TMI Blog2015 (4) TMI 474X X X X Extracts X X X X X X X X Extracts X X X X ..... rator - CIT(A) deleted addition - Held that:- assessee has worked out the availability of fund on the relevant dates. Again it was found that though apparently there may not be direct nexus between the fund available and the investment made in machinery and generator but the circumstantial evidence pointed out by the learned counsel of the assessee that the dates on which cash withdrawals have been made from the various banks of the assessee and the dates on which expenditure has been incurred appears to be plausible explanation for which benefit cannot be denied to the assessee; Accordingly, Ld. CIT(A) has rightly deleted the addition of ₹ 6,11 ,000/-. In the background of the aforesaid discussions, we are of the considered view that no interference is called for in the well reasoned order passed by the Ld. CIT(A) - Decided against revenue. Unexplained investment in form of cash deposits - CIT(A) deleted addition - Held that:- Considering the facts and circumstances of the case, the preponderance of probabilities appears to be in favour of the assessee. However, while scrutinizing the date wise withdrawals and the date of deposit, it is seen that at five places apparentl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of the considered view that no interference is called for in the well reasoned order passed by the Ld. CIT(A)- Decided against revenue. - I.T.A. No. 94/DEL/2009 - - - Dated:- 18-3-2015 - Shri H.S. Sidhu And Shri T.S. Kapoor JJ For the Appellant : Sh. P. DAM. KANUNJNA, SR. DR. For the Respondent : N one Present ORDER Per H.S. Sidhu : JM Revenue has filed the present appeal against the impugned Order dated 25.09.2008 on the following grounds:- 1. That the Ld. CIT(A) has erred in law and on facts in allowing the relief without appreciating the facts stated in the assessment order u/s. 143(3) under the different heads, as stated below:- i) Unexplained investment in factory and building ₹ 9,50,000/- ii) Unexplained investment in machinery Generator ₹ 6,11,000/- iii) Unexplained investment in form of cash deposits in different bank account ₹ 13,86,400/- iv) Unexplained investment in car, furniture etc ₹ 1,03,496/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s including the additions in dispute vide his assessment order dated 30.3.2006 passed u/s. 144/143(3) of the I.T. Act, 1961. 3. Aggrieved by the assessment order dated 30.3.2006 passed by the AO, assessee filed an appeal before the Ld. CIT(A), who vide impugned order dated 25.9.2008 has partly allowed the Appeal filed by the Assessee. 4. Against the aforesaid order of the Ld. CIT(A) dated 30.3.2006, Revenue is in appeal before the Tribunal. 5. The present appeal has been filed by the Revenue on 9.1.2009 which came up for hearing before the Bench many times since 25.6.2009. As per the order sheet, we have seen that most of time assessee remained absent, in spite of valid notice issued to the assessee and the Bench adjourned the case many times. We have perused the records available with us and seen that this office issued many times notices by Regd. Post to the assessee on the address, as per the assessment and appellate records, but assessee remained absent. Lastly, the notice for hearing was issued by Regd. Post for 10.3.2015 which was not received back unserved. Therefore, keeping in view of the facts and circumstances, as explained above, we are of the view that assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Add: Purchases out of undisclosed sources ₹ 54,60,000/- 5. Add: 20% of exp. Incurred in violation of section 40A(3) ₹ 11,60,000/- Total Income Rs.1,43,35,437/- 8. We find that the Ld. First Appellate Authority has adjudicated the issues vide his order dated 25.9.2008 from pages 19 to 27 as under:- (1) Addition of ₹ 17,07,250/- on a/c of unexplained cash deposits in bank A/cs. During appellate proceedings, the learned AR has worked out the availability of cash in appellant's bank alc. On perusal of the accounts, it is seen that the learned AR has given date-wise withdrawals from her bank account along with the dates on which the cash was deposited, in the bank account. Apparently, the dates of withdrawal and the dates of deposits are close which indicate that in absence of' any other undisclosed business accounts, the preponderance of probability is that 'the cash withdrawals have been deposited in her bank account ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,00,000/-. However, it is seen that there is no direct evidence regarding the cash transaction but the date on which such has taken place and the availability of cash on such date shows that there is plausible nexus, which explains the source. However, the details furnished by the assessee in this regard indicate that an amount of ₹ 2,50,000/- has, been shown .to be representing direct credit in capital account. However, in absence of relevant detail, the same cannot be accepted. Thus addition of ₹ 12,00,000/- addition to the extent of ₹ 2,50,000/- stands confirmed and the rest of the amount i.e. ₹ 9,50,000/- is deleted. (b) Addition of ₹ 7,00,000/- As stated above, out of ₹ 37,00,000/- invested in factory building, source of ₹ 25,00,0001- was explained as the amount received by daughters through account' payee cheques. Out of ₹ 25 lacs, the AO, for the reasons discussed' in the' assessment order, has accepted the source to the extent of ₹ 18 lacs and the rest of ₹ 7 lac and added the same to assessee's total income on the ground that that the assessee could not justifiably explain the source of ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the investment made in machinery and generator but the circumstantial evidence pointed out by the learned AR that the dates on which cash withdrawals have been made from the various banks of the assessee and the dates on which expenditure has been incurred appears to be plausible explanation for which benefit cannot be denied to the assessee; Accordingly, addition amounting to ₹ 6,11 ,000/- is hereby deleted. (4) Addition of ₹ 13.97 lac on a/c of unexplained investment in stock: The AO has made the addition by observing as under: From the business results enclosed by the assessee along with her income tax returns, we find that the assessee had an opening stock of just ₹ 11.07 lacs at the beginning of the year and, without any big jump in income, the closing stock has been declared at ₹ 71.65 lacs. The assessee's counsel has explained the increase in the stock as following: Closing stock - RS.71.661acs Less: Opening stock - Rs: 11.08 lacs Rs.60.58 lacs. Canara Bank PC limit - ₹ 36.91 lacs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the assessee's submission are being enclosed for reference as Annexure-D. 'From the perusal of relevant pages of the bank account with bank of Punjab, it is clear that following entries claimed by the assessee as 'not considered' do not exist at all on. the relevant pages in the bank account with bank of Punjab: 7.6.2002 5.12.820 29.6.2002 6,12,720 10.10.2002 1612017 Total 27,37,557 Since the above claim of the assessee has been proved to be wrong, the claim regarding the realization of debtors is not acceptable. Since the claim of realization of debtors is not true, the justification given by the assessee's counsel remains limited to ₹ 46,61 lacs only which calls for the addition of ₹ 13.97 lacs for the unexplained capital addition in stock u/s 69 of LT. Act, 1961. During appellate proceedings, the learned AR has taken general plea that the assessee has made sufficient cash withdrawals and, therefore, the addition on account of unexplained investment in stock is not susta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of this fact, no specific adjudication is called for in respect of this ground taken in appeal. (7) Disallowance of ₹ 11.60 lacs u/s 40A(3 ): Vide Ground No. 9 the appellant has challenged the action of the AO in making disallowance of ₹ 11.60 u/s 40A(3). The AO has made the disallowance by observing as under: If we have a look upon the trading P L Account enclosed along with the return of income filed by the assessee, we find that the assessee has declared the purchases of ₹ 1.64 crores. The assessee has also declared the trading expenses of ₹ 50.51 lacs in trading account and the revenue expenses of ₹ 18.32 lacs in P/L account which means that the assessee has claimed total business expenses of ₹ 2.33 crores. If we have a look on the balance sheet enclosed along with the return of income filed by the assessee, we find that there is an increase in trade creditors by ₹ 9.70 lacs (Rs.41.07 lacs - 31.37 lacs) during the year. The assessee has also shown the expenses payable of ₹ 2.18 lacs at the end of year. The assessee also had the cash balance of ₹ 92,000/- at the beginning of year. If we deduct the incr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sider the investment of ₹ 87 lacs as having made through undisclosed Bank Accounts and to make addition of ₹ 87 lacs u/s. 69 of the l.T. Act, 1961. The second is to consider the same as having been made in violation of the provisions of section 40A(3) out of cash withdrawals made from the undisclosed back accounts. In the interest of justice, the second option is being exercised here. Giving the maximum leverage to the assessee, the expenses of ₹ 29 lacs (1/3rd of the total expenses) are presumed as not covered by the provisions of section 40A(3). (The benefit of cash balance of ₹ 92,666/- has already been given to the assessee for incurring the petty business expenses). If we apply the provisions of section 40A(3) on rest of the expenses of ₹ 58 lacs. there is a clear disallowance of ₹ 11.60 lacs on this account. It is worthwhile to mention here that, in the absence of books of account, there is no other option but to decide the issue on the basis of best judgment while considering the facts on record. In view of the facts on record, there is no option but to treat the business of ₹ 58 lacs as having been made in violation of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 5,24,534/- vide his rectification order passed U/s 154 of the Act remaining an addition of ₹ 1,67,667/- on this account. Now, during appellate proceedings, the learned AR has explained the source of ₹ 1,67,667/- as under: Margin money for car (date of finance 30.11.02) ₹ 77723/- Out of BOP withdrawal of ₹ 4.15 lacs on 26.11.2002. Margin money for scooter (date of finance 28.10.02) ₹ 10273/- Out of BOP withdrawal of ₹ 40000/- on 10.10.2002. Fax (bill dated 11.11.02) ₹ 16000/- Out of BOP withdrawal of ₹ 5.65 lacs on 02.11.2002. Furniture ₹ 64171/- Out of available cash as sufficient cash withdrawal are there as per charge showing availability of cash. The submission of the learned AR has been considered. Out of investment of ₹ 1 ,67,667/-, the source of investment to the extent of ₹ 77,223/- (margin money tor car), RS'.10,273/- (margin money for scooter and ₹ 16,000/- (for fax) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) has rightly confirmed the addition to the extent of ₹ 2,50,000/- and the rest of the amount i.e. ₹ 9,50,000/- is deleted. In the background of the aforesaid discussions, we are of the considered view that no interference is called for in the well reasoned order passed by the Ld. CIT(A), hence, we uphold the same by rejecting this ground of appeal raised by the Revenue in the aforesaid manner. 10. With regard to ground 1(ii) regarding deletion of addition of ₹ 6,11,000/- on account of unexplained investment in machinery and generator is concerned, we find that the assessee claimed to have invested ₹ 5.3 lacs in machinery and ₹ 80,000/- in generator. The AO has made the addition by observing as under:- It is noticeable that no loan whatsoever from any bank was obtained for the purchase of above machinery. The machinery generator were claimed to have been purchased in cash through books of accounts, which were never produced . To explain the source of investment, various opportunities of being heard were given to the assessee but the assessee had no proper explanation regarding the source of investment. No cash book or cash flow statement wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been found by the AO during the course of assessment proceedings or in subsequent assessment proceedings, as has been pointed out by the learned AR. Considering the over facts and circumstances of the case, the preponderance of probabilities appears to be in favour of the assessee. However, while scrutinizing the date wise withdrawals and the date of deposit, it is seen that at five places apparently there are negative balances, which works out to ₹ 3,20,850/-. In the above circumstances, out of ₹ 17,07,250/-, for the amount to the extent of ₹ 3,20,850/-, the assessee could not give the source thereof. IN view of the above, we find considerable cogency in the finding of the Ld. CIT(A) to delete the addition of ₹ 13,86,400/- and ₹ 3,20,850/- is confirmed. In the background of the aforesaid discussions, we are of the considered view that no interference is called for in the well reasoned order passed by the Ld. CIT(A), hence, we uphold the same by rejecting this ground of appeal raised by the Revenue in the aforesaid manner. 12. With regard to ground 1(iv) regarding deletion of addition of ₹ 1,03,496/- on account of unexplained investment in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s called for in the well reasoned order passed by the Ld. CIT(A), hence, we uphold the same by rejecting this ground of appeal raised by the Revenue in the aforesaid manner. 13. With regard to ground 1(v) regarding deletion of addition of ₹ 11,60,000/- on account of 20% of expenditure incurred in violation of section 40A(3) of the I.T. Act is concerned, we find AO has made the disallowance by observing as under: If we have a look upon the trading P L Account enclosed along with the return of income filed by the assessee, we find that the assessee has declared the purchases of ₹ 1.64 crores. The assessee has also declared the trading expenses of ₹ 50.51 lacs in trading account and the revenue expenses of ₹ 18.32 lacs in P/L account which means that the assessee has claimed total business expenses of ₹ 2.33 crores. If we have a look on the balance sheet enclosed along with the return of income filed by the assessee, we find that there is an increase in trade creditors by ₹ 9.70 lacs (Rs.41.07 lacs - 31.37 lacs) during the year. The assessee has also shown the expenses payable of ₹ 2.18 lacs at the end of year. The assessee also ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s other than crossed cheque/crossed DD. Now there are only two options. First is to consider the investment of ₹ 87 lacs as having made through undisclosed Bank Accounts and to make addition of ₹ 87 lacs u/s. 69 of the l.T. Act, 1961. The second is to consider the same as having been made in violation of the provisions of section 40A(3) out of cash withdrawals made from the undisclosed back accounts. In the interest of justice, the second option is being exercised here. Giving the maximum leverage to the assessee, the expenses of ₹ 29 lacs (1/3rd of the total expenses) are presumed as not covered by the provisions of section 40A(3). (The benefit of cash balance of ₹ 92,666/- has already been given to the assessee for incurring the petty business expenses). If we apply the provisions of section 40A(3) on rest of the expenses of ₹ 58 lacs. there is a clear disallowance of ₹ 11.60 lacs on this account. It is worthwhile to mention here that, in the absence of books of account, there is no other option but to decide the issue on the basis of best judgment while considering the facts on record. In view of the facts on record, there is no op ..... X X X X Extracts X X X X X X X X Extracts X X X X
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