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2017 (12) TMI 1658 - AT - Income TaxAddition towards unsecured loan u/s 68 alongwith interest - unsecured loans are bogus accommodation entries provided by Shri Pravinkumar Jain through his hawala companies - Held that:- On perusal of the financial statements filed by the assessee, we find that both the companies are active in the website of Ministry of Corporate Affairs. Also AO has accepted that both companies, viz. Josh Trading Company Pvt Ltd and Viraj Mercantile Pvt Ltd are active in MCA website. Both the companies have filed financial statements for the year ending 31-03-2006. Therefore, we are of the considered view that the assessee has discharged its initial burden cast u/s 68 by filing identity, genuineness of transaction and creditworthiness of the parties. Once, the assessee has discharged its initial burden, the burden shifts to the AO to prove otherwise. In this case, the AO made addition only on the basis of information received from Investigation Wing, but not based on any evidence to disprove the loan transaction from above companies are ingenuine. Therefore, we are of the view that there is no reason for the AO to treat loans from above 2 companies as unexplained credits u/s 68 - assessee has discharged identity, genuineness of transactions and creditworthiness of the parties. Therefore, there is no reason for the AO to make addition towards loan u/s 68 - Decided in favour of assessee. Estimation of net profit from Zoom Plaza and Aurm Park - AO has estimated net profit from Zoom Plaza and Aurm Park on the ground that the assessee is following different methods of accounting for different projects - Held that:- AO has estimated 10% net profit on both the projects without assigning any reasons for incorrectness in books of account maintained by the assessee for both the projects. We further notice that the AO is only on the point that the assessee can follow only one method of accounting for both the projects. No merit in the findings of the AO that when assessee is following different method of accounting for different projects, that too, consistently for many years, there is no reason for the AO to reject those books of account and estimate net profit. Therefore, we are of the view that the AO was erred in estimating net profit of 10% on both the projects. Hence, we direct the AO to adopt net profit as declared by the assessee for both the projects. - Decided against revenue. Disallowance of purchases u/s 40A(3) - assessee has made cash purchases in contravention of provisions of section 40A(3) - Held that:- No merit in the arguments of the assessee for the reason that the assessee has not assigned any reasons for cash payments for purchases in contravention of section 40A(3) of the Act. Though the assessee claims to have made purchases at construction site on urgent basis, the reasons given by the assessee are not coming within the exclusion provided under Rule 6DD of I.T. Rules, 1962. Therefore, we are of the considered view that the AO was right in disallowing cash purchases u/s 40A(3).- Decided against assessee. TDS u/s 194A - disallowance of interest paid to financial institutions u/s 40(a)(ia) for failure to deduct tax - Held that:- assessee has failed to deduct tax at source u/s 194A in respect of interest payment to financial institution though it requires to deduct tax at source as per the provisions of section 194A of the Act. The reasons given by the assessee that it has paid interest through post dated cheques in advance based on the instalments granted by the banks cannot absolve the assessee of his responsibility of deducting tax at source as per the provisions of the Act. Since the assessee has failed to deduct tax at source on interest payment, the AO has rightly disallowed interest u/s 40(a)(ia) of the Act - Decided against assessee.
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