This appeal by assessee is directed against order of CIT (A) relating to asst. yr. 1980-81. first ground is general in nature and therefore, it calls for no specific consideration. second ground is that CIT (A) has erred in confirming action of ITO in disallowing assessee's claim for deduction of Rs. 22,280 paid on count of house tax on factory building. assessee claimed deduction of Rs. 22,280 on account of house tax paid pertaining to accounting periods 1975- 76 to 1978-79 relevant to asst. yrs. 1976-77 to 1979-80. It was stated before ITO on behalf of assessee that house tax was not paid as factory building was declared outside municipal limits vide Director of Local Bodies Chandigarh's order dt. 12th Nov, 1970. said order of Director, Local Bodies stood cancelled vide Punjab Government Notification dt. 24th July, 1974. Under which whole village Banwari where assessee's factory is located was brought within municipal limits. assessee challenged order of Punjab Government by filing writ petition in High Court of Punjab and Haryana which was dismissed on 29th April, 1982. In mean-time, Municipal Committee, Rajpura asked assessee to pay demand which was ultimately paid during accounting period 1979-80 relevant to asst. yr. 1980-81. It was, therefore, urged before ITO that deduction of this amount should be allowed for asst. yr. 1980-81. ITO observed that Municipal Committees and determined annual rental value for factory building in financial year 1975-76 relevant to asst. yr. 1976-77 at Rs. 49,500 for which house tax payable was worked out at Rs. 5,570. assessee filed appeal against said order on plea that rental value determined by Municipal Committee was excessive which was rejected vide Committee's order dt. 3rd July, 1975. Thereafter no appeal was filed with dt. 3rd July, 1975. On basis of this rental value made by Municipal Committee had become final on 15th May, 1975. On basis of this rental value, house-tax liability was determined for subsequent years viz. 1976-77, 1977-78 and 1978-79 which was not paid during these accounting years. total amount of Rs. 22,280 is, therefore, liability of assessee for asst. yr. 1976-77 to 1979-80. ITO further observed that writ petition filed by assessee related to validity of extension of municipal limit to village Bangawari and was against levy of octroi duty which was nothing to do with determination for house-tax liability especially when no appeal had been filed by assessee against house-tax liability which had become final. He further observed that under s. 145(I) of Act, profits and gains of business are to be determined of method of accounting regularly employed by assessee. Since in this case, method of accounting employed by assessee was mercantile and liability was created as soon as demand was raised house-tax liability was not allowable as expenditure for assessment year under appeal. He therefore rejected claim. CIT (A) has upheld same. It has been urged before us by Id. counsel for assessee that matter was in dispute before Hon'ble Punjab and Haryana High Court. Since liability had not crystallised, it was not claimed in relevant accounting periods. He further submitted that wince it was paid in accounting period relevant to asst. yr. 1979-80, it was rightly claimed for assessment year under appeal. He further urged that assessee was following mixed system accounting i.e partly mercantile and partly cash and, therefore, liability was admissible in year of demand. learned departmental representative. on other hand, has contended that levy of house-tax was never in dispute in writ position before Hon'ble High Court. On contrary, levy of octroi duty was only in dispute before High Court. He further urge that levy of house-tax was challenged in appeal before Municipal Authorities which was rejected in year 1975 itself which was accepted by assessee. He further pointed out that even if it is assumed for moment that it was in dispute before High Court it did not crystallise in accounting period relevant to assessment year 1980-81 under appeal as High Court was available only on 29th April 1982, which falls in accounting period relevant to asst. yr. 1983-84. He further urged that assessee was following mercantile system of accounting. There was no evidence to show that assessee had been claiming deduction of tax on payment basis expect prevent claim. He further urged that hybrid system of accounting does not permit such transactions to be on cash basis. He further contended that assessee ought to have relevant assessment years when same accrued. For this proposition, he relied on judgment of Punjab and Haryana High Court in case of CIT vs. United India Woollen Mills (1981) 24 CTR (P & H) 244: (1981) 132 ITR 457 (P & H). He therefore, supported order of CIT (A). We have carefully considered rival submissions. submission by assessee before lower authorities was that liability had not crystallised as dispute was pending before Hon'ble High Court. We have discussed above various stages of litigation. writ petition before High Court was in relation to levy of octroi and not house-tax. In fact house-tax levied by Municipality was challenged before Municipal Authorities which was rejected and thereafter no appeal was filed. liability was accepted in year 1975 and subsequent demands were raised on that basis. We further notice that decision of Hon'ble Punjab and Haryana High Court was available in April, 1982. There was no occasion for claiming deduction in asst. yr. 1980-81. assessee ought to have claimed deduction in relevant accounting periods. We are also in relevant accounting periods. We are also in agreement with learned departmental representative that in garb of hybrid system of accounting assessee cannot claim deduction in asst. yr. 1980-81 as there is no evidence to show that assessee was following this method of accounting in past. In view of above discussion, we have no hesitation in confirming order of CIT (A) on this point. third ground is that CIT (A) has erred in confirming disallowance of Rs. 28,800 under s. 40(2) of Act. We find that this ground does not arise out of under of CIT (A). learned counsel for assessee conceded same. ground is therefore dismissed as infructuous. fourth ground is that ITO was justified in treating two cash credits aggregating to Rs. 23,000 (Rs. 17, 000 + Rs. 6,000) on 29th Oct, 1979 as unexplained simply because creditor having expired could not be produced to give evidence. perusal of squared up cash credit account in name of M/s Jiwan Dass & sons, Rajpura, in books of assessee revealed that assessee had received cash credit from this concern. assessee was repeatedly asked by ITO to give evidence regarding genuineness of credits but assessee failed to do so. ITO therefore, worked out peak credits in this account at Rs. 23,000 on 16th Nov., 1979 and treated same as assessee's income under s. 68 of Act and included in total income of assessee. Before CIT (A) assessee filed affidavit from M/s. Jiwan Dass & Sons which was not admitted by him as assessee had failed to avail of opportunity allowed by ITO. He further observed that even from affidavit furnished it was clear that Shri Jewan Dass was not man of means and could not afford to advance such huge advance to assessee ignoring his own interest. addition made by ITO was therefore confirmed by him. Before us it has been submitted by Id. Counsel for assessee that affidavit of Shri Jiwan Dass should have been admitted in evidence by CIT ( Appeals) as assessee could not file same before ITO inadvertently, He further submitted that CIT (A) had summarily rejected affidavit without making further enquiries in matter. It was also urged that even though Commissioner had not admitted affidavit but virtually he had admitted same, as he has considered same and rejected on merits without appreciating same properly. Id. Departmental representative, on other hand, has supported order for CIT (A). In our opinion, CIT (A) has in substance admitted affidavit when he has considered same on merits. We, however, find that he has summarily rejected same. In such circumstances, we restore this issue to his file for fresh consideration. He should also allow assessee to adduce any evidence in relation thereto as it deems necessary. He should also give opportunity to ITO before redetermining issue. We, therefore, set aside order of CIT (A) on this point and restore same to his file for fresh determination in light of above observations. fifth ground is that CIT (A) has erred in confirming dis- allowance of Rs. 2,000 out of miscellaneous expenses. assessee claimed miscellaneous expenses of Rs. 25,800. ITO disallowed Rs, 2,000 observing that expenses were of inadmissible nature. CIT(Appeals) has observed that disallowance appears to have been made for unvouched, undetailed and inadmissible expenditure. He, therefore, confirmed disallowance. No material has been brought before us on behalf of assessee to show that expenditure did not contain items of inadmissible nature. disallowance confirmed CIT (A) is, therefore, upheld. Sixth ground is that ITO has erred in law in disallowing under s. 40 (b) interest paid by assessee to partners in their representative capacity. At time of hearing of appeal assessee sought permission of Bench to substitute this ground as under: " That Id. ITO erred in law in disallowing under s. 40(b) interest and salaries paid by appellant to partners in their individual capacities whereas they are partners in firm in their representative capacities as Kartas of their respective HUF s." Id. Counsel for assessee urged that due to inadvertence deduction of amount of Rs. 28,800 paid to partners was stated to be in violation of provisions of s. 40(b) of Act and it was also admitted that similar disallowance was made in earlier year which was decided by Tribunal against assessee and matter was pending before High Court. It was contended that there was inadvertent mistakes on part of assessee in stating that issue was rejected by Tribunal under s. 40(b) while in fact earlier issue before Tribunal was under s. 40A (2) and not s. 40(b) of Act. He, therefore, urged that amended ground of appeal may be accepted in relation to disallowance of Rs. 28,800 as salary and salary and also interest under s. 40 (b). In view of above position explained by Id. counsel for assessee, we admit substituted ground of appeal as reproduced above, Since CIT (A) has not applied his mind in relation to disallowance. We set aside his order on this account and restore same to his file for fresh determination as to whether same is disallowable under provisions of s. 40(b). He will give adequate opportunity of hearing to assessee and ITO. In result appeal is partly allowed for statistics. *** GANESH FACTORY v. INCOME TAX OFFICER