ITAT, JABALPUR BENCH

Rewa Group

v.

Income tax Officer

Dinesh K. Agarwal, Judicial Member

And R.K. Panda, Accountant Member

IT Appeal No. 119 (Jab.) of 2005

[Assessment year 2001-02]

January 19, 2007

I Section 68 of the Income - tax Act, 1961 - Cash Credits - Assessment year 2001-02 - Assessee - firm consisting of several partners carried on business in liquor - Said partners made certain investment in assessee firm - Assessee filed all documentary evidence in respect of said investment and further explained that aforesaid amount was in existence prior to 31-3-2000 relevant to assessment year 2000-01 and not in assessment year 2001-02 - Assessing Officer having not been satisfied with statements of partners and material placed on record held that capital investment made by partners remained unexplained and accordingly, made certain addition under section 68 to total income of assessee in assessment year 2001-02 - Whether since amount in question being in existence prior to 31-3-2000 and moreover, assessee had proved identity of creditors and source of investments no addition could be made in assessment year 2001-02 - Held, yes

II Section 37(1) of the Income - tax Act, 1961 - Business expenditure - Allowability of - Assessment year 2001-02- Assessing Officer disallowed entire commission given by assessee to salesmen and employees - He also partly disallowed vehicle running and vehicle rent expenses incurred by assessee - Whether since Assessing Officer in remand report had himself accepted commission as discount to customers and vehicle expenses as genuine, entire expenditure in question was an allowable expenditure - Held, yes.

Section 28(i) of the Income - tax Act, 1961 - Business loss / deductions - Allowable as - Assessment year 2001-02 - Assessee, a liquor contractor, claimed allowance of breakage loss of Rs. 1,38,448 - Assessing Officer disallowed assessee’s claim - Whether since breakage loss was a normal business loss considering value of turnover, it was allowable as a business loss - Held, yes

FACTS I

The assessee-firm which consisted of several partners carried on business in liquor. Said partners made certain investment in the assessee-firm. The assessee produced all the aforesaid persons along with documentary evidence to prove their capacity to invest the aforesaid amounts. He further explained that the aforesaid amount was in existence prior to 31-3-2000 relevant to assessment year 2000-01 and not in the assessment year 2001-02. The Assessing Officer was not satisfied with said explanation and made addition under sectin 68 in assessment year 2001-02. On appeal, the Commissioner (Appeals) confirmed said order.

On second appeal:

HELD I

On examination of the capital investment made by the partners in the assessee - firm and further on going through the explanation furnished by the assessee in this regard, it was clear that the assessee had not only proved the source of credit in the books of account but had also proved the immediate source thereof showing that the aforesaid amount was in existence prior to 31-3-2000 relevant to the assessment year 2000-01 and not in the assessment year 2001-02. In the absence of any contrary material brought on record by the revenue, the Assessing Officer was not justified in making addition to income the of assessee in the assessment year 2001-02.

FACTS II

The assessee-firm was engaged in business of liquor. The Assessing Officer disallowed entire commission given by the assessee to salesman and employees. He also partly disallowed vehicle running and vehicle rent expenses incurred by the assessee. Further, breakage loss of Rs. 1,38,448 was also disallowed by the Assessing Officer. The Commissioner (Appeals) however, set aside order of the Assessing Officer.

On revenue’s appeal :-

HELD II

In the absence of any contrary material brought on record by the revenue against the finding of the Commissioner (Appeals) and keeping in view that the Assessing Officer in the remand report had accepted the commission as discount to the customers and vehicle expenses as genuine and also keeping in view that the breakage loss was a normal business loss considering the value of turnover, the order of the Commissioner (Appeals) in allowing the impugned expenditure and loss was justified.

Editor’s note :

1. Where the assessee a liquidator contractor obtained customary security deposit of Rs.18,000 to 19,000 each from 202 salesman and more than 100 of them had confirmed same, the Assessing Officer was not justified in making addition in that respect.

2. Where the assessee had made certain deposits with Excise Department and had showed same in the asset of balance sheet, which had already been examined and considered by the Assessing Officer, he could not make addition of said sum again as it would amount to double addition.