TMI Blog2012 (3) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... plained Credits - 21 days time given to furnish evidence - CIT(A) deleted additions of Rs.10,41,850 and confirmed Rs.50,91,930 - Held That:- Assessee submitted that complete names and addresses were given during assessment. No enquiry was made by the AO or evidence of remission of liability brought on record by the AO no adequate opportunity was granted to furnish confirmations. We remand the matter to AO for fresh adjudication after verifying the evidences produced by the assessee before the ld. CIT(A) in support of his claim by the assessee. Bank Interest Claimed - No interest charged to advances given to o Gitaben Kalathia of Rs.3,40,303 - Held That:- Assessee has tried to make out a case that assessee had substantial interest-free funds for giving interest free advances in respect of which he has filed the details. But these details require verification at the end of the AO, the matter is, therefore, restored back to the file of AO for fresh decision. This ground is allowed for statistical purposes. - ITA No.502/Ahd/2009, ITA No.566/Ahd/2009 - - - Dated:- 6-1-2012 - S/Shri D.K.Tyagi, A. K. Garodia, JJ. Assessee by :- Shri M. K. Patel, AR Revenue by: - Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he A.O.r not satisfactory, then the sum so credited may be charged to income tax as the income of the assessee for that previous year. [ii] as per the language used in section 68 of the Act, on being failed by the assessee to offer satisfactory explanation only following conclusion can be drawna. there is no distinction between the 'cash credit' existing in the books of the firm whether it is of a partner or of a third party, b. the burden to prove the identity, capacity and genuineness has to be on the assessee. c. if the cash credit is not satisfactorily explained, the A.Q. is justified to treat it as income from 'undisclosed sources'. d. the firm has to establish that the amount was actually given by the lender. e. if the explanation is not supported by any documentary or other evidence then the deeming fiction created by section 68 can be invoked. (2) On the facts and in the circumstances of the case and in law, the learned CIT(A)-I, Surat has erred in deleting the addition of Rs.5,00,000/- on account of unexplained unsecured loans (included in Rs.18,05,000/- holding that In respect of credits of Rs.3,50,000/- and Rs.l,50,000/- in the names of Hema D. Mistri and D. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lathia Rs.4,00,000/- Rs.32,37,280/- In the case of the assessee firm the credit entry was made through the partner s accounts. It was open to the firm to produce the partner during the assessment proceedings and also to prove the capacity and genuineness of the deposit. However the assessee failed to do so. Accordingly, vide show cause notice 26.11.2007 the assessee firm was asked to give details of addition to capital account with documentary proof, otherwise show cause why in absence of the details, the same might not be treated as unexplained and added back to the total income u/s 68 of the Act. The assessee had submitted the copy of acknowledgement, computation and P L account and balance sheet of all the partners in support of the capital introduced by them. However, the copies of passbook or personal cash book were not submitted in the case of any of the partners which could prove genuineness of transaction and capacity of the depositors to pay such sum. As regards the credit entry amounting to Rs.32,37,280/- appearing in the books of the assessee, the same remained unverifiable in absence of complete details/evidence of deposits by the part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 6.1 Most importantly, where the source of such capital or credit entries in the capital account of the partners was clearly explained and identified, no addition could be made in the hands of the assessee firm. There have been several case-laws which have laid down this principle. It is explained that the sum introduced in the individual capital accounts of the partners with the firm had come from the personal accounts of the partners, either from their cash in hand or from their bank account etc. If at all any inquiry was to be made it could only be done in the hands of the individual partners in course of their assessment proceedings. As far as the firm was concerned such capital introduction would stand explained once it was claimed by the partners that they had introduced such capital from out of their own sources. It would thus mean that not only was the identity of the creditors established (though in such a case the partners could not really be treated as creditors) their creditworthiness as well as the genuineness of the transactions would also have to be accepted as proved and established. 6.2 Given such facts of the case and the legal position on the issue, the AO w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equire interference at the hands of this Court. Accordingly, it is held that the Tribunal was right in law and on facts in deleting the addition of Rs.87,250/- being deposits in the accounts of the partners. The question referred to this Court is, accordingly, answered in the affirmative i.e. in favour of the assessee and against the revenue. Respectfully following the above decision of the Jurisdictional High Court, we uphold the order passed by the ld. CIT(A). Accordingly, the ground raised by the is dismissed. 8. The second ground of Revenue s appeal and first ground of assessee s appeal relate to addition of Rs.18,05,000/- being unexplained unsecured loans. During the year, the assessee had shown new unsecured loans from seven different persons totaling to Rs.18,05,000/-. In response to the request made by the AO, the assessee mentioned a break up of the loans, copies of acknowledgements of returns filed, computation of income, confirmation letters from some of the creditors/depositors. However, copies of bank pass-books were not submitted from any of the creditors. The AO had furnished details of the evidences filed in respect of the different creditors. He issued a show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... begin with, when the names and addresses of all the depositors and creditors had been furnished in the confirmation letters, nothing stopped the AO from carrying out investigations of his own. He completely failed in carrying out the duties of an AO, and even to exercise the powers that are vested in him under the provisions of the IT Act. Secondly, there is some confusion and contradiction in the observations of the AO as recorded in paras-5 and 5.1. First he says that the Assessee had submitted confirmation letters, acknowledgments of return, computation of income and copies of accounts of some of the creditors, but the bank pass-books were not submitted. However, some parties had not provided even the confirmation. Then, in a complete contradiction to such observation Jn para-5, he records in para-5,1 that no details such as names and addresses of the persons, confirmation fetters, account statements, PAN, mode of transaction along with dates and source of investment etc, as also assessment details, had been furnished by the Assesses, as a result of which the genuineness of such un5ecured loans was not verifiable. 10.1 The AO was therefore not dear as to whether evidences had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dge, totalling Rs 3 lakh will be treated as unexplained. Consequently, the addition of Rs 18,05,000 Rs. 3,00,000 = Rs 15,05,000 will stand deleted. 11. Aggrieved by this order of ld. CIT(A) now the Revenue and the assessee are in appeal before us. The Revenue is in appeal for the relief of Rs.15,05,000/- given to the assessee while the assessee has come in appeal against the confirmation of Rs.3,00,000/-. 12. At the time of hearing the ld. DR submitted that the AO had added the sum of Rs.18,05,000/- because no details were furnished before him and the ld. CIT(A) has given the relief accepting the submissions of assessee made before him. 13. The ld. counsel on the other hand submitted that details like confirmation, computation of income, acknowledgement of return filed, for unsecured loans from Shri S. K. Gupta (Rs.1,00,000/-) and M/s Parth Computerized Weigh Bridge (Rs.50,000/-), were filed before the lower authorities and, therefore, the ld. CIT(A) was not justified in not giving relief to the extent of Rs.1,50,000/-. 14. Heard both the parties, perused the record and we find that the AO has made an addition of Rs.18,05,000/- to the total income of the assessee by holdi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his amount may be restored to the file of AO for fresh adjudication after verification. In view of the above discussion, the action of the ld. CIT(A) deleting the addition of Rs.15,05,000/- is confirmed and thus the Revenue s appeal is dismissed. 14.5 As far as assessee s appeal is concerned, loan of Rs.1,50,000/- in respect of Shri Mathew is hereby confirmed and addition in respect of Rs.50,000/- from M/s Parth Computerized Weigh Bridge and Rs.1,00,000/- from Shri S. K. Gupta are restored back to the file of AO for verification and fresh adjucation. Assessee s second ground is partly allowed for statistical purposes. 15. Ground No.2 of assessee s appeal relates to addition of Rs.4,66,093/- u/s 68 on account of unexplained cash credit. This amount of Rs.4,66,093/- credit balance relates to M/s Panwar Steel. The confirmation furnished from the said party showed the closing balance as Nil. The assessee failed to provide any reconciliation. The AO, therefore, treated the sum of Rs.4,66,093/- as unexplained cash credit. 16. In appeal before ld. CIT(A) the assessee vide its written submissions it has submitted that the AO had made the addition simply on the basis of a response of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a confirmation of the creditors whose list was produced by the AO at para Nos.6.1 of the assessment order (page no.6). The AO observed that the assessee had not filed the confirmation of the creditors and thus he made addition of Rs.61,33,780/- as unexplained credits u/s 68 of the Act to the total income of the assessee. This issue has been discussed by the AO at para nos.6.1 6.2 of the assessment order. 22. Before ld. CIT(A) it was submitted that the AO had made the addition on the sole ground that confirmation letters had not been furnished from the said parties, even though the assessee had provided complete details including the names and addresses of said parties and the amount of purchases and the amounts outstanding etc. Copies of their ledger accounts had also been furnished. Confirmation letters could not be furnished because of the shortage of time. The AO could have asked the said parties to produce confirmations directly to him. The AR had sought to furnish confirmation letters from the said parties along with the written submissions. It was further contended that the assessee had been regularly dealing with the said parties and all payments made and received were b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecause, the assessee s case is not covered by any of the exceptions provided under the said rule. Having rejected such confirmation letters, there remains no other option but to sustain the action taken by the AO and confirm the addition of the sum of Rs.61,33,780/-. However, since the outstanding balance of Rs.10,41,850/- in the name of M/s R I Traders was actually the closing balance of the immediately preceding year and the opening balance of this year, no addition could be made of the said amount during the year under consideration. This means that the addition which is confirmed would be restricted to the sum of Rs.61,33,780/- (-) Rs.10,41,850 = Rs.50,91,930/-. The AO is directed to take action accordingly. Against this order of the ld. CIT(A), the assessee is in appeal before us. 24. Before us the ld. counsel of the assessee submitted that complete names and addresses were given during assessment vide reply dated 3/8/2007 (page 85 of Paper Book at page 87 of Paper Book). No enquiry was made by the AO or evidence of remission of liability brought on record by the AO no adequate opportunity was granted to furnish confirmations. Before ld. CIT(A) confirmations were filed (p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest-free advances to the said parties. 29. The ld. CIT(A) confirmed the addition of Rs.82,515/- after considering the submissions of the assessee by observing as under :- 18. Once again, both the assessee and the AR have failed to provide any documentary evidence in support of the claim that the interest free loans received were utilized for making interest-free advances. Secondly, the onus was on the assessee to show the availability of the interest free funds before the AO, instead of simply stating in the written submission that the interest free advances were given from amounts received from the debtors and the creditors. It is highly unusal that the creditors were not to be paid any interest. At least no evidence has been produced to support such claim. Unless the initial burden was discharged by the assessee showing the availability of interest free funds, it could not be said that the onus had shifted to the AO to establish that interest bearing borrowings had been given out as interest free advances. Given such facts, I have no other option but to confirm the addition of the sum of Rs.82,515/-. Against this decision of ld. CIT(A) assessee is in appeal before u ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
