TMI Blog2013 (4) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... n this regard. The assessee having proved the identity, capacity and creditworthiness of said persons and therefore, cannot be subject matter of addition. Thus, additions have wrongly been confirmed by the CIT(A) and the same are directed tobe deleted. Disallowance of car expenditure and car depreciation - Held that:- As the AO has not made any discussion in the body of the order and has simply disallowed expenses without application of mind, which has been confirmed by the CIT(A). No such disallowance can be made without passing areasoned order. Therefore, such addition made, is directed to be deleted. - I.T.A. No. 433(Asr)/2012 - - - Dated:- 15-2-2013 - H. S. Sidhu And B. P. Jain, JJ. For the Appellant : Sh. P. N. Arora, Advocate For the Respondent : None ORDER This appeal of the assessee arises from the order of the CIT(A),Amritsar, dated 17.10.2012 for the assessment year 2007-08. The assessee has raised following grounds of appeal: 1. That the assessment order as well as the order of the ld. CIT(A) are both against the facts of the case untenable in law. 2. That the ld. CIT(A) has grossly erred in dismissing the appeal in lime line without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... voking the provisions of section 41(1) of the Act. That this liability was not the liability which came into existence for the first time during the year under consideration, but it as a liability which was still payable by the assessee and there was no earthly reason for confirming the addition of ₹ 14,74,763/-. 9. Again, the ld. CIT(A) has again grossly erred in confirming the addition of ₹ 26,30,038/-. On account of so-called creditors for advances against supply of Machinery. The authorities further failed to appreciate that these loans were genuine old family loans. The identity of the creditors and capacity of the creditors were proved and their confirmed copies of accounts were duly filed. It was explained before the authorities below, that all these creditors were old creditors and these were existing Income-tax assessee's. Thus, the department has got no reasons to disbelieve the same. 10. Furthermore, it was explained before the authorities below that these were the old creditors and there was no fresh loan obtained from these creditors during the year under consideration. Thus, the ld. CIT(A) has grossly erred in appreciating the facts that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice u/s 142(1) fixing the case for 12.11.2009. No compliance was made on this date and further adjournment taken for 16.11.2009 when it was again asked to make explanation as to why assessment may not be completed as already intimated. Copies of accounts of the creditors for the relevant period were filed but no confirmed copies of accounts and complete addresses were filed as claimed by the counsel. However, it was again asked to explain all the creditors with confirmed copies of accounts and details of creditors older than 1 year with reasons for non payments and date since when the creditors is outstanding and upto which date is outstanding fixing the case for 19.11.2009. Again no explanation was made on this date and case adjourned to 23.11.2009 as final date to explain as to why assessment may not be made as above fixing the case for 27.11.2009. No explanation was made. Assessee again vide further show cause notice dated 30.11.2009 was asked to make explanation 03.12.2009 as under: You have failed to make explanation regarding genuineness of all the above creditors: You may however establish the genuineness by furnishing their PAN assessment parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n fact the liability subsists also as per case law: Keshoram Industries and Cotton Mills Ltd. vs. CIT (1992) 196 ITR 845 (Cal.) Accordingly, amount is added to income as fictitious liability to be added as unexplained expenditure being paid outside the books, by rejecting the books of account accordingly u/s 145(3) and which is also to be added u/s 41(1) of the Act as cessation and remission of liability. Assessee has shown some minor payments during the assessment year 2008-09 and 2009-10 against some of minor creditors against creditors for goods of ₹ 2250757 and amount of ₹ 1863588 shown still outstanding and most of the creditors are static as under: Aggarwal Traders 33199 ADS Partap Singh 64262 Bharpoor Engg. Works 103225 Chalotra Engg. Works 42700 Sr. Durga Engg. Works 11104 Gurmukh Singh andSons 78277 Industrial Equipment Co. 170589 Jagji ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (59618) 17885 Total Income 4217888 5. The Ld. CIT(A) at the outset, dismissed the appeal of the assessee being not pursued inspite of notices served. At the same time, the ld. CIT(A) decided the appeal on merits and confirmed the action of the Assessing Officer i.e. with regard to confirmation of addition of ₹ 14,74,765/-. The Ld. CIT(A) observed as under: It is admitted fact during the assessment proceedings books of accounts were never produced and other required information was furnished fully and in all completeness, which enforced the A.O. to make addition of ₹ 14,74,765/- representation fictitious and cessation of liability representing static creditors remained unsubstantiated or confirmed. 6. As regards the confirmation of addition of ₹ 26,30,038/-, the ld. CIT(A) observed as under: As regards the other addition of ₹ 26,30,038/- representing unsecured cash credits/unsecured loans, here also since the appellant failed to discharge its onus/burden heavily cast upon its shoulders to establish genuineness of these so-called unsecured family loans, by substantia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year. The Ld. counsel for the assessee, Mr. P.N. Arora, invited our attention to the copies of accounts of all creditors at paper book pages 6 to 21 with regard to said creditors of ₹ 14,74,763/-. Mr. P.N. Arora, Advocate further invited our attention to the addition confirmed by the ld. CIT(A) in para 6 of his order that the assessee failed to discharge and to establish genuineness of the unsecured family loans by not proving the identity, capacity and creditworthiness which remained unconfirmed and in the absence of PAN on record. In this regard, it was pointed out in respect of Smt. Ujjal Kaur that balance is outstanding since many years and copies of accounts for the year ending 31st March, 2003 to 31st March, 2007 are available at PB 22 to 25 and PB 97. As on 01.04.2002, the balance brought forward as payable was ₹ 10,27,302.86 and the interest as on 31st March, 2003, 31st March, 2004, 31st March, 2005, 31st March, 2006 and the impugned year i.e. the year ending 31st March, 2007 has been provided @ ₹ 4800/- per year, as per said copies of accounts available at paper book pages mentioned hereinabove. The balance outstanding as on 31st March, 2007 relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter of record in the assessment order. The Ld. CIT(A) has also with complete application of his mind has confirmed the addition made by the A. O. The Ld. CIT(A) has also observed that the assessee has not proved the identity, capacity and creditworthiness of unsecured family loans and the family loans are fromSmt. Ujjal Kaur, Smt. Manjit Kaur Smt. Rayam Kaur. Mr. P.N.Arora,Advocate, accordingly prayed to reverse the order of ld. CIT(A) w.r.t. theseadditions and allow the ground nos. 8, 9 and 10 of the assessee. 8.1. As regards the disallowance of expenses for personal use of car expenses and car depreciation amounting to ₹ 15,794/- ₹ 35,408/-, the AO has not passed any reasoned order in the body of the order but has simply disallowed the expenses which have been confirmed by the ld. CIT(A) in a summary manner was argued by Mr. P.N.Arora. The assessee having paid FBT and therefore, there cannot be double taxation also. 9. The Ld. DR, Mr. Tarsem Lal, on the other hand, argued that the assessee has not produced books of account and at PB-1 further pointed out the questionnaire of AO where the assessee was required to submit confirmed copy of accounts which were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e a subject matter of section 41(1) of the Act. It is also a matter of record in the order of the A.O. where the assessee had made some payments during the assessment years 2008-09 2009-10, which the AO at page 2 has mentioned in his order. Inspite of such facts on record, the matter did not find favour to the AO and confirmation made by the Ld. CIT(A) in a summary manner is not justified. The assessee is assessed to income-tax regularly, is on record and sundry creditors are outstanding as per last year for which assessment record was available with the AO which was argued by the ld. counsel and was not rebutted by the Ld. DR in this respect. Even if confirmation copies of accounts and books of account are not produced, the copies of audited accounts for the impugned year and the assessment record of preceding year was available with the A.O. The AO cannot make the assessment on conjectures, surmises or on the basis of suspicion. The AO has not given any findings that the said copies of account as false or fraudulent. Therefore, the assessment has to be made on the basis of such copies of account when they are not proved false or fraudulent. Notwithstanding the fact, the reje ..... X X X X Extracts X X X X X X X X Extracts X X X X
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