TMI Blog2007 (10) TMI 338X X X X Extracts X X X X X X X X Extracts X X X X ..... edits u/s 68 - It is a settled position of law that the assessee is duty bound to, prima facie, establish the identity and capacity of the cash creditors along with genuineness of the transactions. We have examined each and every cash creditor, out of 32 squared up cash creditors, 27 parties were examined by the Inspector of the Department. Even before the Inspector 24 parties confirmed the factum of loan having been given to the assessee and also having been received it back by them. These parties also confirmed receipts of interest on their respective deposits. The identity of these persons was established beyond doubt. We (sic-They) have also explained their respective source(s) of income along with their monthly expenses. Therefore, their creditworthiness also stands explained being sufficiently proved on record. The transactions are found genuine; therefore, there is no justification for addition on account of 27 squared up cash creditors. We confirm the finding of the learned CIT(A) to that extent and hold that the learned CIT(A) has correctly deleted the same. As regards 5 cash creditors, who were not examined but they had their duly sworn in and attested affidavits file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. The AO simply made this addition based on guesswork. We cannot approve the same. We hold that the learned CIT(A) has correctly deleted this addition. In the result, the appeal of the Revenue is dismissed and cross-objection is partly allowed. - Hari Om Maratha Judicial Member And B. C. Meena Accountant Member For the Appellant : Sanjay Goyal For the Respondent : Shailendra Bardia ORDER By the Bench - The appeal by the Revenue and cross-objection by the assessee, are directed against the order of the CIT(A) dated 30-11-2004, pertaining to assessment year 2001-02. 2. The Revenue has raised the following grounds of appeal: 1. Deleting addition of Rs. 50,918 made by the Assessing Officer on account of excess stock found during survey. 2. Deleting addition of Rs. 5,14,900 made by the Assessing Officer on account of unexplained cash credits under section 68. 3. Deleting addition of Rs. 4,27,300 made by the Assessing Officer under section 69B on account of unexplained investment in purchases of plot. 4. Deleting addition of Rs. 12,000 made by the Assessing Officer on account of inadequate withdrawals for household expenses. 3. In cross-ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, and made addition of Rs. 50,918 under section 69 of the Act as unexplained investment in the stock. The learned CIT(A), however, deleted this addition by accepting the explanation of the assessee. Therefore, the Revenue is in appeal. 5. We have heard rival submissions and have perused the available materials on record carefully. 6. It is an undisputed fact that the difference in stock was worked out during the course of survey on the basis of GP rate of 3.37 per cent shown in the immediately preceding year whereas the assessee in his statement recorded under section 131 had stated that the difference in the stock was as a result of application of profit rate of the past year and if the profit rate of the current year was applied, there was no such difference. The assessee had agreed to pay tax as per the section 44AF and he has also honoured the same. The assessee has shown net income of Rs. 1,82,315 by applying a net profit rate of 5 per cent as against net profit worked out in P L a/c of Rs. 91,385 which in our opinion clearly explains the amount of Rs. 50,918 taken as difference in stock. Consequently; we confirm the finding of the learned CIT(A) and dismiss gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2-2-2001 11. Satyanarayan Sharma Sadar Bazar, Ren 15000 14-9-2000 12-2-2001 12. Radheysyam Sharma Dagariyon Ka Mohalla Mertacity 15000 14-9-2000 29-3-2001 13. Raju Harijan Village-Moriyana Tehsil Degana 15000 15-9-2000 19-2-2000 14. Panchu Singh Rawat Village-Pratapgarh District- Pali 17000 15-9-2000 21-12-2000 15. Mansi Ram Dewasi 17000 17-9-2000 9-2-2001 16. Sadique Vllage - Malawas, Tehsil- Bilara 16000 17-9-2000 20-12-2000 17. Deen Mohammed Gotan Road, Borunda 18000 13-6-2000 20-3-2001 18. Islam Bhai Gotan Road, Borunda 15000 14-6-20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total 6,12,900 When the assessee was asked to explain the nature of cash credits appearing in the names of aforementioned persons, the assessee explained the same by filing a written submission. The Assessing Officer examined the explanation of the assessee but did not found it favourable, so he made the addition of the entire amount. On the contrary, learned CIT(A) examined all the cash creditors with respect to their identity, capacity and genuineness of the transactions and he ultimately gave the following finding by accepting most of the cash creditors as genuine and some were held as ingenuine. Thus, both the parties are aggrieved and have taken their respective grounds. Ground No. (2) of Revenue's appeal and ground No. (1) of cross-objection are being decided together. 9. We have heard rival submissions and have perused the available materials on record carefully. 10. It is a settled position of law that the assessee is duty bound to, prima facie, establish the identity and capacity of the cash creditors along with genuineness of the transactions. Shri Laxman Lohar S/o Shanker Ram Loh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the statements were recorded by the Inspector, who has no legal authority to record the statements- This is also a consistent view of this Bench. Therefore, we accept these cash creditors also as genuine. As regards the contention of the Assessing Officer regarding non-appearance of interest entry in the copies of accounts of the cash creditors the assessee explained that the interest was paid in cash and debited to interest account. This fact in our view is sufficient enough to explain the above doubt of the Assessing Officer. Regarding transaction being not by cheque, it was explained that the place where the assessee has carried on business and further that in this line of the business, the banking habits are not normal. This is also a valid explanation. Therefore, the addition cannot be made merely because transaction was not through cheque. Hence, we accept all the cash creditors as genuine and delete the entire addition so made under section 68 of the Act. Otherwise also, the assessee is entitled to set off of the amounts of some cash creditors who denied the factum of loan against the extra income declared by the assessee by declaring income under the provisions of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch were not relied by him. Therefore, by respectfully following the above noted decision of the Jodhpur Bench, we confirm the impugned finding and dismiss ground No. (3) of Revenue's appeal. 15. The last ground i.e., ground No. (4) of Revenue's appeal relates to deletion of an addition of Rs. 12,000 made by the Assessing Officer on account of inadequate withdrawals for household expenses. 16. The family of the assessee consisted of 2 members only and total withdrawals shown by him and his wife were at Rs. 48,000, which was considered to be quite reasonable by the learned CIT (A). On the very face of it, in the absence of any other material available on record, we also confirm the impugned deletion. The Assessing Officer simply made this addition based on guesswork. We cannot approve the same. We hold that the learned CIT(A) has correctly deleted this addition. 17. The other grounds, i.e., ground Nos. (2) and (3) of cross-objection read as under: 2. That the learned CIT(A) was not justified on facts and in law in confirming disallowance of Rs. 1,200 on account of telephone expenses more particularly when the income of the assessee has been determined under sectio ..... 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