TMI Blog2012 (8) TMI 363X X X X Extracts X X X X X X X X Extracts X X X X ..... inanciers were also charging similar rate of interest as compared to other ordinary lenders - against assessee. Addition on unexplained purchases - Held that:- Addition made by A.O. u/s 69C is not warranted as the source of incurring the expenditure is not in doubt because the source of expenditure is from book but as per the ledger account of the party sales of Rs.4,51,989/- has been shown but the assessee is showing purchases of Rs.5,35,392/- and difference of Rs.83,403/- could not be reconciled by the assessee before the A.O. or before Ld. CIT(A)- proved to be a case of bogus purchases - against assessee. Disallowance of unverifiable purchases - CIT(A) deleted the addition - Held that:- The used tyres by the transporter is generally not having any resale value and whatever nominal amounts are receivable against the said tyres is adjusted by the truck driver against minor repair/puncture and other miscellaneous repairs - against revenue. Restricting the disallowance of expenditure to Rs.25,964/- Held that:- Disallowance on account of these petty expenditure cannot be made on the basis that expenses are not fully verifiable and there is no allegation of the A.O. that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counts are considered together, the entire expenses get reconciled - against Revenue. Addition on account of low household expenses - Held that:- CIT(A) on this basis that the assessee’s wife has shown withdrawal of Rs.36,000/- and therefore, the addition has to be restricted to Rs.14,000/- only after reducing this amount of Rs.36,000/- from the addition made by the A.O. of Rs.50,000/- - no controvert finding against CIT(A) - against revenue. - I.T.A. No. 528/ Ahd/2009 & 876/Ahd/2009 - - - Dated:- 15-6-2012 - SHRI A. K. GARODIA, AND SHRI KUL BHARAT, JJ. Appellant by: Shri Sapnesh R Seth, AR Respondent by: Shri B L Yadav, Sr. DR O R D E R PER SHRI A. K. GARODIA, AM:- These are cross appeals field by the assessee and the revenue which are directed against the order of Ld. CIT(A) II, Surat dated 15.12.2008 for the assessment year 2005-06. 1. First, we take up the assessee s appeal in I.T.A.No. 528/Ahd/2009 1.1 Ground No.1 is as under: 1. On the facts and in the circumstances of the case, the Id. CIT(A) has erred in confirming the addition of Rs.5,00,000/- being the gifts made by three donors and treated as unexplained cash credit by the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the AO. 4.1 The AO rejected the Assessee's submission and listed out the reasons for such rejection in para-4.4, pages 5-6 of the assessment order. The first reason was that, the Assessee had been unable to furnish the details of the opening balances in the capital accounts of the three donors. It was further observed that the statements of the two donors was recorded in the presence of the Assessee's AR, and therefore, their cross-examination could not be allowed since they were the Assessee's witnesses. The AR who was present had not requested for cross-examination. Further, with regard to the third donor, no evidence was furnished to prove that he was unwell and incapable of appearing before the AO. The statements of the two donors clearly showed that they did not have any source of income. Even though they had made the gifts in instalments of small amounts, the Assessee had shown their gifts by way of cash of the total amount. Finally, the AO observed that the Assessee was in the habit of receiving gifts every year. In the immediately preceding year, the Assessee has shown gifts from 6 persons totalling Rs 11,50,000. However, the Assessee had surrendered the same and o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee cannot be rejected as bogus because the donor is the father of the assessee and he is income tax assessee also. Regarding this that he was not produced before the A.O., this explanation of the assessee appears to be reasonable that because of his old age, he could not be produced. Therefore, this addition of gift is deleted. Regarding the remaining two gifts, it was noted that these two persons are not relatives of the assessee and they could not satisfactorily explain the sources also and if we go by human probabilities, gifts of such a huge amount by an outsider is always subject to doubt and in the absence of sufficient material on record regarding sources and occasion of gifts etc, such gift cannot be accepted as genuine and therefore, the balance addition of Rs.3 lacs is sustained. This ground is partly allowed. 1.2 Ground No.2 is as under: 2. On the facts and in the circumstances of the case, the Id. CIT(A) has erred in confirming the addition of Rs.25964/- made by the AO out or telephone expense. 1.2.1 We find that out of telephone expense of Rs.1,29,822/-, the A.O. has made disallowance of Rs.25,962/- being 20% of such expenses on this basis that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... below. In addition to the submission, no evidence have been brought on record even before us that this party is a financier and other financiers were also charging similar rate of interest. Hence, we do not find any reason to interfere in the order of Ld. CIT(A) on this issue also. This ground is also rejected. 1.4 Ground No.4 is as under: 4. On the facts and in the circumstances of the case, the Id. CIT(A) has erred in confirming the addition of Rs.83403/- made by the AO u/s 69C out of purchases from M/s Volvo India (P) Ltd. 1.4.1 Brief facts are that the A.O. made addition of Rs.83,403/- being unexplained purchases shown form M/s. Volvo (India) Pvt. Ltd. In the course of verifying the purchases, the A.O. issued notice u/s 133(6) but no response was received form this party. The assessee furnished contra account from the said party and it is observed by the A.O. that this party had confirmed sale of Rs.4,51,989/- while assessee has shown purchases of Rs.5,35,392/- and the A.O. made addition of the difference amount ofRs.83,403/- u/s 69C of the Income tax Act, 1961. Being aggrieved, assessee carried the matter in appeal before Ld. CIT(A) but without success and now, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs.50,000/- on account of low household expenses. (2) On the facts and in the circumstances of the case, the learned CIT (A) ought to have upheld the order of the Assessing Officer. (3) It is, therefore, prayed that the order of the CIT(A) may be set-aside and that of Assessing Officer may be restored to the above extent. 2.1 In respect of all the grounds, the Ld. D.R. supported the assessment order. He further submitted that disallowance of insurance payment was made by the A.O. on this basis that this is the amount of prepaid insurance and, therefore, it cannot be allowed in the present year. Ld. CIT(A) had deleted even this disallowance which is not justified at all. Ld. A.R. supported the order of Ld. CIT(A). 2.1.1 We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below. Regarding ground No.1.a, we find that his issue was decided by Ld. CIT(A) as per para 10 of his order which is reproduced below: 10. I have carefully considered both the positions. I am of the view that the AO was not really justified in making any disallowance out of the expenditure incurred towards the purchase of truck sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich means that most of such expenses have to be incurred in cash. Nor do they provide any bill or voucher or even a cash receipt which means that the business person has to prepare his own vouchers after consolidation of such expenses on weekly or monthly basis. Therefore, no disallowance could be made or should be made out of such expenses, simply on the ground of non-veriflability. In any case, there cannot be any personal element in such expenses, The AO on his part has not been able to show or prove any item of expenditure included under the said head, as either not genuine or not incurred wholly and exclusively for the purpose of business. Therefore, the is allowance of Rs.1,37,061 made out of such expenses, will stand deleted. 2.2.1 From the above para of the order of Ld. CIT(A), we find that it is held by Ld. CIT(A) that disallowance on account of these petty expenditure cannot be made on the basis that expenses are not fully verifiable and there is no allegation of the A.O. that the expenditure are personal in nature. We, therefore, decline to interfere in the order of Ld. CIT(A) on this issue also. Ground No.1.b is also rejected. 2.3 Regarding ground No.1.c, we find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent clients/customers. Therefore, the Assessee necessarily had to have a special financial arrangement with the said party, which meant that whenever there was receipt of short payment from a customer, the Assessee would have to make good the shortage while reimbursing M/s Arrow Logistics such amounts. There was absolutely nothing unusual or unreasonable about such an arrangement. Once again, the onus was on the AO to disprove the Assessee's claim. He could have summoned M/s Arrow Logistics to verify, the claim made by the assessee. 20.2 Taking into account such facts and circumstances of the case as discussed above, it is held that there was no justification on the part of the A.O. in making any disallowance under the provisions of section 40A(2)(b) of the Income tax Act, 1961. Consequently, the additions of the sums of Rs.80,330/- and of Rs.25,417/- will stand deleted. 2.4.1 When we go through the order of Ld. CIT(A) as per above paras, we find that the reasoning given by Ld. CIT(A) for deleting this disallowance are convincing and hence, we decline to interfere in the order of Ld. CIT(A) on this issue also. 2.5 Regarding ground No.1.e of the revenue s appeal, we find tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same is not supported by proper evidence. Considering these facts and ground business reality, we are of the considered opinion that disallowance of such expenditure on the basis of suspicion without bringing any adverse material on record is not justified. We, therefore, decline to interfere in the order of Ld. CIT(A) on this issue also. This ground of the revenue is also rejected. 2.6 Regarding ground No.1.f, we find that this issue was decided by Ld. CIT(A) by following his own order for assessment year 2004-05. In the assessment order, it is noted by the A.O. in para 13 that a sum of Rs.190.16 lacs has been debited by the assessee under the head freight expenses. The A.O. asked the assessee to produce copies of the ledger with bills/vouchers and it is noted by the A.O. that the assessee has produced relevant books and vouchers for verification but those vouchers are self made cash vouchers and there was no signature of recipient on some of them. The A.O. has made disallowance on this basis that the possibility of inflated expenses cannot be ruled out and he made disallowance to the extent of 2% of the total expenditure. As per the chart showing gross profit, net profit and e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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