9911796707
TMI Blog2015 (2) TMI 1036X X X X Extracts X X X X X X X X Extracts X X X X ..... ing disallowance of 1/5th of motor car expenses and depreciation and 1/5th of telephone expenses. 4. Your appellant therefore humbly prays that the addition made u/s 68 and disallowance made 1/5th motor car and telephone expenses may please be deleted / the impugned order may please be annulled." 2. Ground No.1 is general in nature and no specific finding is required. 3. Ground No.2 is regarding the addition made under section 68 of the Income tax Act. The assessee is a firm and working as commission agent of sale of yarn. During the course of assessment proceedings the AO noted from the bank statement of the assessee that the closing balance in the account as on 31/03/2003 was Rs. 13,52,673/- whereas the balance-sheet as on 31/3/2003 showed a debit balance of Rs. 1,12,82,800/-. As there was a huge variation between the balance as per books and that of bank statement, the assessee was asked to furnish bank reconciliation statement. The assessee filed summary of bank reconciliation statement to show the reason for difference as cheques issued but not debited in the bank account of Rs. 1,78,12,041/-. The AO observed that most of the cheques were issued on 25/3/2003 and 26/3/2003 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad increased in the meantime. The assessee contended that the cheques were then given to the sister concern of the assessee and only on the intervention of the 'Yarn Merchant Association' the refund was made to the buyers through sister concern. 3.1 The AO did not accept the explanation of the assessee and observed that in the absence of relevant details, address of the parties, the genuineness of the transaction is not proved. Since the assessee claimed that the amounts were repaid through its sister concern, the AO called the details from the bank of the assessee, Bank of Baroda, Jhaveri Bazar, Mumbai and found that the alleged cheques issued by the assessee were credited in the personal account of the family members of the partners of the assessee. Further, the AO noted that the cheques purported to be issued in the month of March 2003 were cleared/encashed in the month of September 2003. The AO has annexed the details of all the cash credits, the cheques issued by the assessee to the sister concern in annexure A, B and C of the assessment order. The AO has held that the claim of the assessee was that the amount was finally returned to the parties is contrary to the fact as it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement was recorded. The AO found that this party is having a different version as this party had not advanced any loan to the assessee. The payments were made against purchase bills. However, the AO mentioned in the remand report that reply from 10 parties were received in which these parties stated that payments were made as advance for purchase of yarn and payments for such purchases were received by cheque. Since the summons issued to these parties through RPAD were received back unserved, the AO doubted the genuineness of the reply in the absence of personal attendance of these parties. The CIT(A) after considering the remand report as well as the comments and submissions of the assessee confirmed the addition made by the AO. 4 Before us, the ld. AR of the assessee submitted that the AO has proceeded on wrong premises and doubted the re-payment by the assessee. He has pointed out that initially the AO initiated the enquiry due to the discrepancy in the balance in the books of account and in the bank account of the assessee. The assessee filed the reconciliation and explained the difference being cheques issued by the assessee but not encashed. Therefore, balance in the bank wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the assessee has never claimed having borrowed any loan from these parties, but amounts were received as advance against supply of yarn. He has further contended that it is a standard practice in this trade that the goods are not supplied to Bhiwandi parties without receiving money in advance. All the transactions were through cheques and repayment was made by the intervention of the Yarn Merchant's Association. Therefore, the repayment was accepted and confirmed by these parties to prove that the transaction of receiving advance from these parties is genuine. He has further submitted that when the partner of M/s. Textile Product Marketing Agency appeared before the AO and stated that they have not advanced any loan to the assessee it corroborates the claim of the assessee that these amounts were not received as an advance or loan but it was an advance against supply of yarn. The AO in para-6 of the remand report has stated that this party has taken a different stand which is not correct observation of the AO. The Ld. AR has referred to the invoice/bills in respect of sale of M/s. Textile Product Marketing Agency (Pg No.44 and 45 of PB) and submitted that the amount of these bill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee from the Bhiwandi parties for supply of goods but due to the objection of the Reliance Industries, whose products the assessee was dealing in, the assessee decided to refund the said amount of Rs. 36,77,093/-. It is pertinent to note that the entire explanation of the assessee is only the submission and the contentions without any supporting evidence to show that the credit shown by the assessee in the books is an advance received from the buyers of the goods. The assessee claimed that the parties refused to accept the refund due to increase in the price of the yarn and, therefore, the assessee transferred the said amount through cheques to its sister concerns. The cheques were issued in the month of March 2003, which were finally encashed and cleared in the month of September 2003 after a gap of six months. There is no explanation from the assessee as to why the cheques were issued to the sister concern and it were encashed only after a lapse of six month period. How the AO doubted the genuineness of the transaction as the explanation of the assessee was not found to be acceptable and asked the assessee to produce the creditors in person? The assessee expressed its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss of the parties/creditors as well as to prove the genuineness of the advance from these parties. The AO made the addition under section 68 as unexplained credit. On appeal, the assessee has contended before the ld. CIT(A) that the AO should have summoned the creditors under section 131 to verify the genuineness of the transaction, on which the CIT(A) issued the remand order. During the remand proceeding the AO issued summons to all 22 parties. The summons issued through speed post to the Bhiwandi parties were returned unserved by the postal authorities in case of 17 out of 20 parties and the remaining 3 summons neither returned back nor any acknowledgment were received. The assessee claimed that it has served summons to 18 parties out of 20 parties. In these circumstances, the AO asked the assessee to produce the parties in question. The assessee again expressed its inability to produce the parties in person. It is pertinent to note that out of two Mumbai based parties one party appeared in response to summons issued to M/s. Textile Product Marketing Agency. One Shri Sitaram Rawat, partner of the said concern appeared before the AO on 11/3/2010 whose statement was recorded. We no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o accept the refunds. It is beyond imagination that an amount is received by the assessee as an advance against supply of goods and the assessee offered the refund to the parties which was refused by them, but there is no correspondence regarding the entire episode of refund and refusal and payment was claimed to have been made to the creditors. The entire explanation of the assessee is only submission which is full of loopholes. Why were the cheques, issued in March 2005, not in favour of the creditors (buyers)? There is nothing to show that these were issued in the favour of the proposed buyers, and only subsequently endorsed in the favour of the sister concern, as stated by the ld. AR, on a query by the Bench during the hearing. Rather, why were the funds at all transferred to the account of the sister concern? The settlement, stated to be arrived at through the agency of the trade association, is completely unevidenced. Why, again, were the funds transferred from the account of the assessee's sister concern to that of the assessee's family members? The assessee has not produced any records to substantiate its story that the amount was finally repaid by the intervention of the ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 68 of the Act, the case law on which is legion. Accordingly, in the facts and circumstances of the case except in the case of Textile Product Marketing Agency where there is actual transaction of supply of goods, in all other cases we do not find any error or illegality in the orders of authority below. Hence the addition under section 68 in respect of 21 parties is confirmed. 5.2 Ground No.3 and 4 regarding adhoc disallowance of motor car expenses, depreciation and telephone expenses. 5.3 We have heard the ld. AR as well as the ld. DR and considered the relevant material on record. The AO has disallowed 20% of the expenditure debited on account of motor car, depreciation and telephone on the ground of personal use of car and telephone. This disallowance was made by AO because the assessee has not produced the log book for running the car to verify the exclusive use of car for business purposes. Similarly the personal use of telephone was not ruled out because the assessee has not furnished the details. After considering the facts and circumstances of the case and the assessee being a partnership firm the personal use of car and telephone cannot be ruled out. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
