheet as the import licence to be utilised were not received during earlier assessment years, held as under. ".... that as the assessee was given the import licence after 31st March, 1971, he was not in a position to ascertain the market value of the goods imported against the import licenses, as the value varied from time to time and the loss incurred by the assessee in the export of the cycle spare parts could not be ascertained before 31st March, 1971. As the import licences were received by the assessee only during the accounting year relevant to the asst. yr. 1972-73, the Tribunal was right in directing that the assessee was entitled to set off the loss of Rs.32,118 in the exports of the cycle parts in the asst. yr. 1972-73." In the instant case, the fact that 50 bales of rags were confiscated by the customs authorities cannot be ignored because once the bales are confiscated the assessee would be the last person to incur further expenses to warehouse charges. It was only after the release in April, 1976 that M/s Lathi Warehouse started press ..... 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