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2015 (4) TMI 666 - AT - Income TaxAdditions for unexplained cash credits - Dis-allowance of various expenses - Assessee fail to produce documents to establish the identity and capacity of the concerned creditors - Held that:- It is observed that advances aggregating to ₹ 17,89,500 were claimed to be received by the assessee from four parties during the year under consideration in cash against supply of material. No supply of material against the said advances, however, was made by the assessee and since the advances were claimed to be repaid in the subsequent year again in cash, the Assessing Officer required the assessee to establish the identity and capacity of the concerned creditors as well as the genuineness of the relevant transactions by furnishing relevant evidence. The assessee, however, failed to discharge its onus satisfactorily in as much as the confirmation letters of the concerned creditors filed by him did not contain the relevant details such as mode of payments, Permanent Account Number of the concerned creditors etc. Copies of the said confirmation letters are placed on record before us in the paper book filed by the assessee and a perusal of the same shows that the said letters worded identically, do not even contain the dates of issuance of the confirmation letters. The assessee also failed to file any other documentary evidence such as income tax particulars of the creditors or their balance sheets to show that the advances claimed to be given by them to the assessee were duly reflected in their income tax return or even in their Balance Sheets. Despite this failure of the assessee to discharge the onus of establishing the creditworthiness of the concerned creditors, the learned CIT(A) strangely deleted the addition made by the Assessing Officer under Section 68 vide his impugned order, and that too, in our opinion, on all irrelevant and immaterial grounds. It is undisputed that the advances in question received by the assessee in cash represented cash credits and the assessee having failed to discharge the primary onus that lay upon him to establish inter alia the capacity of the concerned creditors, the provisions of S.68 were clearly attracted, as rightly held by the Assessing Officer relying on the decision of the Kerala High Court in the case of K.M.Mahim [1994 (11) TMI 88 - KERALA High Court]. In our opinion, the relief allowed by the learned CIT(A) on this issue was totally unwarranted and his impugned order on this aspect is liable to be set aside. Accordingly, we set aside the impugned order of the learned CIT(A) on this issue and restore that of the Assessing Officer. Grounds (b) to (h) of the Revenue in this appeal are accordingly allowed. As regards the issue involved in grounds (i) and (j) relating to the disallowance of ₹ 1,71,572 made by the Assessing Officer out of various expenses, which is sustained by the learned CIT(A) to the extent of ₹ 70,000, it is observed that the relevant expense claimed by the assessee such as block cutting charges, champering charges, machinery maintenance, polishing charges, cleaning chares, etc. were in the nature of the business expenditure regularly required to be incurred by the assessee going by the nature of his business. Moreover, the nature of these expenses claimed by the assessee is such that they are sometimes required to be paid by way of self-made vouchers. Although some deficiencies in such self made vouchers were pointed out by the Assessing Officer by stating that the same did not contain complete details of the nature of work done, the quantum of work done, etc., we are of the view that the disallowance of 10% of the total expenses made by the Assessing Officer for such deficiencies was on the higher side keeping in view the nature of the expenditure claimed by the assessee as well as the nature of assessee’s business, and the learned CIT(A) was quite fair and reasonable to restrict the same to ₹ 70,000. - Decided partly in favour of revenue.
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