GIRI LAND & FINANCE CO. v. INCOME TAX OFFICER
[Citation -1985-LL-0820]

Citation 1985-LL-0820
Appellant Name GIRI LAND & FINANCE CO.
Respondent Name INCOME TAX OFFICER
Court ITAT
Relevant Act Income-tax
Date of Order 20/08/1985
Assessment Year 1969-70,1970-71, 1972-73, 1974-75
Judgment View Judgment
Keyword Tags computation of income • system of accounting • deeming provision • registered firm • deemed interest
Bot Summary: VICE PRESIDENT ELHENCE, J.M.: Order These are four appeals filed by the Department and one appeal filed by the assessee. Since the assessee did not show the full amount of interest which would have been earned by it on such surplus funds, the ITO made additions, relying upon s. 28(iv) of the IT Act, 1961. The position would be clear from the following table : Interest Interest Addition Assessment Surplus shown by at the rate of made by the year fund the 12 per cent ITO assessee Rs. Rs. Rs. Rs. 1969-70 6,80,000 81,600 3,480 78,120 1970-71 6,75,000 81,000 4,075 76,925 1972-73 6,75,000 81,000 6,100 74,900 1974-75 7,00,000 84,000 14,737 69,263 3. Even if the assessee s contention that the money remained idle and that no bank account was kept, may appear to be difficult to believe, it cannot be presumed that the money was earning interest. In the assessee s appeal, the only question raised relates to the disallowance of 50 percent of expenses debited to the PL A/c. After hearing the learned representatives on both the sides, we are of the view that no exception could be taken to the above disallowance since the assessee had not maintained any vouchers nor any other evidence was produced to justify that the expenditure was entirely admissible. In the result, the appeals filed by the Department, as well as the appeal filed by the assessee fail and are dismissed.


VICE PRESIDENT ELHENCE, J.M.: Order These are four appeals filed by Department and one appeal filed by assessee. assessment years involved are 1969-70, 1970-71, 1972-73 and 1974-75. For asst. yr. 1972-73 there are cross-appeals. 2. assessee which is registered firm, deals in purchase and sale of land. In Department s appeals, point involved is common. It relates to varying amounts of additions by way of interest. facts in that regard are that assessee received earnest moneys which remained with it till sales were completed. In this way, according to ITO, assessee was having surplus funds with it on which interest would have been earned by it at rate of 12 per cent. Since assessee did not show full amount of interest which would have been earned by it on such surplus funds, ITO made additions, relying upon s. 28(iv) of IT Act, 1961 ( Act ). position would be clear from following table : Interest Interest Addition Assessment Surplus shown by at rate of made by year fund 12 per cent ITO assessee Rs. Rs. Rs. Rs. 1969-70 6,80,000 81,600 3,480 78,120 1970-71 6,75,000 81,000 4,075 76,925 1972-73 6,75,000 81,000 6,100 74,900 1974-75 7,00,000 84,000 14,737 69,263 3 . In appeal, learned AAC held that until and unless Department could establish that money remained engaged profitably somewhere to fetch some return, to assessee-firm, nothing could be included in total income in form of deemed interest . He held that provisions of s. 28(iv) were not attracted. 4. In appeals before us, both parties pointed out that provisions of s. 28(iv), dealing with benefit or perquisite, were not attracted. After hearing learned representatives on both sides, we are of view that learned AAC was absolutely justified in deleting these additions. Nobody can be forced to earn income. It is only where it is established that income was earned and system of accounting maintained by assessee is such as does not enable computation of income that resort can be had to estimate. In present case, there is no evidence to show that surplus money earned interest. There is no provision under Act containing deeming provision regarding earning of interest income. Therefore, even if assessee s contention that money remained idle and that no bank account was kept, may appear to be difficult to believe, it cannot be presumed that money was earning interest. We, therefore, uphold order of learned AAC. In this connection, decision of Supreme Court in CIT vs. Shoorji Vallabhdas & Co. (1962) 46 ITR 144 (SC) is relevant. Therefore, Departmental appeals fail. 5 . In assessee s appeal, only question raised relates to disallowance of 50 percent of expenses debited to P&L A/c. assessee debited expenditure of Rs. 12,528 in P&L A/c for asst. yr. 1972-73. ITO found that assessee was not maintaining any vouchers nor there was any other evidence to establish these expenses. Therefore, he disallowed 50 per cent of expenses amounting to Rs. 6,264. 6. In appeal, disallowance was confirmed by learned AAC. 7 . After hearing learned representatives on both sides, we are of view that no exception could be taken to above disallowance since assessee had not maintained any vouchers nor any other evidence was produced to justify that expenditure was entirely admissible. 8. In result, appeals filed by Department, as well as appeal filed by assessee fail and are dismissed. *** GIRI LAND & FINANCE CO. v. INCOME TAX OFFICER
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