Dinesh K. Agarwal, J.M. - (1.) THESE cross-appeals by the assessee and Revenue are directed against the order passed by the learned CIT(A), dt. 2nd Feb., 2005 for the asst. yr. 2001-02. Since facts are identical and grounds are interconnected, therefore, both these appeals are disposed of by this common order for the sake of convenience.
(2.) Briefly stated facts, of the case are that the assessee an AOP derives income as a liquor contractor. The return was filed showing a loss of Rs. 7,475. During the course of assessment, it was found by the AO that the assessee constituted a firm as per partnership deed dt. 31st March, 2000 and deposited earnest money at Rs. 54,60,000. It was also found that the partners have made capital investment namely, S/Sri Nandlal Pandey Rs. 24,60,000, Parmanand Soni Rs. 5,00,000, Chitrabhan Singh Rs. 10,00,000. Prakashchand Madan Rs. 50,000, Arun Singh Rs. 5,00,000, Nevandram Ahuja Rs. 10,00,000, Prakashchand Ahuja Rs. 5,00,000, Anil Kumar Pathak Rs. 5,00,000 and Jairamdas Malkani Rs. 5,00,000. Accordingly, the assessee was asked to produce all the aforesaid persons along with documentary evidence to prove their capacity to invest the aforesaid amount. The AO after considering the statement of the persons and the material placed on record was of the view that the capital investment of Rs. 10,00,000 by Sri Nevandram Ahuja stood proved satisfactorily but capital contribution of Rs. 10,00,000 by Sri Chitrabhan Singh, Rs. 24,60,000 by Sri Nandlal Pandey, Rs. 10,00,000 by Sri Parmanand Soni, Rs. 50,000 by Sri Prakashchand Ahuja, Rs. 5,00,000 by Sri Arun Singh, Rs. 5,00,000 by Sri Anil Kumar Pathak, Rs. 5,00,000 by Sri Prakashchand Madan and Rs. 5,00,000 by Sri Jairamdas Malkani remained unexplained, however, he added Rs. 60,10,000 as income from undisclosed source in the total income of the assessee. Besides this, it was also found by the AO that in the balance sheet there is a security deposit of Rs. 37.46 lakhs from 202 persons. The assessee was asked to produce the said persons along with evidence of genuineness of transaction and creditworthiness. Some of the sundry creditors/security depositors were produced but in the absence of their identity cards issued by the election commission and certain discrepancies in their statements, the AO added the entire security amount of Rs. 37.46 lakhs in the income of the assessee as unexplained cash credits. Further, it was found by the AO that in the balance sheet the assessee has shown sundry creditors in the name of M/s Deepak Enterprises Rs. 9,00,105, Glasgow Distilleries Ltd. Rs. 30,13,260 and Krishna Agencies Rs. 16,56,600 aggregating to Rs. 55,69,965. The AO after examining the confirmations of account found that there is a difference of Rs. 2 lakhs in the account of Glasgow Distilleries Ltd., therefore, he added Rs. 2 lakhs in the income of the assessee. Further, it was found by the AO that the assessee has claimed commission expenses Rs. 94,27,505. It was claimed by the assessee that the said commission was given to the salesmen and employees of the assessee. The assessee was asked to produce them. Since the assessee failed to produce any evidence for payment of commission, the AO disallowed the entire amount of commission of Rs. 94,27,505 and added the same in the income of the assessee. Further, the AO also made disallowance of Rs. 8,79,693 out of vehicle running and vehicle rent expenses, breakage Rs. 1,38,448, penalty Rs. 21,533 and donation Rs. 10,000. Furthermore, it was also found by the AO that the assessee participated in the bid of liquor auction and during the year under consideration deposited Rs. 1.33 crores with the District Excise Department. This amount was deposited by Sri Parmanand Soni on behalf of the assessee. The AO after considering the statement of Sri Parmanand Soni observed that the assessee failed to establish the source of the said investment of Rs. 1.33 crores, therefore, he also added Rs. 1.33 crores in the total income of the assessee and accordingly, completed the assessment vide order dt. 25th March, 2003 passed under Section 143(3) at an income of Rs. 3,37,25,700 in the status of AOP. The assessee preferred first appeal before the learned CIT(A). The learned CIT(A) while partly allowing the appeal allowed substantial relief to the assessee as under: JUDGEMENT_12868_TLIT0_20070.htm Being aggrieved by the order of the learned CIT(A), the assessee and the Revenue both are in appeal before us.
(3.) GROUND No. 1 in the assessee's appeal reads as under: 1. The learned CIT(A)-II was not justified in confirming the addition on account of capital contribution to the tune of Rs. 24.60 lakhs by Shri Nandlal Pandey, one of the partners, when like other partners he was also an assessee at ITO-Allahabad having his own PAN and also the details of returns filed with ITO, Allahabad. He also was unjustified in not considering the fact that the investments by Prakash Chand Madan and Nandlal Pandey in form of deposits to Excise Department, were made through demand drafts dt. 28th March, 2000 (financial year 1999-2000), the date before the firm M/s Rewa Group (assessed as AOP) was constituted and all the persons joined hands to work together during financial year 2000-01 and onwards.;